Tuesday, January 02, 2007

Why Most Companies are Terrible at Selecting, Retaining and Motivating their Talent

Over the long weekend, I was chatting with someone from a very successful Internet-based company (not Yahoo!). He asked me a little about my consulting business. I explained that we worked with companies who wanted to build programs to increase their ability to select, retain and motivate their top talent.

I didn't have to say any more: "God, do we need your help! We're constantly developing our people and our competitors will swoop in and poach them. We're growing so fast, so we haven't had time to really focus on it. However, I keep telling the folks in HR that they need to get a better plan to stop our bleeding there."

It reminded me of something I read in the most recent 10-Q for Yahoo!. Under the "risk factors" facing their ability to continue to grow the business, they cite the risk: "If we are unable to retain our existing senior management and key personnel and hire new highly skilled personnel, we may not be able to execute our business plan."

Then, they go on to explain that: "Many of our management and key personnel have reached or will soon reach the four year anniversary of their Yahoo! hiring date and, as a result, have become or will shortly become fully vested in their initial stock option grants. Although employees receive additional grants, an employee may be more likely to leave Yahoo! upon completion of the vesting period for the initial option grant, which is generally the largest option grant an employee receives. If we do not succeed in retaining and motivating our existing key employees and in attracting new key personnel, we may be unable to meet our business plan and as a result, our stock price may decline."

So, here are two examples of highly successful companies, who realize that their continued success depends on being able to select, retain, and motivate great people. Yet, at least in the first example (and I would guess the 2nd), they acknowledge that they don't really know what to do.

They're not alone. I can't tell you how many companies I'll go into and hear the refrain: "Our people drive the business" or "Our most important assets go down the elevator at night" or some variation of those. I'm sure you've heard them.

The problem is that most companies stop at this superficial level. They don't actually develop sophisticated programs to actually address the problem of keeping their best people and finding more to further accelerate their growth. And, by the way, the demographics are irrefutable that this problem is just going to become worse in the next 5 years.

As in the first example above, the reference to HR is typical. Many of the 'top talent' executives in our clients rely on HR to solve this problem -- and it certainly is in its domain. However, at many companies (especially the fastest growing ones), HR is chronically under-staffed and having difficulty keeping up with the more nuts-and-bolts aspects of their jobs (i.e., getting payroll out the door, doing basic hiring/promotion, and generally keeping the business moving ahead). True, some of the best companies have HR experts in leadership development who are building and implementing some great programs for talent selection, retention, and motivation. However, this is more the exception than the norm. This is where subject matter expert consultants like Jackson Leadership come in.

In the 2nd example, the reference to stock option vesting is interesting. Many people believe more compensation will solve the "talent problem." However, this rarely happens -- or it's only a quick-fix for problems that will recur. I don't want to be Pollyanna-ish. Money is a factor. But it's usually 4 or 5 on the list -- not 1, 2, or even 3.

So, what is the solution? There are some suggestions here, here, here, and here. But, to net it out: you need to meet regularly with your best people and build an actionable and measureable leadership development plan aligned with their career ambitions. If they feel that you're investing in them and they understand where they want to go in their careers and how that aligns with the company's goals, they will feel attached to the company and likely stay.

Growth can mask a lot of problems. However, you shouldn't neglect the issue of talent selection, retention, and motivation in your company for too long. You only have to go through the experience of trying to replace a "star" once to know what I mean.

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Cath said...

Excellent post, you took the words and the thoughs right out of my own experience, here in France....

Thank you. Great to know you!

Eric Jackson said...

Thanks, Cath.

Interesting to see that these experiences are not limited to North America.



Cath said...

No, unfortunately. Big words and no action.
The human capital is not rentabilized (if I dare say so) at its optimum and this, in spite of the presence of all kinds of consultants and experts (incl. psy and all) within companies, medium and large.

I have posted several time on the topic and will post again by the end of the week a very controversial post on the subject...

Anonymous said...

Good article. Wise companies are investing in retention management.

blake p. said...

Strong post. I followed the links to the others posts about employee retention. I can definitely pull something from each of them. Thanks.

Eric Jackson said...

Thanks, Anon.

And, thank you, Blake. Glad they were helpful.

Hirdu said...

Selecting Talent by HR: Interesting but I shall prefer to differ.

Lemme enlighten about some mal-practices which HR at Indian Software Companies practice a lot. Few Suggestions for the job-seekers are also there.

About to Switch - Beware of HR (MAL) Practices

I am sure You shall find it quite interesting.

Nitin said...

my 2 cents :)

In the second scenario..

It has also been observed that many times people who have been given stock options stop growing. Their learning curves stops as they feel complacent and they dont have to do anything for their money to multiply. They just have to spend the lock in period and then they can easily plan to move out. During this time they stop contributing and also kill new ideas and mitigate the growth of others and the organisation.

Hence any policy (be it stock option policy) need to be implemented with good thought out plans.

The organisation should be bold ( have the balls ) enough to state out the best performers in the open and chalk out their career paths and development methodologies. The program should be made strong by publicising and creating social and peer pressures.

A well thought out strategy should be made for implementation. Organisations are not developed in one day. The culture has to be built and SUSTAINED ...

Eric Jackson said...

Hi Nitin:

I agree with you that the right types of leadership development programs can help create positive peer pressure which benefits the organization and the individuals.



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