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The Right Bait for Keeping Staff

For the last few years, companies haven't had to worry too much about keeping their employees. With businesses looking to cut costs in the economic downturn, employees worried about keeping their jobs. But that's starting to change.

Voluntary turnover inched up in 2004, and hiring managers are concerned that it will pick up in 2005, according to several surveys of human resource professionals. Christopher Mulligan, chief operating officer of Orlando-based TalentKeepers, a global employee-retention research organization, discussed employers' concerns and what they can do to combat turnover with BusinessWeek B-Schools Dept. Editor Jennifer Merritt. Edited excerpts of their conversation follow:

Q: A year ago, you barely heard a word about retention. Why has that changed in recent months?

A: Our turnover trends research report (October, 2004) covered 251 organizations, and 84% of the companies [said] that employee retention was increasing in importance. It's going to become a bigger issue as the economy continues to improve. [In the last few months] turnover has been growing -- though not at the pace it will in the future.

Q: What's the impact on companies when they lose top talent?

A: Executives are becoming very aware that attrition is impacting business -- [and not just] because companies have to replace the people that have left. Companies say turnover affects issues such as shareholder value and profitability. Seventy-six of the [respondents] reported that employee turnover significantly impacts shareholder value. Reduced profits were cited by 54% [of the respondents]. And even though 52% of respondents had developed specific programs [to increase retention], of those, 68% reported that their efforts had been ineffective.

Q: Why are so many companies finding their efforts to be ineffective?

A: The traditional approach many companies take to reduce turnover is through programs -- better pay, different benefits, or letting an employee change their schedule. Those programs are attractive to the organization because they uniformly impact all employees. But our research has shown that programs, while necessary, are insufficient to drive turnover down. The missing component is [the] people part of the equation.

Q: But aren't some industries just prone to high turnover?

A: In some high-turnover industries like call centers and retail, executives have thought of attrition like rush-hour traffic -- it's unpleasant and costly, but every one else in industry is sitting here with me.

But [what] we're finding is that the bulk of attrition is controllable -- about two-thirds. People are leaving for reasons an organization can control.

Q: What, then, can executives and managers do to control that two-thirds?

A: Executives need to set goals for attrition and hold leaders accountable. Traditionally, retention has been human resource's problem. But the data is very clear that...the direct supervisor is most influential [in the decision about whether] the employee will stay or leave. This is a people piece of the equation, not a program piece.

Q: But isn't there a place for the traditional programs -- like competitive pay?

A: Programs aren't to be ignored. If you're underpaying, you aren't going to keep an employee. But just because you pay them well doesn't mean the employee will stay, either.

When they're considering staying at a job vs. changing jobs, top performers are very concerned about challenging work and opportunities to advance. The organization may have excellent career-development programs and may offer all sorts of assistance for employees to improve their skills -- [but that's] insufficient.

Does the individual's leader or supervisor talk to that employee to understand his aspirations, educate him to help him meet those aspirations, and encourage him to do so? The more successful companies are finding ways to keep talented people engaged.

Q: The job market keeps improving, but plenty of workers are still looking. Why focus on turnover now?

A: Smart companies aren't satisfied with relatively low levels of attrition, even relative to their industries. What we find is that smart companies parse their turnover into particular types: controllable or not, desirable or not.

Because of baby boomers retiring [and other demographic issues] we will face a worker shortage. Your ability to retain talent may become your most important skill as a manager. So organizations have to deliver training to their leaders that will help them be more effective in retaining talent. [In our recent survey] only 28% [of companies] said they believe their leaders have the skills to keep talent.

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