Managing for the Short Term, Part 2
At any given time, more than 40% of managers and senior executives expect to leave their jobs within two years, writes author Chuck Martin in a new book, citing a recent study of 500 North American bosses. The challenge for employers is to get the most out of these people during their brief tenure. This will require new ways of hiring, training, and compensating employees vs. the methods that were in vogue when workers aspired to be lifers.
The change required amounts to nothing less than a new approach to management, argues Martin in his latest book, Managing for the Short Term: The New Rules for Running a Business in a Day-to-Day World (Doubleday, June, 2002).
It isn't just execs who are preoccupied with the short term, writes Martin, chairman and chief executive of business research firm NFI Research and a former vice-president at IBM. Companies are insisting on better and better performance in shorter and shorter time frames. While long-term planning will continue to determine an organization's direction, companies need to divide a multiyear strategy into short-term elements to improve performance, adds Martin, whose other books include Net Future (McGraw-Hill, 1999).
With strategies broken down into incremental steps, execs and managers will better understand corporate goals, employees will more easily comprehend their roles, companies will become more nimble competitors, and shareholders will see better results, Martin argues.
In Chapter 10, "Managing People for the Short Term," Martin writes that companies will have to become more skilled at managing what are likely to be increasingly restless workforces. The current hiring slump notwithstanding, labor shortages are expected to worsen soon, as baby boomers retire. Among the challenges corporations will face: offering quick rewards and gratifying work that will encourage the best employees to stay long enough to make substantive contributions. During future downturns, moreover, employers will increasingly have to find alternatives to layoffs -- such as unpaid vacation or temporary pay reductions -- since it will only become harder to hire employees back in upturns, Martin adds. Here is Part 2 of an excerpt from Chapter 10:
Every type of organization faces various challenges with recruiting, as highlighted by the comments from three survey respondents concerning different aspects of employee retention.
• Availability of talent. "As an IT organization within a large research university recruiting great folks is hard -- even after the 'dot-bomb' era. Our threefold approach, beyond advancement, is a copious supply of technology, travel, and training opportunities."
• Ability to screen candidates. Recruiting at different levels of an organization requires different skills. Says one survey respondent: "We use recruitment firms for top management positions, and that works fine. But we seem clueless when it comes to mid-level skill positions. It takes effort to recruit properly. That effort always seems to have a low priority."
• Market conditions. In a tight economy, some employees feel safest where they are while riding out the storm. "Most currently employed workers are not interested in changing jobs, and as a company needing additional employees, it is harder to find suitable candidates. The downturn of the economy has set candidates' expectations of income to a more realistic mode than [during] the height of the boom in technology a couple of years ago."
Aligning Hiring With Existing Networks
Possessing great skills in recruiting but not addressing the issue of losing valued employees is like pouring water into a sieve. There's never enough water in the basin.
At SAP America, the North American arm of Germany-based SAP, the world's largest inter-enterprise software company, there is a holistic approach to employee recruitment and retention. Larry Kleinman, senior vice-president of HR for SAP America, and a member of the executive team, leads a 120-person HR staff serving the 5,000 employees throughout the Americas. He works on trying to understand and optimize the organization's dynamics.
Kleinman views his role as one of making sure the company's managers can manage people. Says Kleinman:
"I believe in viral networks involving informal communications rather than the planned communications. The most effective are the informal networks. You have to identify that network, who talks to whom and when, and who is important. You have to make sure you message to them first. Employees are disenfranchised about vision and strategy. People end up working on things that matter to them. The desire in people is that they always want to be worthwhile.
"There are two schools of thought. You can either get a clear sense of where we're going or you can get a vision that's just enough to keep chunking along. I opt for the first. If you can get a clear sense of purpose, people can share in it. Things change so fast, especially in the technology world. Technology really is a different industry.
"It's a challenge to make HR strategic. Retention has become a strategic issue because it is the biggest limit to growth. Hiring and keeping people is the mantra of what will make a company successful today.
"At SAP, we're quantitative in terms of what drives the business. There are big outcomes for people who match the profile, which drives our ability to do market research. We have a good profile of what kind of person can succeed here and we have linked that to economic outcome. We know that if we hire a certain kind of salesperson and if they are in the top of our measurement, they will produce 60% more than another person.
"The glue in the middle is the manager, it's the glue that makes everything come together -- or not. It's real basic stuff that has to happen. Management matters. For us, we found it involves basic things: making sure expectations are crystal clear as to what is expected of people every day; make sure you have the right person in the right job; craft jobs around the individuals; and give recognition.
"The manager of the future is a very different animal, because things are getting so complex. Managers need to communicate better and relate to people in different ways."
Part of the problem in recruiting has been in the way the role of human resources has traditionally been viewed within the corporation. Raj Singh, CEO of Toronto-based Brainhunter.com, which offers Web-based recruitment systems and staffing services, says recruiting might be more cost-effective if internal HR people were compensated more like the outside recruiters companies now hire to find talent -- in other words, on an incentive basis, or salary plus incentive, rather than straight salary.
"Companies have to take a strategic view of HR, as opposed to seeing it as an operational cost center. Historically, emphasis in Human Resources has never been placed on recruiting. The emphasis has been on payroll management, compensation, and benefits. There has never been somebody in charge of the attraction and retention of talent."
Companies may need to create titles like "Chief Talent Officer" to emphasize and strategically manage the attraction and retention of talent. And they also need to come up with better strategic alternatives to bad economic times than simple layoffs, since recruitment costs will rise when many of those dismissed are once again needed when the economy picks up.
Aligning Training with Individual Desire for Autonomy
Companies are struggling with balancing the demands of managing for the short term with employees' needs for long-term professional development. In one study, although the lack of career-development opportunities was high on the list of reasons for people leaving their jobs, less than half of those companies in that study offered multiple career paths or adequate career development for their IT professionals. And it's safe to assume that if that's the case for IT, an area in which workers are generally in great demand and turnover rates tend to be high, career-development opportunities are probably even more lacking in areas with less competition for employees.
Only 28.2% of employees in one study reported being satisfied with educational and job training programs and 22.2% expressed satisfaction with promotion policies. Only 50.9% of companies have set formal career paths, and 28.2% of those have established formal career-development processes.
How can companies balance employees' demands and needs for training that keeps their skills fresh with the fact that the company may have to watch money spent on training walk out the door when the employee takes a job elsewhere? How can companies train for the short term when training implies a long-term perspective?
One answer is to become a facilitator of employees' own training efforts. As employees become free agents and companies structure their workforce needs to be more flexible and dynamic to accommodate changing needs and economic conditions, workers will increasingly have to rely less on structured company training efforts and more on themselves. Rather than prescribing career paths, companies will increasingly find themselves in the role of enablers, helping workers pursue the skills necessary for their futures. One reason companies face the difficult decision about training is the investment vs. how much the employee or manager "returns" to the company.
Consider this response to a Net Future Institute survey by a manager at a mid-sized company:
"We invest so much time and money in training. However, because employees are less loyal than in the past (partly a Gen-X issue), we are finding that we are training people well who have no problem moving to a new company or industry with the skills we've trained them in. That is causing us to rethink how much training these new recruits get and how quickly we give them all we've got. We will train them well enough to do well and let them earn more training opportunities as rewards."
Company-specific training efforts -- for example, training on specific products -- will always be needed. However, at least some of the need for that training will be offloaded onto technology. As wireless devices make data more accessible, workers will simply tap a database for information that would once have required specialized knowledge. Employees may be trained on how to use the database, but understanding the value of the information it contains and how that information can be used to help customers may be up to the individual.
This sort of training also does not provide the higher-level skills that make an employee both more marketable outside the company and more valuable inside the company. For example, in managing for the short term, managers determine how they best receive information and how they can most effectively disseminate it. Many companies have implemented formal testing strategies such as the Myers-Briggs personality inventory to help managers and employees profile themselves and understand how they take in and process information.
For those skills, a company may encourage individual development, but the individual is often responsible for obtaining the skills he or she needs, since it ultimately rewards the individual more than the company. Making the right choices will influence how well an individual is able to do his or her job, and produce results.
Companies are more willing to train people in some of the technical skills of a job, says Carol Rohm, Vice President of PrideStaff, Inc., a Fresno (Calif.)-based staffing company with 33 offices in 13 states. In many cases those skills are simply easier for people to pick up than such things as communication and a sense of accountability.
"A lot of those soft skills need to be taught at a young age; it's often a question of whether they get them at their first official company they work for. I've seen kids coming out of college never having utilized a checkbook and assuming they'll make $50,000 a year. Often they're not even trained to send thank-you notes after an interview."
This ability to self-select training options and paths, facilitated by the organization, provides managers and employees with the autonomy and freedom of choice that is so important to motivating them long-term. Managing for the short term in this case may not only help the company to "make its numbers," but also provide individuals with greater ability to chart their own destiny.
Aligning Outplacement with the Realities of Turnover In a study of more than 500 managers in North America, three-quarters of them reported knowing employees within their company whose unique knowledge would be lost if they left the company. Yet the same study showed that most companies have no established plan for capturing knowledge from departing employees and passing it on to others.
Part of managing for the short term is acknowledging that key employees may not be around forever under the best of circumstances, and that it is important to retain as much knowledge as possible. Some companies work formally with employees leaving the company to do a "brain dump," to get as much as possible of what's inside an employee's head on paper before the exit. Others encourage "alumni" to stay in touch with people inside the company, on the theory that even though they have left the company, they can serve as valuable resources, informal salespeople for the company's products, or even customers.
Downsizing is another area in which the need to balance short-term concerns about cost with long-term strategy is strong. A company struggling to make its numbers often must decide whether to eliminate people it may have spent a great deal of time and money to get into the company. And companies may have to do so knowing that when the economy or the specific industry picks up, many of those positions and the expertise those employees have will be needed once again. At that point, the scramble to fill positions starts over.
The constraints of having to deliver in the short term cannot be escaped. At some point costs simply have to be cut, and layoffs may become inevitable. However, managing for the short term points to the need to create a strong hiring pipeline and maintain a broad base of contingent workers. Such options can provide flexibility in the short term while keeping in view the overall direction in which the organization wants to move.
Companies also are exploring ways to reduce the impact of hard times on their employees, to make their numbers while still trying to keep their employees' good opinion. For example, some companies are offering their employees a choice of taking unpaid vacation time, a pay cut for a specified period of time, or some combination of the two. Such strategies can help address short-term needs while allowing employees some degree of control over how those needs affect them personally.
VOICES FROM THE FRONT LINES -- The Value of Short-Term Incentives
"I think it is unrealistic to think we can motivate the troops with long-term incentives when our outlook/perspective is so short-term. Another point: to the extent there is a 'clear line of sight' from behavior to reward, performance improves. Short-term incentives make that linkage clearer." "With the recent economic developments, employees are more interested in what they can get in the short run. Long-run rewards work well at retaining people in a tight employment/booming market (e.g. stock options), but aren't very useful in more difficult times." "Every executive clearly knows the impact that short- and long-term incentive comp has on their motivation and productivity. Why wouldn't the same apply to the entire employee base? This will soon become normal practice."
"I think it is unrealistic to think we can motivate the troops with long-term incentives when our outlook/perspective is so short-term. Another point: to the extent there is a 'clear line of sight' from behavior to reward, performance improves. Short-term incentives make that linkage clearer."
"With the recent economic developments, employees are more interested in what they can get in the short run. Long-run rewards work well at retaining people in a tight employment/booming market (e.g. stock options), but aren't very useful in more difficult times."
"Every executive clearly knows the impact that short- and long-term incentive comp has on their motivation and productivity. Why wouldn't the same apply to the entire employee base? This will soon become normal practice."
Keeping Those You Want
The retention problem is particularly acute in areas where the demand is highest. Take information technology as an example. Among IT professionals, four years is the average stay in a job. For newer hires -- those who have been with a company less than two years -- it is even lower: less than three years. The demand for IT professionals outstrips supply by 20%, while the volume of work that IT departments will be asked to complete is expected to increase by 50% by 2005. Increased workload and high demand for certain skills combine to create a recipe for a highly fluid workforce in an area considered increasingly strategic.
As might be expected, the reasons for turnover vary. Among younger IT workers, the most mobile, the most frequently cited are promotions and higher salaries offered at other firms. For those 46 and older, the No.1 reason cited was retirement. Net Future Institute research shows that, though it is not necessarily what they desire, managers generally believe they have been most successful at increasing employee productivity by motivating and rewarding them on a short-term basis.
Examples of short-term incentives -- both financial and non-financial -- that Net Future Institute members have found effective include:
• "Incentives that focus on quarterly time frames."
• "Remuneration [that] follows the project life cycle -- for example, bonuses in connection with milestones."
• "Programs that have made working for the company a fun and dynamic experience, from Fun Fridays, to employee appreciation week, to 'Spot' awards, to quarterly awards."
• "Incentive compensation."
• "Paying attention to workplace environments, company philosophy, and effective benefits packages."
• "Challenging them to solve hard problems, empowering them to make decisions, supporting them if it wasn't quite the right decision, and getting them back on track. Having fun in a safe and caring environment, making sure they have career growth and opportunities and fair compensation. Sounds like pie in the sky, but it really works."
• "Stability and corporate track record...in a volatile market."
• "The prospects of the business as [an] incentive to remain part of an organization that has a future.
• "A program called '9/80,' [in which] employees work nine hours a day Monday through Thursday, then work 8 hours on one Friday and get the next Friday off. This results in a three-day weekend every other weekend.
In managing for the short term, it makes little sense to ask people to wait for long periods for their rewards when they are being asked to deliver in the short term, day by day, week by week, month by month. Instead, the entire organization needs to adopt some of the mentality of the traditional sales force, which has always been focused on immediate results.
Salespeople are frequently given incentives for reaching their short-term goals, whether the prize is a trip to Hawaii or a week's vacation with pay. Such immediate, competitive incentives can be a key way to keep everyone's attention on the here and now.
Nonetheless, long-term incentives continue to play a role in helping a company to achieve its long-term objectives. Senior executives and managers both view autonomy and challenge as the top incentive for retaining employees. Consider these verbatim comments from managers in response to a survey on short- and long-term incentives:
• "Compensation is not the key driver of productivity...short or long term. Productivity is best enhanced in organizations: with the right people, rewarded properly, in an environment where decisionmaking is speedy and high quality, where work processes are efficient and rational, where information and knowledge flow is open and honest, and where the management structure is supportive and goal specific."
• "Years ago when I worked for a company that provided computer software for the apparel-manufacturing industry, we found that in the manufacturing facilities where employees were paid on a piecework basis that the quicker they were able to see their earnings and receive them, the more efficient and productive they were." • "Immediate rewards for positive performance have had a dramatic impact on our productivity and employee-satisfaction measurements. Additionally, we have found that awarding quarterly bonuses, based on profitability, keeps our employees focused on profit-generating initiatives."
Executives who believe that employees really only work for the money need to re-examine whether they have missed opportunities to make non-monetary factors more significant to their employees. A more independent, mobile workforce may place a higher value on autonomy and latitude in decisionmaking than has been the case in the past. And that autonomy is precisely the kind of reward that managing for the short term can and should provide. In this case, that requires making sure that employees understand how they can further the company's goals in very tangible ways -- ways that may also earn them financial reward -- and enabling them to take action to do so.
Pushing decisionmaking ability down the chain of command does more than offer workers some of the autonomy executives find so important for themselves. It also frees up time for a manager to take on higher-level tasks personally. And those higher-level tasks can mark the manager as a leader.
From Managing for the Short Term (Doubleday, June 2002). Copyright 2002 by Chuck Martin. Reprinted by permission of Currency Doubleday.