Forward

A Note from the Author

GOOD ECONOMY, MODERATE ECONOMY, bad economy, hiring or laying off people —it makes no difference. Every company depends on key people. In my twenty some odd years running, owning and advising businesses the 80/20 rule (modified to 60/40) applies: sixty percent of the work is done by 40% of the people (the sixty percent who are doing only 40% of the work are reading Dilbert and complaining). It was ever thus and likely will be ever so.

But that’s not the problem. The problem is this. Most organizations, profit/non-profit, public/private, large/small, high tech/no tech have no comprehensive and consistent plan for keeping their key people. From department managers to CEO’s, from college deans to school principals, from shop floor supervisors to managers in city government, it seems like losing key people is just part of organizational life. I have run into few organizations that have a comprehensive key employee retention initiative as one of their top three priorities. It is kind of a classic organizational issue: we talk lots about it, but generally do little. Sorry, but that’s the truth.

Why? Because it is a complex and multi-faceted problem requiring a comprehensive yet somewhat individualized solution. That’s a challenge. But can’t we solve it with money? Money is an answer, but not the answer. In the last ten years I have watched money become much more critical in terms of employee retention, but it is still only part of a larger equation. To borrow an example from the world of sports, some high profile professional athletes simply sell their services to the highest bidder. Others take less money to stay with a team that has a chance of winning, that’s respected, where he or she is comfortable, maybe even has a home and family.

But I am getting into the meat of the matter, into the story of Steve Turnberry and Enserv1. Here’s the bottom line. If you want to increase the retention of key employees, if you want to decrease the turnover of key staff, if you want to manage your talent, the solutions are here. I have tried to suggest in 150 pages or so of easy reading what any organization, any manager or supervisor, can do to reduce turnover of key people.

My position on retention is clear. Turnover is the problem that doesn’t have to be. My hope is that the journey through the E-R (Employee- Retention) initiative of Enserv will provide a guide to helping you, your department, and your organization retain key staff. We begin our E-R journey with the reminisces of Steve Turnberry, CEO of Enserv…

Images, whether physical or mental, grab our attention far better than words. The mental image that grabbed my attention, the image that caused me to question the effectiveness of my own management practices, the image that made me finally take action after years of "head in the sand" evasion tactics, was one of me standing on the roof of our headquarters building dropping ten dollar bills into the air, not just ten or twenty, not a thousand or five thousand, but two hundred ninety thousand (yes 290,000!).

When I saw this image and realized that this figure of two million nine hundred thousand dollars minimally equaled our twelve month turnover cost, when I finally realized that this was just a low estimate of the hard cost of losing good people over the past twelve months, I (we) finally realized that this was a true emergency—a heart attack, not a sore knee—and did something.

This is the story of that something. This is the story of how Enserv put the pieces of the puzzle together to go from a key staff retention rate of 84.3% to one of 96.6%. In so doing, we not only took a couple of million to the bottom line, but significantly increased other measures of success such as repeat business, customer satisfaction and productivity. It all began as I unraveled the answer to the question of "who took my team."

C H A P T E R 1

The Awakening

In Which the Cost of Turnover is

Revealed, the Premise of the Retention

Plan is Shared, and Agreement is

Reached on the Next Step

IREAD ALEX’S PROPOSAL over the weekend as I had promised. It was eye opening, to say the least. I’d obviously dozed through her attempts to give me a wake-up call—or maybe I had just been punching the snooze button. In either case, in terms of retention, I had definitely overslept. This was much more of an emergency than I realized.

However, being the control person that I am, I couldn’t accept the plan without more detail. I needed to believe that there would be a happy ending before I gave the go ahead. Looking back on it today, I realize my response was somewhat unconscious—an irrational search for a guarantee before I invested time and money in the process. I wanted a model to adopt, easy solutions from which to select. I wanted this problem solved—now! I needed more detail from Alex and I wanted it soon.

"Alex, are you free for lunch today?" It was 7:25 Monday morning and I was leaving Alex a voice mail. Although I was booked for the first few hours of the morning, lunch was open. "How about 11:30 in my office? Just let Terry know what you want from Tony’s Deli and I’ll have it brought in. If you can’t make it, let me know and we’ll schedule later in the afternoon." I paused briefly and then added, "Oh yeah, I’m intrigued. Can’t believe it will work, but I’m intrigued."

At 11:30 on the dot Alex walked in with Ram Patel, MBA, CPA, JD and I don’t know what else—he may even have an engineering degree. All I know is that I depend on him not only to run Accounting, but also to sit with me whenever we talk to bankers, insurance people, retirement specialists, those types. He’s extremely bright, very dedicated, thorough, deliberate, analytical and very results driven. My first thought was, "Why is he here?" My second, "I hope he’s not resigning." Then I remembered that Alex had mentioned Ram in the proposal. The Accounting Department was Alex’s beta site, the department where she piloted her plan.

I guess the surprise showed on my face. "Didn’t get my e-mail, huh," chided Alex. (No I hadn’t. Monday mornings usually mean 40-80 e-mails and I was in meetings all morning and just hadn’t had the time.) "Well, I asked Ram to come to this meeting so that he can provide anecdotal evidence that the plan works and answer any questions you might have about its implementation in his department."

"Fine, no problem. I assume Ram put in his order, too. Let’s just chat while we eat and then we’ll look at the proposal." They both had salads while I had my cholesterol laden po’ boy. (That’s a hoagie to some of you and a sub to others, but in Louisiana and southeast Texas, the main ingredient is usually mayonnaise). After we were finished, I fired my opening salvo. "I perused the proposal and, honestly, I know it worked for Ram, and no offense to accountants, but the demand for them is not as great as it is for engineers."

Before Ram could speak, Alex replied—pounced would be more accurate. "Au contraire, mon ami. The demand for quality professionals at all levels exceeds the supply. Ram’s people get calls from headhunters the same way engineers, computer folks and good sales and marketing people do. As a matter of fact, if you look at the turnover in Ram’s department a year or two ago, it was one of the worst in the company. That’s why he came to me.

Steve, you’ve gotta stop thinking why this won’t work and start thinking about how to make it work."

"Ram came to you?" "Yes, Ram came to me." Ram jumped into the discussion, "I went to her for advice, I mean, she is HR," he said defensively.

"Okay, okay, that makes sense. But, Ram, why didn’t you come to me?"

"If I may speak directly," Ram responded, "you have been so focused on making sure contracts are met and revenue is maintained, that you have had little time for anything else. As a matter of fact, I did come to you first. In effect, with a few carefully chosen words, you said, ‘Not now.’"

Properly chastised, I asked Alex to begin her presentation. I asked her to just give me the background and rationale, and some of the plan as if there had been no written proposal. Finally, I asked for some specifics in terms of projected results. Then, for good measure, I added, "And also exactly how much will this initiative cost me per year?"

Alex gave me "the look"—a facial expression she uses that clearly and unambiguously conveys the message that sometimes I can be a real pain. She flipped a switch, the light came from the projector, she hit another button on her laptop and a graphic appeared on the wall (Figure 1).

"Key Employee Retention," she began, "or if you prefer its negative sibling, key employee turnover, occurs at three levels: the organizational level— for us, that’s Enserv—the departmental or business unit level and the individual level. The most important of these is the departmental level, and I’ll tell you why later, but before I do, let me briefly explain the importance of organizational or company-wide issues.

Let’s first look at the issues that are primarily controlled at the top of the organization.

Another graphic appeared (Figure 2).

"Corporate or organizational policies can encourage or discourage retention of key employees. In a moment I’m going to show that the behavior of the individual supervisor, by whatever title, is the single most important determinant in whether a person stays or goes, but what we are really talking about is a weighted matrix of factors that differs by individual and in which things like pay and benefits are a critically important part of the mixture."

I interrupted. "I know you know what you just said, but I’m not too clear. How about trying it again."

"Okay. What I am saying is this. Money is important, very, very important but so are sick time, vacation time, choice of insurance, and all the other benefits. We must pay attention to these and make sure that we use these tools to make people want to stay with the company. Notice I said ‘want to,’ not have to. We don’t want to put golden handcuffs on anyone. Salary, commission, bonuses and benefits are baseline expectations; they are not differentiators except where they far exceed that which others are offering.

"For example, if our people were leaving to go to work for a company with the promise or hope of becoming a millionaire within the next couple of years, or if they were getting a fifteen to twenty thousand dollar increase in salary, then money matters. However, according to my exit interviews,

KEY EMPLOYEE RETENTION AS A SYSTEMIC ISSUE:

• Organization or Company

• Department or Business Unit

• Individual

that is not why most of our people are leaving. They are leaving for a variety of reasons, some of which are more important to some people than they are to others. I will get to more specifics of why they are leaving later, but I can tell you this: most of it has to do with their direct supervisor."

"So," she continued, "pay and benefits are important at a company-wide level, but so are things like management, growth opportunities, promotions, training and freedom to explore."

She paused for a moment and I immediately rose to my own defense. "Alex, ten years ago, even five years ago, there were growth opportunities and we were promoting like crazy. But today we have few openings. The market is tight and we aren’t growing. The only promotional opportunities come when people quit, and, if your plan succeeds there will be fewer of those. I’m damned if I do and damned if I don’t." Alex gave me the "look" again. "Steve, are you going to let me present this proposal?" "Sure, go ahead," I said, then muttered, "but I can’t just manufacture promotions for people."

ORGANIZATION OR COMPANY WIDE ISSUES:

• Pay Benefits

• Growth, Training, Freedom to Innovate

• Vision, Alignment, Pride of Belonging

"I didn’t say promotions," she continued patiently, "I said ‘growth opportunities.’ When I say growth, you think promotion. But there are many other types of growth opportunities that you can provide. People can share time in other departments and on other projects. They can further the skills they currently have by attending training classes or by working with a mentor. The company can support their desire to be more creative or encourage them to start and run a pet project or improve internal processes.

They might proceed up a career ladder that recognizes technical competence, and that parallels in salary and benefits, the management ladder. "In short, there are lots of things that we are not doing that we could be doing. If we want ideas on what they see as growth opportunities, all we have to do is ask them and they will tell us. No, we can’t do all of it, but yes we can do some of it. That’s why this second bullet reads ‘Growth, Training and Freedom.’ If you give people some freedom to be creative, to innovate and to contribute, they are going to want to stay."

I couldn’t help myself. I jumped in again. "But that’s not up to me!

That’s the department manager’s job. I don’t micromanage this place. It’s their direct supervisor who gives them the latitude to do things differently." At the micro-management comment, Alex and Ram exchanged what might most charitably be described as an "insider’s smile."

"And who, Steve," asked Alex, "gives the managers the latitude to extend latitude?"

"The people they report to, my executive staff…oh, I get it. They get it from me, so it’s all my fault."

"No, Steve, it’s not your fault, but it is your responsibility. You think you don’t micro-manage? Everyone here is cautious about making decisions because they fear your disapproval. You have pounded on the table so many times; you have reversed the decisions of others so frequently; you have overruled the combined weight of your executive team so often, that few meaningful decisions are made around here by anyone but you."

Her accusations caught me somewhat off-guard. I just kind of looked at her is silence trying to decided if she was maybe, just maybe, a little right.

She continued. "When we were a company of two or three hundred, when revenues were under two hundred million, that approach may have made sense. Today it doesn’t. You just wind up with people waiting around to see what Steve wants, then they do it. Even in senior staff meetings there is minimal discussion. They just try to guess what you want so that they can get out of there and back to their departments."

I must have looked unconvinced because Ram got about as direct as he can. "Steve," he said, "we have worked together for almost fifteen years and you do listen to me, but I am one of the few. Alex is right."

Alex did not wait for me to reply, but continued her presentation. "Which leads me to the third point; the one about vision, alignment and pride of belonging," said Alex and another slide appeared on the screen. "You will notice," she continued, "that I say, ‘Without senior leadership commitment and active involvement, retention efforts fail to achieve their full potential.’ In fact, individual managers can do a lot. They can impact at least seventy-five percent of all turnover. But that still leaves a lot of money on the table, a lot of money. When you understand how much that other twenty-five percent is, Steve, you will agree—it’s a lot of money at Enserv."

WITHOUT SENIOR LEADERSHIP COMMITMENT AND ACTIVE INVOLVEMENT—

KEY EMPLOYEE RETENTION EFFORTS

Alex knew my hot button and I didn’t disappoint her. "How much are we talking?" I asked. I hadn’t forgotten the comments about fear and pounding on the table, but some things—like money—were, well, more significant at this particular moment in my life.

"Steve," she replied, "we have lost thirty-nine professional staff, primarily engineers, during the past twelve months. Some, frankly, were just cruising, just doing the minimum to draw a paycheck. But at least thirty-one of these we considered key staff. In addition, we lost twenty-three support staff, everything from admin to billing, the great majority of whom had been with us less than eighteen months, but we still considered fourteen of them key people. And of course, we lost two of your executive team."

Ram spoke up. "Based on my initial analysis, I conservatively estimate, remember this is just a very conservative estimate, and you know how I hate round numbers—the cost at two million, nine hundred thousand dollars." I thought the figure would be, at the max, mid to high six figures. I had no idea it would be that much. I coughed, "What? How much?"

Alex added more fuel to the fire. "Oh, yeah and those are just the real dollars, not the ones from lost customers, rebates and concessions for late projects. We are finding that, on the average, it takes sixty to ninety days to fill a position. So, these indirect costs probably double or triple the hard dollar costs. Turnover is probably costing this company five point five million to eight million dollars annually. We should be able to cut that in half, maybe by two-thirds. Some companies in our industry run at five to six percent— and they don’t pay much better than we do. That’s the best I can do for you in terms of projected results. You ask me how much this proposal would cost you, but I am thinking in terms of how much this is going to save you. But I can’t give you any guarantees. By the way, Steve, three to five percent in our industry is very, very good and, to be honest, you don’t want to keep everyone."

It would be an understatement to say that Alex now had my full attention, but I hadn’t finished protesting, not yet anyway. "Wait a minute," I said, "a few minutes ago you were talking about vision and alignment. I hate that silly ‘consultese.’ That’s how all those guys talk. ‘Vision, alignment, pride of belonging.’ Makes me want to throw up.

They come in here and sell me a deck of cards that I am supposed to create a building with. Then they leave." "Steve," she began in here most empathetic and patient voice, I know that you have been burned with these concepts before, but this time it’s really different. Ram and I have already crafted a short vision statement that will focus the entire organization on the importance of retention and the alignment needed to achieve it. The statement is designed to rekindle pride in being an employee of Enserv and to re-establish our goal of being the leading provider of services in our field—with our customer base. We really are good, so let’s brag about it. People want to be a part of the best. Striving to be the best brings meaning to individual effort. I don’t want to get too far up on this soap box, but just giving people a vision and showing people you are committed to it should help increase retention."

I wasn’t giving in that easily. One last shot. "Can’t I just give staying bonuses and raises to some targeted employees, kind of like they give football, basketball, hockey and baseball free agents?"

Alex flared, but kept her voice calm. "Sure, but what will you do six months from now? Offer more? Money has a short-term motivating effect. Powerful, but short-term. Our plan is to involve all company managers, from project leaders to vice presidents, in a defined strategic plan to increase key staff retention. It’s going to mean several meetings, lots of training and follow-through. In the short term it means more work for us all. But long term, this plan will really pay off."

"There’s one more thing, Steve." Always was. But I didn’t say anything.

"It’s the really tough part of this whole deal. I chose E-R both because of the play on words, the image that it suggests and because of how Emergency Rooms work. Think about it. In an emergency room, what works for one patient, doesn’t work for another. The treatment needed by one individual is not the same treatment needed by another. One diagnosis, doesn’t…"

"I got it, Alex." I interrupted. "What are you saying?"

I am saying that there is no "one-size fits all," no bureaucratic across the board treatment. Individual managers, to some degree, consistent with some broad guidelines, need to individualize their E-R approach. We did it with Ram’s group we can do it across the whole company. Ram was, for Ram, pumped. He spoke up again. "Yes, in my department alone during the last twelve months I have saved four people that I would have lost had Alex and I not developed and implemented the plan.

Two accountants, one billing clerk and one in AP. That’s just the ones I know of, it may have been more. Some others have mentioned to me that before I started doing things differently they were ready to leave. You know Sam Greene in my department? He actually came up to me and said ‘thanks.’ After I developed a vision statement for accounting and started talking to people about their plans and goals, I even felt better about my job. I must speak directly once more in clarifying my position. I must say again, that based on both my experience and my analysis, you cannot afford not to put this plan into action."

"What’s this plan you keep talking about?" I asked. "And you keep talking about how important the individual manager is. How does that figure in and how do I control what the individual manager does anyway? It seems like a contradiction. First you say more freedom. Then you say control them.

Can’t have both." I thought I had her on that one, I was now, I realized, just fighting from ego.

"Sure you can," replied Alex. "You are still thinking about ‘or’ when you need to be thinking about ‘and.’ Buy us lunch again tomorrow, and we’ll show you how it works. I’ll send you summary meeting minutes later this afternoon."