Thursday, October 16, 2008

Employee Retention Needs Similar Across the Globe

Employee Retention is not just a North American challenge. In some global markets, the rate of employee turnover is reaching close to unsustainable levels. According to an article in MIT Sloan Management Review Fall 2008, some companies in India are experiencing turnover rates of young professionals of up to 50% per year. Can you imagine 100% turnover every 24 months?

India's initial approach to solving the turnover crisis appears to be similar to the United States tactic during the dot-com era. That is, increase salaries. Indian employees working for multi-national corporations are projected to receive average salary increases of 14% per year, following on last year's average increase of 12.6%. This is the largest expected increase world-wide as reported by ECA International's Salary Survey for 2007-2008.

Unfortunately, as most of us in Human Resources have learned (the hard way), higher salaries don't effectively plug the turnover drain. In fact, I will theorize that increasing salaries not only doesn't solve the problem, it also serves to exacerbate the situation as companies compete with one another to offer the best pay. Creating a talent pool of "money-hoppers" causes instability for the entire market as employees bounce from company to company.

Which brings us back to India and the MIT Review article. This short piece titled, "How to Retain Talent in India" discusses the findings of research conducted by the Villanova School of Business on the non-monetary rewards that retain employees within the high turnover job market of India. The research consisted of conducting and analyzing approximately 4800 surveys of employees in 28 different companies regarding their attitude about their employers and their intentions to stay or leave the company.

The results are not shocking but they are organized and presented nicely. The researchers found four areas that contribute to employee retention:
  • performance management practices
  • professional development practices
  • quality of supervision
  • level of social responsibility of the company
These four areas were shown to drive employee satisfaction and pride in the organization which was further correlated with the likeliness of the employee to stay (or leave).

Interestingly, the researchers found that in a fast paced market like India (and one can extrapolate this to other markets) employers need to focus on the above four areas from the very first days of each employee's career with the company.
The best companies drive employee satisfaction and pride by providing management support, training and professional opportunities early on, says (Jonathan P.) Doh, who is director of the Center for Global Leadership at Villanova. Just how early? In the high velocity Indian marketplace, the new employee honeymoon is so short that employers should start an employee's professional development plan on his or her first day, the author's advise. 'Our findings suggest that even six months from the start date is probably too late,' Doh says. [At that point] the employee is already making decisions about whether to stay around or not."
Professor Doh suggests that if employees do not receive support early on, they will seek it out elsewhere. This is consistent with what we are seeing in the US market with the Generation Y population. For many employees, the job is viewed strictly in terms of the development opportunities it provides with little thought or care about the employee's responsibility in helping the company succeed. (However the tide may be changing on this - more in another post on this topic.)

Two recommendations from the researchers include:
  1. Target high potential employees early on and create accelerated development plans for them.
  2. Train supervisors on how to best provide support and development for employees
To which I will add a third suggestion that addresses all of these areas:
  • Develop mentoring programs, particularly niche mentoring programs for high performers, new supervisors, new employees and other difficult to retain populations like women and diverse employees.
The research addressed in this article was conducted by Professor Doh along with Stephen A. Stumpf and Walter Tymon also from Villanova and Michael Haid of Right Management.

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