It’s a nightmare scenario for any business: A star employee gives notice. Out the door goes years of experience, in-depth knowledge of sales and marketing plans, and a number of hard-won customer connections.
The ghosting of a top-performing employee has a major impact on a home building operation. “When you lose your best employees you lose not only their skills but also their leadership potential,” says David Dye, president of Lets Grow Leaders, a management consulting firm in Washington, D.C.
Expect more top employees to seek greener pastures in the months ahead, and fewer quality replacement prospects. With the U.S. unemployment rate now less than 4%, most economists believe the labor market has reached a condition of full employment. As top-quality talent grows scarce, companies will try harder to lure away your best people. “When demand for personnel is high and supply is low, people have more choices for where to work,” Dye says.
A survey by SAP and Oxford Economics, published in the Harvard Business Review (HBR), found that less than half of high performers were satisfied with their current duties, and one in five is likely to seek work elsewhere in the next six months. “Many want to further their careers by moving on to more promising positions,” says Richard Avdoian, an employee development consultant in St. Louis.
Spot the Stars
The first step to keeping your best employees is to identify and focus on them. Avdoian suggests viewing your employment pool as a complex of three levels of workers on an escalating scale of value: slackers, foundationals, and high achievers. Slackers do the bare minimum to collect their paychecks. Foundational employees, in contrast, perform their duties in a conscientious and dependable manner, serving as reliable anchors to your business. The final category consists of people who outperform the norm. “High achievers are driven go-getters,” says
Avdoian. “They are your most productive employees.” These individuals can deliver up to 400% more productivity to a workplace than other employees, according to the HBR report.
With this short list in hand, make sure you give your best people the things they need to keep them on board. What do they want more than anything else? The answer is probably not surprising: The HBR report found top performers care more about competitive compensation. You must offer them a salary commensurate with their skills and at least equal to what other employers in your region provide.
Pay for Performance
High performers care more than their slacker or foundational co-workers about the ability to earn bonus pay based on performance. Top salespeople, for example, will expect additional compensation when they outperform their peers. The goal is to create a win-win situation for employer and worker: Fixed compensation costs remain low while employees have the chance to earn more when they excel.
A pay-for-performance system is a far cry from familiar reward relics, such as annual seniority-based salary hikes and automatic year-end bonuses. The conventional systems weren’t getting the job done because they did not incentivize better performance. Meanwhile, ongoing salary increases bloated payrolls until the business risked becoming uncompetitive.
“It’s important that people understand their overall part in the success of a business,” says Donna Cutting, CEO of Asheville, N.C.–based Red Carpet Learning Systems. “Performance-based pay does that.” At some firms, performance compensation represents 20% or more of take-home pay.
Valuable as it is as a retention tool, performance-based pay also carries the hazard of unwittingly rewarding the wrong behavior. “You have to make sure the objectives you set are not just based on sales or revenue, but also on the way customers and colleagues are treated,” Cutting says.
Be Inclusive
One more hazard for performance-based pay: Employees left out of the program may resent their inability to earn bonus compensation. That’s why it’s important to include everyone, even those for whom it’s difficult to measure quantifiable workplace results.
“For people who are solely responsible for their work and where their activities can be readily quantified, pay-for-performance plans are more straightforward,” says Dye. That’s why many companies begin by looking at easily measurable achievements.
Designing an effective program is more difficult for some staffers who do not perform in quantifiable ways. However, it is not impossible. It can work for “any kind of support staff, as long as they are given the necessary tools by management,” says Cutting.
The biggest challenge is finding a way to measure support staff performance that is fair and reasonable. One approach is to ask, “What is this person’s job, and how well are they doing it?” If you ask employees how they measure their own performance, you may hear good ideas that can be translated into a quantifiable system.
Advancement Pathways
Top performers expect their employer to help them advance. “You need to create a culture where people want to work with you because of what they are going to learn and have a real clear-cut career ladder so they see how they can move up,” Cutting says.
In a perfect world, a business would have enough management positions to accommodate every deserving person. Since that’s not often the case, “you need to create a growth path for top-performing people that keeps them feeling challenged even though they are not advanced into management positions,” says Dye.
One solution is to feed the craving of top performers for new skills. “The more opportunities you can provide them to learn, the more loyal they will be,” says Christina Eanes, a workforce management consultant in Alexandria, Va., noting that those opportunities can be offered by thinking laterally as well. “Not every top performer expects that advancement means a higher-level position.”
Eanes suggests creating an individual development plan (IDP) with each star employee. An IDP might include a pathway to advancement, or the acquisition of new skills. One individual might take on responsibility for larger projects. A second might share their knowledge by training other people. A third might cross train in areas outside of their core competency. Think of these as “expertise promotions.”
These work environment modifications, combined with a robust pay-for-performance plan, should go a long way toward keeping your best people content. Monitor how well you are doing by asking your staff for feedback. And observe how employees perform: Are they acting in more motivated ways and paying closer attention to things that are really important?
Healthy Work Environment
A respectful, supportive work environment also is key to retaining top employees. “It’s important that people understand what the business wants, and that they feel valued when they meet the employer’s expectations,” says Cutting.
Communicating those expectations is necessary as top employees want regular feedback. Negative surprises such as a drop in bonus pay may well send them packing. The HBR report highlights the importance of monthly performance reviews.
Creating a program to retain your top people takes time and effort but the payoff can be considerable. “Businesses which fail to retain their best people will be stuck with a majority of their employees being slackers and overtaxing the foundational employees whom they rely on for productivity,” says Avdoian. “And that will lead to a decline in employee morale, which will in turn impact productivity and devastate profitability.”
