HOW TO KEEP YOUR HIGH- PERFORMANCE TALENT How to Keep Your High-Performance Talent

5 | 2012
The Magazine of WorldatWork©
®
HOW TO KEEP YOUR HIGHPERFORMANCE TALENT
How to Keep Your High-Performance Talent
By Myrna Hellerman and Jim Kochanski, Sibson Consulting
Identify and
reward high
performers
to drive
organizational
success.
There is palpable tension in many
organizations regarding how to retain
employees. The expansive approach
advocates retaining all but the very
worst. The selective approach focuses
on retaining star performers — a
small group of high performers whose
sustained, evidenced contributions drive
organizational success. Although advocates of both approaches have reasons for
their stance, the selective approach will
make the organization a winner in the
war for stars. (See The War for Stars and
The War for Talent on page 59.)
© 2012 WorldatWork. All Rights Reserved. For information about reprints/re-use, email [email protected]
The Expansive Approach
The expansive approach strives to retain
virtually every employee under the
theory that everyone is needed or they
would not be there. Its proponents argue,
“Why upset our harmonious culture by
creating an elite group that receives
special treatment? All our employees are
critical and perform well, and most are
not going to leave.”
The expansive approach is easy to
administer because managers do not
need to identify exceptional contributors.
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MOST SELECTIVE APPROACH ORGANIZATIONS
SET VERY HIGH PERFORMANCE STANDARDS,
which typically appeal to high performers who relish the
challenge and the recognition associated with achieving tough goals.
Nor do they have to differentiate
performance messages and rewards,
level with low and average
performers or risk raising high
performers’ expectations.
However, the expansive approach
does not support an organization’s
efforts to raise overall performance.
It discourages and disengages
high performers, who may begin
to think, “Although I contribute
more, I get treated like everyone
else. Why bother?” Consequently,
the expansive approach eventually
creates an entitlement culture that
drives away the best performers.
The Selective Approach
The selective approach acknowledges
high performers’ contributions to the
organization’s success. It identifies,
nurtures and works to retain the
high performers at all levels of the
organization. It seeks to produce a
cycle that, in the long term, will not
only retain existing high performers,
but create and attract more high
performers and generate everimproving standards of performance
and organizational results.
Most selective approach organizations set very high performance
standards, which typically appeal
to high performers who relish the
challenge and the recognition associated with achieving tough goals.
They want to win, and when they
do, the organization wins through
improved results and the continued
retention of the high performers who
make it succeed.
56 | workspan may 2012
Although critics of the selective
approach suggest it is not a good
fit for organizations that want to
foster an egalitarian culture, its
practitioners understand that every
workplace has employees who
contribute more than most and
should be recognized and retained.
For example, a high-tech company
ranked near the top of several Best
Companies to Work For lists fosters
an egalitarian culture where all
employees receive the same annual
cash incentive (a percentage of base
pay), which is determined by overall
company results. However, the high
performers (about 5 percent) are
also rewarded with much larger
base pay increases. This helps the
organization retain its exceptional
contributors, who would be difficult
to replace and are critical to its
long-term success.
Most importantly, selective approach
organizations recognize they are
in a war for stars. They know that
while other organizations are not
hiring as many people as they used
to, high performers always have
opportunities to move.
How to Win the War for Stars
The selective approach requires a
disciplined focus on retaining the
organization’s high performers. The
key steps are described below.
Identify High Performers
Selective approach organizations
are experts in identifying high
performers. As one organization’s
leader said, “If you do not know
who your high performers are, it is
hard to take the necessary steps to
retain them.”
Selective approach organizations
set high standards. Typically, high
performers have made consistent,
evidenced, extraordinary contributions to the enterprise’s ongoing
success. The most common standards
are measureable business-based
performance goals, job duties,
activity objectives and competency
standards. Because few employees
consistently exceed the standards,
few are rated high performers.
Selective approach organizations
generally designate 5 percent to
25 percent of their employees as
high performers. When that number
exceeds 25 to 30 percent, which
is typical at expansive approach
organizations, it usually signals
low performance standards. It can
also mean the organization designates high performers based on a
single event rather than sustained,
evidenced, high-value contributions.
An organization’s leaders must be
aligned on the toughness and achievability of its performance standards.
When one organization struggling
to retain its top talent asked its
leaders, “What percent of employees
should be rated high performers
when organizational performance
is strong?” the answers ranged from
10 percent to 75 percent, illustrating
the need for better alignment on the
definition of high performance. Until
the leaders agreed, the organization
ALTHOUGH CRITICS CLAIM
DIFFERENTIATION RESULTS IN FAVORITISM
and creates a difficult-to-penetrate group, selective approach
advocates argue that the high-performer group is not closed.
could not begin to move away from
its expansive approach culture.
Set and Communicate Expectations
Selective approach organizations
recognize their responsibility to help
employees have accurate expectations
about their performance as well as
the career and rewards consequences.
Without clear expectations, many
employees (not just high performers)
will be disappointed and dissatisfied.
Expansive approach organizations
hesitate to let their high performers
know they are high performers
because it might raise their expectations. Selective approach organizations
know that high performers already
have high expectations for the
employee/employer value exchange.
Companies recognize the importance of being able to differentiate
rewards for high performers as well
as being upfront with them about
what to expect.
Several years ago, a large retail
business decided to be honest
with its professional staff about
expectations and consequences.
Senior managers had to complete
a simple spreadsheet that included
the employee’s:
❙❙ Prior and current
performance ratings
❙❙ Compensation and any compensation actions recommended
❙❙ Next career step, if any.
Senior leaders met annually to
calibrate their ratings and recommendations. Leaders who rated too easy
had to adjust their assessments, as did
58 | workspan may 2012
the few who rated everyone the same.
Managers were then responsible
for delivering the honest messages
to employees, telling everyone
where they stood in the view of
the leadership team.
Two years later because of this
process, several problem employees
had exited the organization, a
number of employees had improved
their performance dramatically and,
most importantly, not one high
performer had quit.
approach advocates argue that the
high-performer group is not closed.
They point to robust evaluation
systems that identify rising and
declining high performers and
manage them into or out of the group.
Expansive approach organizations
cannot differentiate rewards and stay
within a competitive cost. If 30, 40
or 50 percent of employees are rated
high performers, there will not be
enough money to make a significant
differentiation in merit or incentives.
A prominent media company
What Is Different for High Performers?
illustrates the use of a differentiSelective approach organizations
ated compensation and career
differentiate high performers’ career
trajectory plan for its well-vetted
trajectories and compensation
high-performer group. Instead
opportunities. They are faster paced
of participating in the company’s
and more generous.
egalitarian profit sharing-type incenHigh performers are less likely
tive plan, high performers have a
to leave or be recruited elsewhere
high-risk/high-reward incentive
because they are treated as indispensarrangement. Although this program
able players on a winning team. In
can generate outsized rewards, the
return for their consistent, evidenced
threshold for compensable perforcontributions, high performers are
mance is also very high. (Small or
recognized and rewarded exception$0 payouts can occur.)
ally well, both extrinsically and
Each year, each high performer
intrinsically. They are chosen for
meets with the COO and CFO to
special, highnegotiate a deal, which is
To read a book
profile assignments,
memorialized on a deal
about this topic, visit
receive accelerated
sheet that defines financial,
www.worldatwork.org/
personal developoperational and leadership
workspan.
ment opportunities,
expectations and the value
enjoy coaching/mentoring relationships
of the award that could be generated.
with senior leaders, and, of course,
Each quarter, a self-evaluation against
have the opportunity for significantly
performance expectations is reviewed
larger performance-based rewards.
in person with the COO and CFO.
Although critics claim differentiation
These conversations — which some
results in favoritism and creates a
participants value more than the
difficult-to-penetrate group, selective
financial reward — create a unique
mentoring relationship between the
high performers and the top leaders.
High performers think and feel like
owners in the company’s success
(which has been exemplary, despite
difficult economic times). Because
none of the company’s talent competitors offer this opportunity, high
performers rarely leave.
Make it Personal
Selective approach organizations recognize that retaining
high performers is not just about
aggressive compensation differentiation. They make being a high
performer a very personal and
professionally special experience.
Senior managers at selective
approach organizations take the
time to know and mold the high
performers. Their involvement goes
beyond an email blast, a congratulatory handshake or an annual
meet-and-greet session. Through
regular face-to-face dialogue, they
provide frequent feedback at a strategic and tactical level on how the
high performers can enhance their
contributions to the organization.
A major retailer believes the unique
reputation-building opportunities it
provides its high performers improves
retention. The executive leadership
regularly asks the high performers
to analyze and develop directional
recommendations for a specific strategic initiative under consideration.
A small cross-functional team of
corporate and field high potentials
is assigned to work with the high
performers. Sometimes multiple highperformer-led teams work on the
same issue. This work is in addition
to the high performers’ regular jobs.
At the end of a very aggressive timeline, the team discusses its findings
and debates its directional recommendations with the executive leadership.
This direct interface with executive leadership on a strategic issue
can be very motivating for the high
performers. The executive leadership
frequently gets creative solutions and,
more importantly, gets to observe
The War for Stars
and the War for Talent
The authors’
longstanding
interest in the
For more
retention of high
information, visit
performers dates
www.sibson.com/
back to the “War
publications-andresources/articles/
for Talent” study
performance-bar.
by McKinsey &
pdf.
Co. and Sibson
Consulting in
1998. The research was conducted
during a general talent shortage,
when unemployment was low and
turnover high. Now the war is more
subtle and is being waged mainly
for star performers and skills in
short supply.
firsthand the high performers’ creative
problem-solving and project-management skills. High performers get the
opportunity to build their reputation
beyond their immediate workgroup
and the organization’s high potentials
get role models.
Define Success
Selective approach organizations are
fact-based and focused in their efforts
to identify and retain high performers.
While most organizations claim
they pay for performance, selective
approach organizations really do.
They know not just their overall
turnover rate, but how it differs
by performance level. But perhaps
the most important ingredient is
the nonformulaic, nonbureaucratic
engagement of senior management
with high performers.
One example of a well-executed
selective approach is Alpha Corp.,
a multibillion-dollar, publicly traded
corporation with almost 15,000
employees and total shareholder
returns in the upper quartile of its
industry. It is headed by an energized,
charismatic CEO who attributes the
company’s success to its focus on
home-growing and retaining high
performers. Alpha’s approach includes
an extensive intern/training program,
a comprehensive performance
management/evaluation process
throughout an employee’s career
and a high-performer compensation
program that rewards selected participants (at all organizational levels)
for their contribution to both the
short-term (four year) and long-term
success (an award that vests at age 62).
However, the key characteristic that
sets Alpha’s approach apart is the
high profile maintained by the CEO
in every phase of the career development, performance management/
evaluation and compensation for
the high performers.
Conclusion
The selective approach is a powerful
strategy to improve the retention
of high performers. To employ this
strategy, organizations must accept
that they are in a war for stars. They
must identify their high performers,
define their performance standards
and set and communicate expectations
and consequences. They must also
differentiate the career trajectories and
compensation opportunities for high
performers, get senior management
personally involved and assiduously
execute the retention program. Myrna Hellerman is a senior vice president
at Sibson Consulting in Chicago. She can be
reached at [email protected].
Jim Kochanski is a senior vice president at
Sibson Consulting in Raleigh, N.C. He can be
reached at [email protected].
resources plus
For more information, books and
education related to this topic, log
on to www.worldatwork.org and
use any or all of these keywords:
❙❙ High performers
❙❙ Employee retention
❙❙ War for talent.
may 2012 workspan | 59