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. | www.worldatwork.org | 877-951-9191 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
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