Addressing the Problem
Some companies recognize this danger and proactively work to solve the problem. At Portland, Ore., software firm Coaxis, executives identified a specific gap in their internal staff development, including leadership development and succession planning. They have since developed a plan and a program to address these issues.
Coaxis is building these capabilities on the fly. It started a leadership and management development program and is working with director-level employees, with plans for subsequent phases for managers, supervisors and high-potential employees. "I don't think we're a company that currently exhibits best practice," says Mary Carvour, director of human resources for Coaxis. "But we are one in which management has recognized the need and has put a strategic HR department in place to do the planning and execution necessary to achieve best practice."
Before Owens Corning shut down three divisions due to the housing industry decline last year, Tony Friday, then the vice president of sales and marketing of the Homeowners Services Division, implemented a performance management system to reward all employees, regardless of title or position in the company. At the beginning of each year, every employee works with their supervisor to develop individual goals and metrics that support the organization's goals for the year.
Employees who meet or exceed their goals receive a bonus, generally in the form of a percentage of their annual salary or wage. If the company meets its goals, all employees receive additional compensation. If employees are not meeting their goals, their supervisor meets with them for coaching. Employees who continue to underperform are let go.
"The functional costs associated with high turnover can kill your business and send the wrong message to customers and job seekers," Friday says. "Rewarding the right behaviors is the key to any incentive compensation plan."
Friday's emphasis was on bringing in people with the right skills. One of his successes was the creation of a university-style in-house training program that gave employees a career path and helped create an aspirational culture within the organization. An added bonus was a partnership with local community colleges and universities, which helped employees gain credits toward a degree.
"We identified high performers within our departments and put them on a performance track," Friday says. "We worked to bring them up, focusing on their knowledge gaps and skills, such as increased training in software, programming, networks and team leadership skills. That meant putting them on a four-year plan to bring them up the ranks."
Other Owen Corning divisions soon took notice: The success of the program created a buzz throughout the organization and created a positive culture. Career advancement was taking place where it had been stagnant. "My focus is always on people," Friday says. "If you treat people well, they will take care of your customers. I implemented morale-boosting events, such as quarterly barbeques for employees and their families. People from other divisions looked at our division and wanted to get in, rather than our division's employees wanting to get out."
Another example: When Owens Corning switched from Timberline Software to SAP, it set up focus groups for employees to find out how this transition was affecting customers, employee workload and work groups. The company designated a champion--the go-to person--in each SAP team to oversee its implementation. The champions received special training in Kaizen Workstream, a lean manufacturing process that also works in service organizations.
"This process created a great amount of employee buy-in, because their opinions were valued," Friday says. "We looked at how this transition to SAP was going to impact employees' workloads and developed an internal help desk for employee support." This process contributed to the success of individual employees--not only as a positive retention-building effort, but also to reduce succession gaps.
By planning for succession, companies can reduce or even eliminate gaps that cause them to scramble for talent. Growth will always create more opportunities for hiring from the outside, but by using internal talent and resources first, a company is in a far better position to reduce turnover and increase profits.
Gary Perman is a certified recruiting professional and owns PermanTech, which specializes in recruiting technology executives, managers and engineers.