Retention strategies for the new economy

While the phrase “war for talent” has become something of a cliché, it is nevertheless a grim reality for many HR people.

For those trying to recruit and retain IT staff, the situation is particularly stark. According to figures released by IDC in 1999, there were 500,000 open positions in Europe in the field of IT – and this skills gap is expected to grow to 1,700,000 by 2003.

The Industrial Society has claimed that industry is being held to ransom by “free workers”, upwardly mobile thirty- somethings who have the vastly sought-after expertise companies need for success.

It seems that as long as the IT sector and international economies continue to grow, the problem of recruiting and retaining the top staff is here to stay.

But how can you make CEOs and financial directors understand the severity of the task and give you the support you need to really participate in the war for talent?

According to HR guru Paul Kearns, senior partner at the consultancy Personnel Works, the first step is to convince boardrooms of the financial problems caused by recruitment and retention problems.

He says: “If you go in without putting pound and dollar signs on the equation, you will be laughed out of the boardroom. The only way to make your case is by showing the financial effect of recruitment and retention problems.”

Kearns advises HR professionals to calculate the total cost of training an employee and then measure the time it takes on average for each employee to pay back that money in sales.

Another good way of measuring the cost of recruitment and retention is to compare sales generated by a trainee compared to those generated by a well-established salesperson.

This comparison generates a “sales deficit” figure over a period of months, which HR professionals can use to justify their recruitment and retention policies.

IBM is taking recruitment and retention so seriously it has adopted radical “grow your own” policies to find new IT staff.

Brian Woolf, director of HR for sales and distribution for Europe, the Middle East and Africa, says IBM is offering a $5,000 “internal bounty” to non-sales employees who successfully retrain in sales.

IBM has taken advantage of its massive size – it employs more than 90,000 people in Europe and Africa alone – and created an internal market to boost career opportunities within the company.

Says Woolf, “Money should not be a reason for us failing to retrain our employees – the key to maintaining our competitive advantage is employee development.”

The IT patenting company ARM is one of the success stories of the last ten years and has risen to be a major player on the FTSE 100 even though it does not produce any products.

ARM designs and patents chips for around one-third of the world’s computers and mobile phones – not bad for aa company which began in the early nineties as a 12-employee joint venture between the failed computer company Acorn, Apple and VSLI technology.

HR director Bill Parsons says the biggest challenge the company faces is maintaining the entrepreneurial internal culture as it expands.

Ranked as 35 on the FTSE 100, ARM Holdings is worth more than £7 billion and has around 600 employees world-wide – meaning each employee is on average worth more than £10 million.

He says, “We are a company of nerds – in fact I am about the only non-engineering person in the entire company. Nerds like to work with other nerds, so we keep HR out of recruitment.”

Parsons said the company recruited and retained staff by moving bases to where the talent was and marketing itself as a world leader in the field of IT design.

He says, “To us HR equals marketing – we try and get as many stories as we can into computer trade journals and market ourselves to engineers at a very early age.”

To recruit the brightest young talent, ARM sponsors young engineers’ awards and gives scholarships to engineers as young as 14.

Parsons says these strategies have helped to create a no-blame culture, which is maintained purely by peer pressure and the enthusiasm of employees.

Jonathan Donovan, head of employee relations at Alliance and Leicester says retraining managers is the key to preventing employees defecting to rivals.

“Old style managers are obsolete and they know it and some have gone. But most can, will and do adapt to their new role and new culture,” he says.

The company’s corporate goal is to be the most customer-focused financial service provider in the UK bar none and has adopted a management culture which encourages knowledge sharing.

Anyone creating innovative and financially beneficial business practices outside their area of expertise is rewarded financially up to a maximum reward of £10,000 – and there are plans to raise this limit.

Employees largely manage their own work, the company rewards both individual and team work, with individual innovation and development being encouraged at all levels.

In 1999, the wastage rate for front-line call centre and branch staff who had been with the company for less than a year was 60 per cent. The current wastage rate for the same employee group is 19 per cent and Alliance and Leicester is targeting a wastage rate of 15 per cent for the same employee group.

Donovan claims the key to the success of the new strategy is a corporate vision that inspires staff to stay within the company.

“It is dogma eat dogma out there – a strategy which is clear will encourage leadership and commitment and that strategy makes people think the organisation is going somewhere,” he says.

Donovan says that to win over employees in today’s highly competitive market, fostering individualism is the key to recruiting and retaining employees who are crucial to the success of the business.

By Richard Staines

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