Retention Issues Make Growth More Difficult
by Harry W. Love 

In spite of the usual mixed bag of economic news, business indicators point to better conditions ahead. Service sector employment indices are setting new records by the month. Full-time employment statistics show gains in recent weeks. The American Staffing Association’s 2003 annual report of growth adds weight to the argument that we are on the leading edge of an expanding job market. Do you have the talent in your organization to expand your business as the environment improves? Do you know who are your most valuable and vulnerable people? Are you taking effective steps to encourage your best people to stay and grow with your business?

Why do employees stay or leave?

Since the mid-1940’s, organizational researchers have been studying factors that influence employees to build long-term careers with their companies[1]. Across businesses of all types and sizes, the results have been remarkably similar throughout the last sixty years. Unfortunately, the research also highlights a persistent disconnection between managers and employees when it comes to ranking the importance of the factors that are most likely to influence retention. 

When asked to rank a standard list of ten factors, managers tend to place tangible factors in the top five:

  1. Good wages
  2. Job security
  3. Promotion and growth
  4. Good working conditions
  5. Interesting work

Employees usually list intangibles as most important when asked to rank the same factors:

  1. Full appreciation for work done
  2. Being filled in on things
  3. Help with personal problems
  4. Job security
  5. Good wages

This long-running divergence in manager and employee perceptions doesn’t come from intentional bad management. However, it is a sign of how we can easily forget not only what motivates our staff, but also what motivates us. When a business is under pressure, especially in a downturn, paying attention to the “intangibles” consumes precious management time and energy. When the job market is soft, it is easy to be less attentive to the concerns of your people, believing they will not leave under such conditions. Experience shows that it’s a pretty good bet your people will hang on through the downturns, but their motives may not be in the best interest of your business. 

Recent research by Towers Perrin HR Services[2] sheds new light on a phenomenon they call “rational endurance”, a play on the 90’s catchphrase “irrational exuberance”. According to this comprehensive study, workers have remained surprisingly resilient in the face of two years of business and economic blows. While most respondents acknowledged that their employers have made progress in some important aspects of the work environment, they also seem to be driven by a sense that helping their employers will help preserve their own job and financial security. 

What happens as business conditions improve? Frederic Herzberg’s research since the 1950’s holds true today. As employees regain confidence in financial and job security, they begin to focus on the intangibles such as interesting work, opportunities to learn new skills and advance in their careers. Watson Wyatt’s research[3] demonstrates that this is particularly true for high performers. In the absence of these factors, high performers tend to look for new employment, most often citing “company management” and “lack of advancement opportunities” as their reasons for leaving.

How can you encourage your best performers to stay with your company?

Demonstrate positive leadership. Leadership is emotional – not intellectual, and it’s the employees’ hearts you have to win, not their brains. Encourage your top performers to think like owners – tap into their experience and enthusiasm to help define the mission, vision and goals of your business. Communicate a winning strategy, guide change and inspire commitment to achieve success. Behave with integrity, be consistent and truthful.

Listen. Get to know your best performers personally, and take an interest in their well-being. They don’t expect you to solve all their personal problems – just remove the barriers that prevent them from achieving their potential at work. Provide them with informal feedback that is knowledgeable, fair, accurate, voluntary, detailed, immediate and positive.

Provide training and development that is directly related to improving their performance. Recent studies[4] show that training unrelated to the current job (AKA “just-in-case” training) can be linked to a 5.6 percent decrease in a company’s market value. Adding to the damage, newly-trained workers who see no advancement prospects often take their new skills to a new job with one of your competitors.

Carefully select and develop the people who will help sustain your business. If you want your best performers to grow with your business and take on management responsibilities, they need to know what you expect. You don’t have to make promises about promotions, just tell them why you think they have a bright future in your organization. 

The entire organization benefits when managers pay attention to the intangibles and create an environment that promotes retention. Competent people want to work with other competent people. In the long run it enhances the company’s stability, performance and success. 

Do you have the talent in your organization to take advantage of the market upswing? If so, invest the time now to show those talented people how important they are to your business, before they are tempted to look elsewhere. If not, maybe you should be recruiting key new talent now, to help jump-start your next growth cycle. The right people, carefully chosen and developed are always a good investment in the future of your business. 

Harry Love, an independent management consultant in Loveland, Colorado helps businesses improve their performance by aligning their people processes and business goals. For more information, contact him at

©Harry Love. This article cannot be reprinted or published without the written consent of the author.

[1] Thompson, R., “Build It and They Will Stay: Secrets to Employee Retention”, Innovative Approaches to Organizational Success in the New Economy, American Productivity and Quality Center, 2001

[2] “Working Today: Understanding What Drives Employee Engagement”, The 2003 Towers Perrin Talent Report,

[3] “Strategic Rewards” by Watson Wyatt, 1999

[4] “2001 Watson Wyatt Human Capital Index Study”,



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