Retention in a Tough Economy

Barbara Butterfield (bbutterfield@sibson.com) has more than 40 years of experience in higher education, including appointments as chief human resource officer at the University of Pennsylvania, Stanford University, and the University of Michigan. She currently is a senior consultant for Sibson Consulting, a division of Segal. In this interview with HR Horizons, Butterfield discusses talent-management opportunities in tight economic times. (See also Butterfield’s recent article, “Talent Management Strategies for Attracting and Retaining the Best and Brightest,” published in the Spring/Summer 2008 CUPA-HR Journal.)

How would you distinguish between talent management and succession planning?

If you think of talent management as the umbrella under which you implement particular strategies—human capital development, workforce planning, succession planning, and so forth—then one hallmark of a good talent-management program is to concentrate on all the various strategies at the same time, to consider them as a group of integrated possibilities. In my observations, succession planning has often been something of a sidebar issue, not necessarily integrated with everything else. Within the past five years, I’ve witnessed more advanced planning to determine bench strengths and come up with a growth and replacement plan. Even so, the succession planning I’ve witnessed within most higher education institutions tends to be more eclectic than systematic. Those executives who do realize its importance tend to know their organization’s strengths and weaknesses, and that gives them an advantage in developing new leaders internally. Occasionally this takes place in a formal way, but in general I don’t see a big push for formalized succession planning.

How could you formalize this?

For starters, as an executive or middle manager I would design an organizational chart showing every individual in my unit. Then, in addition to identifying overall strengths and weaknesses of particular departments or functions, assess the performance for every employee, including your estimation of an employee’s commitment and engagement as well as his or her skills. I would even color code the chart to better see where to intervene. For instance, you might identify top performers and pair them with up-and-coming individuals. When you have attrition, use your chart to examine where you have opportunities to broaden someone’s skill level. Not all growth is vertical, so look to where you might provide additional experience to a high-potential employee with a special project. Above all, make sure you conduct periodic retention interviews with those who already exhibit success.

What exactly do you mean by a retention interview?

Well first, I have to say that I don’t think many leaders actually do this. But if you’re going to be intentional about retaining your best people, you have to determine the best way to do this for each individual, especially if what is important to an employee is not only the money but also the affiliation with the organization, recognition and inclusion, and opportunities to learn and to have leading-edge tools with which to work.

As I see it practiced most effectively, a retention interview is when you make a formal appointment with a high performer and you go to his or her office to make known your appreciation of the contributions he or she has made, providing specific examples of when you’ve recognized this excellent performance. You ask the employee why he or she came to organization, why he or she stays, and what the single most important thing is that you could do to make his or her work more rewarding. And then you conclude by agreeing to meet several times a year to ensure that the employee’s assignments are interesting and rewarding. The intention is to make certain your best employees understand that if they make a commitment to the institution, you will make a commitment to them. Now, it could be that some leaders do this kind of thing more informally and perhaps have common understandings with high-performance employees about their future at the institution, but a formal appointment signals that this is important. Going to the employee’s office says, “I respect you.”

How might the current economy pose changes for how higher education contemplates talent-management initiatives?

I think the current economy does alter some options, but it also provides opportunities. First, I hear a lot of talk about broad-scale layoffs, and that concerns me. This may solve something in the short term, but it’s not clear to me that this is the best choice in the long run. What I think is needed instead is a wide-scale rethinking of work itself. A bad economy allows an opportunity to obliterate and eliminate. Get rid of what isn’t your core business and mission. Focus on high performance, and dedicate yourself to eliminating low performance at every turn. Use attrition management to your benefit. If you need to eliminate positions, commit to retraining high-performance and high-potential employees to fill in other gaps.

What tough economic times really offer is an opportunity to step back and consider how to increase productivity and capability even if you aren’t able to expand overall capacity. It’s also a time to evaluate your balance of internal versus external hires. With a tough job market, institutions will likely see significant increases in external applicants, some of whom will be quite skilled. At the same time, in order to hold on to your best people, it’s imperative that high-performance staff are able to sense real opportunities for growth. A good rule of thumb is this: With less than 30 or 40 percent of internal promotions filling vacant positions, employees usually report disappointment and lack of commitment to the organization. If more than 60 percent of vacancies are filled internally, that could stifle the kind of new ideas and innovation that can come from external hires.

The current economic slowdown also presents the need to scrutinize and revise competencies and selection criteria for critical jobs to ensure that you have the best and most productive talent on board. For instance, do you simply need a benefits administrator who is proficient within a transactional role? Or do you need a benefits strategist—someone with a creative mind to help design an attractive benefits package that offers relevant services to a broad range of employees?

In general, how should institutions budget for talent management?

I wouldn’t budget for it as an institution. Talent management should be a key component of every leader’s responsibility within an organization. I would simply formalize this expectation. Now, more generic across-the-board training and orientation is great for helping new employees adapt to the institution, but this isn’t the same thing as talent development, which must focus on the particular needs of a specific career group. Talent development is most effective when it takes place in the context of self-directed groups that assess how they can best build their own internal competencies and capability through training and mentoring initiatives. For instance, a group of accountants or auditors are best equipped to teach their own. Certainly there will be needs for conference attendance or for formal classes to fulfill certification requirements. Those funds should be factored into the budgets of individual departments or units or schools. In this context, HR can serve as an enabler to help career families identify and evaluate the external resources they might need, to assist with developing RFPs for facilitators, and so forth.

In what ways can the value of talent management be quantified? What must be shown as evidence of return on institutional investment in talent development?

One fairly straightforward measure is your vertical growth rate. What is your internal promotion rate? Does your selection rate show a good balance between hiring internal and external candidates? Another measure is what dollar amount you are spending. When institution leaders assess talent development, they tend to look at what is spent through the HR office, but they must also look at travel and conference fees paid, tuition assistance, certification programs, and so forth, to get the full picture.

Now, you can measure dollar investment, but does that tell you how much it advances the capacity of your organization? You can look at how many employees have development plans, but does that tell you they were executed? For instance, how do you arrive at a concise measurement of the value of developmental opportunities? Did what was learned get applied to the job? You can ask employees and supervisors and try to get their narrative or numeric response. In fact, one of the most serious gaps is reporting on realistic performance data. This is tough to assess and to standardize, but it’s increasingly important to know. For instance, if your enterprise system can record performance data such that you can rate employees on a scale of, say, 1 to 5, in which 5 is your highest performance employees, then you can begin to analyze your success in retaining your best employees. So, if you lose 100 people in a given year, what percentage of those were high-performance or high-potential employees?

How far out should institution leaders look when considering future talent needs of the institution?

This really depends on the institution’s strategic-planning process. If a university’s planning efforts look out 10 years or 20 years, then you should assess talent needs based on the goals and objectives established in your strategic plan. What are your current strengths? Where do you need to invest to build staff capacities to meet future needs and goals identified? If your strategic plan calls for eliminating a program or adding a new school, that certainly impacts your talent needs.

What is the biggest obstacle most institutions face in identifying talent gaps and their biggest mistake in implementing plans to fill those gaps?

What most often trips up institution leaders is 1) failure to plan, 2) failure to align activities of supporting units to the plan, and 3) attachment to outlived programs.

Many institutions tend to grow by building instead of replacing. When you think back to 1999 when so many were working feverishly to avoid doomsday predictions of Y2K—when it was widely thought that computers systems might fail—how many were looking ahead to what should happen once we got through that? Would we simply fire all those programmers? Or did we look ahead and start planning to retrain these individuals for other needs? The point is that we must always be thinking not only about what is currently happening but how future talent needs may change. For instance, fewer organizations have a need for straight secretarial assistance, since these days most workers are already computer literate. In response, how should you change your hiring policies and position descriptions and competency requirements to reflect this? Which groups represent the institution’s reputed strengths now and for the future? What programs will grow and evolve, which ones should be eliminated? And, most importantly, what can you do to bring along your best and brightest through those transitions?

Finally, what about the internal development of organizational leaders themselves?

It’s important to repeatedly identify and develop cohort groups of high-performance, high-potential leaders. Several universities—including MIT, Minnesota, Duke, and Penn—are investing in developing their own cadre of leaders for the future. These cohorts study institutional and organizational effectiveness together. They investigate current challenges facing the institution and take on key or major projects ranging from new policy to capital development. By investing in internal development of future leaders, they avoid the on-boarding challenges of bringing leadership from the outside and at the same time incorporate high-potential leaders in current issues of the university. Members of the cohort become well known to other participants who may be part of the leadership team, and the respect that comes from being nominated to such programs and the inclusion felt by the members is palpable.

Karla Hignite, principal of KH Communication, is editor of NACUBO's HR Horizons. E-mail: karlahignite@msn.com.