September 2005
Who Goes, Who Stays A Question of Values
Fermin Diez
Sydney
+ 61 2 8272-6336
Fermin.Diez@mercer.com
A Bit of Background
Why does it matter?
Because you want to have better people than your competitors!
Percent Change by Population Age Group, NZ 2004 - 2014
In ten years time, there will be
60%
85,000 fewer New
Percent Change
50%
Zealanders in the 30 to 45 age group
than there are now.
40%
30%
20%
10%
0%
-10%
-20%
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
Age Groups
Source: NZ Department of Statistics
Mercer Human Resource Consulting
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Let’s meet some of the Leavers and Stayers
Jim
Jude
Jo
John
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One of the Leavers
Jim
n
n
n
Jim has just left the company after eighteen
months, for better money, he said.
Jim started with a “bang”, but after the novelty
wore off, became increasingly disappointed with
the work he was doing.
“There aren’t many opportunities to innovate in
this job!”
What went wrong?
Mercer Human Resource Consulting
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Another Leaver …
Jude
n
n
n
n
Jude has just resigned from her well-paid job as
an Executive Assistant.
She has always been good at her job, but has
become increasingly frustrated by the “sameness”
of it, and her perception that she has hit the glass
ceiling.
She feels taken for granted in her current position.
Jude is moving to a slightly lower paid job which
will give her the chance to move into PR, an area
which has always interested her.
What happened here?
Mercer Human Resource Consulting
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A Stayer?
n
Jo
n
n
n
Jo is a highly experienced commercial lawyer with an
impressive record of achievement on her clients’
behalf.
Jo has seen colleagues (some of whom she considers
to be less capable than herself) promoted over her
head to partner and, after the last round of promotions,
she began to wonder how long she should put up with
this sort of treatment.
She can’t help feeling that her (first) maternity leave a
couple of years ago has made the partners (mostly
traditional males, in her view) reluctant to invest in her.
Another highly respected firm has made her an
attractive offer. Should she take it?
What‘s going on here?
Mercer Human Resource Consulting
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And finally …
John
n
n
n
n
John is a survivor of a recent restructure, which
saw several team mates (including his immediate
boss) retrenched.
The GM spoke to John herself, and told him they
were all very lucky to have kept their jobs.
Now, several months later, John seems to be
doing the work of the people who left (some of
whom are still overseas, enjoying the proceeds
of their severance; a point noted tartly by his
wife!)
Work stress, coupled with a number of other
problems at home (his children are teenagers),
are making John feel it’s just not worth it.
John is at risk – what would you do?
Mercer Human Resource Consulting
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Why people leave:
Perception versus Reality
The perception -
89% of managers believe employees leave for more money.
The reality -
88% of employees leave for reasons other than money.
Saratoga Institute, 2003
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What the Company says may not match
employees’ perceptions…
“our values”
… but they still left!!
§ “We aim to be the Employer of
Choice for our staff”
§ “We work together in an open,
communicating environment”
§ The job and workplace don’t
match expectations.
§ “We offer every employee the
chance to be the best they can”
§ Too few growth and
advancement opportunities
§ “We respect and challenge all
our staff”
§ Feeling devalued and
unrecognised
§ “We are a family-friendly
company”
§ Stress from overwork and worklife balance
§ “We take care to recruit and
select the right people for the
job”
§ There is a mismatch between job
and person
§ “We are all on the same team!”
§ “Until we make you redundant!”
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§ Too little coaching and feedback
10
Beware Employee/Company
value divergence:
“It’s a big firm, it won’t matter if I take this home”
“You can’t expect ________ workers to be good at that”
(Fill in your favourite minority!)
“I just do what I need to get by”
“I’m only a receptionist”
“Once people get into management they can’t be trusted”
INDIVIDUAL beliefs & values have a lot
more influence on what happens than the
company’s
VALUE STATEMENT!
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To become an Employer of Choice
Look at the values that underlie your
Workforce Strategy
Successful companies don’t go for one-off programmes;
they create a values-based Workforce Strategy
COMPONENTS OF BLUEPRINT
A blueprint to
help secure,
motivate, and
manage the
workforce
needed to
accomplish
organisational
goals.
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Capabilities
Who your workforce is
Behaviors
What your workforce does
Attitudes
What your workforce values
Specific practices
The programmes and policies that
influence who your workforce is, what it
is becoming, and how it performs
13
Workforce Strategy is a system that
addresses many HR components
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A Workforce Strategy is needed to deliver
specific workforce requirements.
BUSINESS OBJECTIVES
n
n
n
n
WORKFORCE REQUIREMENTS
Accelerate shift from product focus to
customer focus, developing integrated,
customized solutions to client needs
n
n
Harvest synergies within and across
business segments
Better leverage technology, both in
product/service delivery and in internal
operations
Enhance speed, quality and costeffectiveness of innovation
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n
WORKFORCE
STRATEGY
n
n
n
Diverse and experienced “homegrown” talent
(e.g., know markets, customers, products)
Superior leadership skills (e.g., know how to
grow business and people)
Leaders at all levels who take initiative (and risk)
in support of goals
Ability to leverage technology and innovate
Behavior and values consistent with performance
culture
Blend of technical specialists and cadre of
“leaders” with experience across multiple
business lines – “the catalysts”
15
To develop the right strategy, you need the
right facts.
WHAT THEY SAY
Identify intentions and
perceptions through:
§ Executive interviews
§ Employee research
WHAT THEY DO
Observe behaviours and
organisational practices
through:
■
Internal Labour Market
(ILM) workforce dynamics
§ Policy review
Complete and verifiable
understanding of the facts
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INTERNAL LABOUR MARKET ANALYSIS (ILM)
a process to map the flows that define your workforce.
Hires
Level 8
Exits
11
168
38
17
16
7
72
81
517
49
81
6
Career
level
186
640
125
Lateral
moves
123
129
5
190
341
830
184
134
4
312
Promotions
3
234
963
116
Mercer Human Resource Consulting
227
85
383
45
86
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ILM Analysis models underlying workforce
dynamics.
Know Who You Are Selecting
This selection instrument not only failed to be predictive of success,
it tended to select individuals with a higher propensity to quit.
Know What You Are Rewarding
High
Agency / Newspaper
More prior jobs
Earnings growth
International experience
Higher performance rating
West Coast
Younger
Education in Tech field
Past promotion
Education
Higher pay level
Occupation
Prior industry experience
Tight labor market
Sales department non-sales job
Tenure
Position tenure
Tenured manager
Older manager
Highly rated manager
Unit size
Low
Lower
Know How You Are Managing
Performance
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Likelihood of promotion
Higher
Know What Retains Employees
Redirecting investments to career programs vs. salary increases should
reduce turnover by over 20%.
Disguised case examples
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Case Example
Multi-Co is a global, diversified services
company.
n
n
Strategic situation
– Diversified company looking to accelerate global growth, leveraging
strength of brands, while maintaining financial performance
– Company lacking explicit human capital strategy for global growth
Critical questions
– Are people aligned with Multi-Co’s future business
requirements...which workforce practices should be maintained or
changed?
– How do we maximize business results by adjusting talent
management practices?
– What practices should be enterprise-wide versus specific to
business units?
– Which combination of practices will create a “best place to work”
environment?
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Careful examination of workforce dynamics
revealed commonalities and differences …
Segment 1
Segment 2
Segment 3
Illustrative example of ILM maps by segment
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Dependence on new hires at middle and
upper levels was high, undermining the
ability to develop homegrown talent.
Ratio of hires to promotions, by level and business unit
Overall
Overall
Level
Unit 1
Unit 2
Unit 3
Corp
11
1.8
0.8
0.8
1.0
1.1
10
0.8
0.9
0.6
1.0
0.7
9
0.3
0.5
0.5
0.1
0.5
8
0.5
0.3
0.5
0.6
0.5
7
0.3
0.6
0.5
0.4
0.4
6
0.3
1.2
0.5
0.9
0.7
5
0.8
1.3
0.7
1.2
0.9
4
0.8
1.4
1.2
1.4
1.3
3
0.9
1.2
1.6
1.8
1.4
2
3.2
4.3
5.0
7.6
5.5
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Values > 1
indicate that
entries are
dominated
by hires
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Intra-company moves, which enhance
synergies within and across units, were rare.
Employees who changed units
Changed TO
Changed FROM
Unit 1
Unit-1
Unit 2
Unit 3
Corporate
.03%
.25%
.78%
.19%
.59%
Unit-2
.08%
Unit-3
1.22%
.41%
Corporate
.21%
.67%
.05%
2.40%
In examining otherwise comparable employees, those
who move within and across units are NOT VALUED.
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Firm-wide, there was insufficient performance
differentiation, reflecting a lack of performance
values
UNIT 1
UNIT 2
UNIT 3
CORP
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percent receiving a given performance rating
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1
2
3
4
5
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The consequence: The shortfall of “promotion“promotionready” employees threatened the pipeline for
leadership talent.
"Promotion-ready" employees vs. hires
1200
“Promotion-ready” employees are defined as employees
in the next lower career level with at least 2 years of
tenure in position and a most recent performance rating
of “Exceeds expectations”
1029
964
Number of employees
1000
800
Number of
hires into this
career level
606
600
387
400
200
Number of employees in the next
lower career level who are “ready”
for promotion into this level
210
194
156
156
107
63
55
15
0
2
3
4
5
6
7
Management level
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Desired “performance culture” behaviours were
generally not exhibited, because they were not valued!
Most Descriptive of Current
Workforce
n
n
n
n
n
Somewhat Descriptive of
Current Workforce
Financial results orientation
n
Emphasis on quality –
analytical/editorial
excellence
n
Protects firm’s reputation
and credibility
Focus on products and
markets
n
n
n
Pride in work and
organization
strength
weakness
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Shared vision of performance
excellence
Least Descriptive of
Current Workforce
n
Willing to question status quo
Insistence on constant
performance improvement
n
Speed of execution – finds
ways to shorten cycle time
n
Learns from mistakes and
focuses on responding to
mistakes rather than blame
n
Works collaboratively
n
Focus on customers
n
Innovation oriented
n
n
n
Care about development of people,
focus on continuous learning and skill
development
Receive and seek honest and
ongoing performance feedback
Encourage performance
accountability and rewards
differentiation
Prepared to let consistent underperformers go
Entrepreneurial, takes calculated risks
when necessary
Adapts interpersonal style or business
practices to address individual or
regional cultural differences
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There were systemic misalignments between
“desired state” and the underlying value set in
reward practices.
Risk-taking /
entrepreneurship
Business degree /
background
Individual performance
High-potential
Length of service
Being in the “right”
division
Less
important
Should be
Very
important
Broad experience in MHP
Less
prevalent
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Actual
Very
prevalent
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Multi-Co identified a combination of practices
to deliver requisite workforce and business
outcomes.
TALENT
ACQUISITION
& DEVELOPMENT
REWARDS
Value careers
BUSINESS
OBJECTIVES
Build over buy
DESIRED
WORKFORCE
OUTCOMES
Total
STRATEGY
PERFORMANCE
MANAGEMENT
Illustrative example
Mercer Human Resource Consulting
Emphasize growth
and performance
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Lessons Learned: Use Metrics to Reinforce
Accountability for Execution
The Key Metrics of the People Strategy Scorecard
BUILD OVER BUY
FOCUS ON PERFORMANCE AND GROWTH
Direction / Magnitude
of Desired Change
Metric
Ratio of hires to
promotees in middle
and upper levels
Difference in retention
rates between top and
average performers
Relative performance
of hires from top-tier
schools
−|+
−|+
−|+
Metric
Skew of performance
rating distribution, for
each segment and level
% of employees with
performance and
career development
plans
Percent turnover
of chronic underperformers
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Direction / Magnitude
of Desired Change
−|+
−|+
−|+
VALUE PERFORMANCE AND GROWTH
Metric
Differences in rewards (pay
and promotion) across overall
performance categories
“Value of promotion” –
extent of calibration between
pay and advancement
opportunities (e.g., Mercer
formula)
Differences in total
rewards associated with
contributions to growth
Direction / Magnitude
of Desired Change
−|+
−|+
−|+
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Lessons Learned: Transformational Strategy
Implementation Takes Time
2002
Q1
Q2
Q3
2003
Q4
Q1
Q2
Q3
2004
Q4
Q1
Q2
Q3
Q4
Performance Management Initiative
SoftScape
Comp Study
Leadership Horizons
People Strategy
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Lessons Learned: Get Commitment and Active
Participation of Executives
Transformation requires
executive-led change
High
(Overhauling)
Executive-led change
Intensity of
Change
Low
(Tuning)
Change through
delegation
Change through
normal
management
Low
Organizational Complexity
Source: Champions of Change, David A. Nadler, Mercer Delta
Mercer Human Resource Consulting
High
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Summary
n
n
n
n
n
Emerging shortfall in talent means we need to design the work
environment to make working at our company a fun experience.
People leave for all sorts of “hidden” reasons. What they tell you may
be only half the story!
To become an Employer of Choice, design a value based workforce
strategy.
Base your Workforce Strategy on facts: investigate the underlying
dynamics of your workforce – Internal Labour Market Analysis.
Employees do the math – as prime investors in our company they
expect to receive an adequate ROI. If they don’t get it, they will start
to look elsewhere!
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Value your employees as your
FIRST INVESTORS …
n
n
employees invest their time, their talents, and
their energy in our business …
And they expect a …
* An adequate ROI involves ALL FORMS OF REWARD.
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Questions?