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February 06, 2001
Competitive Advantage Threatened by Retention Discrepancies
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DAVOS, Switzerland--

As many as 86 percent of employees cite work/life balance as the top priority in their career, yet in reality strategic clarity is the strongest driver of employee retention.

Research launched at the World Economic Forum's Annual Meeting 2001 in Davos, Switzerland, by Korn/Ferry International, shows that there is a large discrepancy between what employees say they want and the actual drivers of their behavior, reinforcing competitive challenges for company leaders struggling to retain and motivate an increasingly diverse workforce.

With the spiraling demands on firms and their employees, as many as 86 percent of employees rate work/life balance as `very important' or `extremely important' in their careers. However, company leaders face the reality of strategic clarity being the top driver of management and employee retention - in these times of economic change and projected turbulence, an increasingly tough challenge. This is according to a new global study from Korn/Ferry International and the University of Southern California's Center for Effective Organizations.

Professor David Finegold commented, "Despite relevant advances in technology, our research shows that most companies are failing to mine their employee data, falling into the trap of using the Intranet to standardize, rather than customize, their human resource policies".

All respondents in the study say that their priorities are first work/life balance, and then job security, followed by financial reward. In analyzing behavior patterns however, these priorities provide a misleading indication of how retention and commitment may be achieved. Instead, common to retention in all employee subgroups is a focus on strategic clarity - with employees identifying more closely with the company if they believe it has a viable and well-communicated strategy for success. In terms of financial reward, pay-for-organizational performance has a positive impact on commitment for all groups except Europeans. Rewards such as stock options or profit sharing do increase how much individuals identify with the company. In contrast, pay-for-individual performance does not affect the commitment of any employee group, except for men under 30 years of age.

Job security not that big a factor
The only group for whom job security drives retention is the late career group - those over 50 years of age.

-- For early career employees - those aged 30 and under - job security does not have a positive effect on either retention or commitment, whereas career advancement is very significant to the retention of this group. Their ability to influence the organization and their satisfaction with their professional work environment also help build their commitment to the company. Being part of an innovative organization is important both for retention and commitment.
-- For mid career employees - those aged 31 to 50 - commitment to the company increases if they are able to manage their own careers, and professional satisfaction results in greater retention for this age group than for either their younger or older colleagues.
-- For late career employees - those aged over 50 - professional satisfaction relates to neither retention nor commitment. This is the only group for whom job security drives retention.

Building an effective organization
What Do Employees Really Want? indicates that this entails much more than offering competitive pay packages of stock options. Findings show that there is a discernable set of common organizational features that impact the behavior of most segments of the workforce, enhancing the organization's effectiveness and employee satisfaction and motivation:

1. A clear and compelling strategy;
2. An innovative environment low in bureaucracy;
3. Challenging work assignments that enable employees to grow
their capabilities; and
4. Rewards based, in part, on how well the organization performs.

Using Intranets' to build employee relationships
David Finegold adds, "Just as the leading business-to-consumer and business-to-business companies are continuously mining the data they collect from the Internet and building personalized portals to allow them to build much closer relationships with individual customers, companies too can harness their own Intranet's capacity to develop a much more sophisticated understanding of their business-to-employee relationships."

Findings show current challenges in achieving this to be:

1. Many human resource departments view the Intranet as a way to
reduce costs and automate the delivery of employee
transactions, rather than a chance to build richer
relationships with individual employees;
2. Most human resources departments lack the staff and data
mining skills needed to analyze the data effectively; and
3. Too often, the focus is on standardizing human resource
policies, rather than creating options that allow for
customizing to individual needs.

Mike Bekins counsels, "As leaders seek to build an employment brand, they need to resist fashionable perks that make the company seem attractive to work for. It is the core features of the employment contract that are important - such as providing exciting work in an innovative and winning environment, creating ongoing opportunities for skills development and giving employees a financial stake in the company through broadly based stock options."

With career advancement high on the agenda, continuous learning is a crucial part of any retention program. The University of Southern California's David Finegold says, "Our research shows that many leading firms are pursuing innovative approaches to developing employee skills, such as e-learning, online simulations, project-based learning using new electronic tools and the creation of online corporate universities".

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