Retaining Employees When There Is No Budget

Sergey Kuzin
Trainer-Consultant, Ph.D.

Though loyal and able employees are often called any business’ No. 1 resource, the current crisis has proved again that employee development budgets are the first to get cut in turbulent times. According to Amplua Broker, more than half of businesses have either reduced or frozen their training budgets causing a training market downturn of 70 percent in Q1 2009 against the previous year. Because the shrinking development budgets often go hand in hand with staff reductions and other fatal changes, the critical steps taken by businesses seemed logical: survival came first.

Shifting to internal corporate education, using less costly forms of training (such as e-learning) and focusing on areas directly related to the business performance have become a trend. And that “earning” is set to follow “learning” seems healthy and natural. That said, major cutbacks in employee development continue to go on, which may be dangerous in the long run, experts say. According to global personnel development research by IMC Learning, 80 percent of HR people believe cutting training budgets causes more problems than it solves, while 83 percent believe that investments in training are as important during a recession as they are in good times. The line managers faced a difficult dilemma: save money or save people.

The save-money-and-survive approach may produce a very unpleasant side effect called “perceived employee devaluation.” When people are seen as costs to be controlled instead of assets to be valued, their motivation may fall down more drastically than any financial indicators. When companies centralized decision-making, controlled information flows, suppressed risk-taking, and discouraged entrepreneurial spirit, many high-potential (HIPOs) employees defected. In early 2009, there was an illusion that it would be easy to compensate any loss of personnel since so many people had lost their jobs. The problem was that those jobseekers were not high-performers. Replacement remained as problematic as it used to be before the crisis. “Highly qualified and talented employees mostly saved their job or moved to another company with the same or higher pay,” said Natalia Kurkchi, a partner at recruiting firm Antal Russia. Smart companies knew that, and instead of making hasty cuts, they took steps to retain valuable employees.

What can a company do to save people without overspending? A large part of the answer lies in the attitudes of HIPOs to their employers. A research project by Sirota Intelligence shows that High Potentials are among the most positive employees. In general, they rate job autonomy, pay, career and rewards more favorably than do other employees; and report feeling more involved with and respected by the company and its leaders. What does that mean for the line managers? The good news is that in hard times HIPO’s can be retained without increasing their salaries. The bad news is that HIPOs take time and effort to be taken care of. Below are some ideas on what can be done:

1. Don’t stop focusing on their career development. Give them special projects and make sure they take advantage of training and development opportunities.

2. Communicate! HIPO’s are the future leaders of the company, so share as much information as possible with them. This kind of behavior shows trust. The alternative is leaving them uninvolved and receptive to outside job offers.

3. Go beyond cutting costs. High performers know about organizational inefficiencies and poor strategy execution. Cutting costs is a tactic; HIPO’s want to be assured that the leadership is focusing on the longer term.

4. Involve them in the solutions. HIPO’s want to make a difference. Be creative to find ways for talented people to show their talent and contribute to the company’s success. The more important and challenging the task will be, the better.

5. Show them that they are valued. With financial rewards often diminished (including sales commissions, annual bonuses, etc.) it becomes more important for HIPOs to feel valued.

“During times of change, it is critical for line managers to communicate what must be done and why it is important,” said Dennis Hopple, president of CBSD/ Thunderbird Russia. To retain and develop employees in today’s environment, line managers have to stand up to challenges such as setting clear expectations, providing regular feedback, arranging sufficient resources, making sure the job fits the abilities, getting the right training and making sure that performance is clearly linked to compensation. Does it sound like too much? Compare it with the possible losses and you will see how little it is. In companies where there is no such thing as coaching communications, where feedback is delayed or absent, where managers do not hear issues and show little understanding, employees — average and HIPOs alike — start feeling abandoned. In these circumstances, even the most generous monetary compensations may appear to be futile. On the right side of the spectrum, there are companies like Phillip Morris, where they use individual development planning and an effective recognition system to retain the best.

The threat of talent fleeing in an unstable economy makes it urgent for all businesses to retain the best people at the lowest possible cost. If high potentials are to produce their maximum added value, organizations must ensure that their retention schemes are implemented as part of a long-term strategy rather than as a one-time reaction.