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Attracting and Retaining TopPerforming Technology Employees

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Title: Attracting and Retaining TopPerforming Technology Employees


1
W A T S O N W Y A T T
Attracting and Retaining Top-Performing
Technology Employees IEEE-USA Careers
Conference November 3, 2000 Rick
Beal 415-733-4310 www.watsonwyatt.com
2
I was insufficiently appreciative of the human
dimension. Ive learned thats critical. Mich
ael Hammer, reflecting on the business
reengineering movement
3
Agenda
  • Current Challenges
  • Recent Research Results
  • The Human Capital Index
  • Strategic Rewards
  • Competitive Advantage of Top Performing Companies

4
4
Challenges in a Tight Labor Market
  • Critical challenges today
  • Attracting the right people at all levels
  • Retaining (and motivating) them
  • Focusing on top performers needs
  • Engaging employees

5
Research
  • Human Capital IndexTM (HCI)
  • Strategic Rewards
  • Survey of Top Performing Employees

6
6
The HCI Research Process
  • Key Linkages to
  • Organizational Value
  • Recruiting Excellence
  • Clear Rewards and Accountability
  • Collegial, Flexible Workplace
  • Communications Integrity
  • Prudent Use of Resources

7
7
Human Capital Practices Create More Value
Median 5-Year Total Return to Stakeholders
(1/1/94-1/1/99)
103
High HCI
Companies
88
Medium HCI
Companies
53
Low HCI Companies
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
8
Linking Human Capital and Value Creation
Recruiting Excellence
10.1
Clear Rewards andAccountability
9.2
Collegial, Flexible Workplace
7.8
4.0
Communications Integrity
Prudent Use ofResources
-10.0
0.00
Expected change in market value associated with
a significant (1 SD) improvement in HCI dimension
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
9
Linking Recruiting and Value Creation
Professional new hires are well-equipped to
perform duties
2.3
Recruiting efforts are specifically designed to
support business plan
2.3
Company has established reputation as desirable
place to work
1.8
Hourly new hires are well-equipped to perform
duties
1.7
Employees have input on hiring decisions
1.4
Formal recruiting strategyexists for hiring
critical positions
0.6
0.00
Expected change in market value associated with
a significant (1 SD) increase in HCI practice
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
10
Rewards and Accountability and Value Creation
1.8
Employees are eligible for stock plan programs
Company terminates employees who perform
unacceptably
1.8
Company does a good job of helping poor
performers improve
1.8
Top performers get significantly more pay than
average performers
1.5
Company positions pay above market
0.8
Pay is linked to companys business strategy
0.6
Employee performance appraisals used to set pay
0.4
Employees participate in profit- sharing plan
based on firms overall success
0.4
0.00
Expected change in market value associated with
a significant (1 SD) improvement in HCI practice
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
11
Collegial, Flexible Workplace and Value Creation
Expected change in market value associated with
a significant (1 SD) improvement in HCI practice
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
12
Communication Integrity and Value Creation
Employees have easy access to technologies for
communicating
1.8
Employees have the opportunity to give ideas and
suggestions directly to senior managers
0.8
Financial information is shared with employees
0.8
Employees have input into how the work gets done
0.4
Business plans and goals are shared with employees
0.2
0.00
Expected change in market value associated with
a significant (1 SD) improvement in HCI dimension
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
13
Prudent Use of Resources and Value Creation
Employees participate in profit sharing based on
business units success
-0.8
Training programs are maintained even in less
than favorable economic circumstances
-1.0
Training is provided to employees for attaining
higher level positions
-1.9
Employees have input in evaluating their peers
-2.5
Employees have input in evaluating managers
-3.9
0.00
Expected change in market value associated with
a significant (1 SD) improvement in HCI dimension
Source Watson Wyatts Human Capital IndexTM
(HCI) Research
14
The Good News A Virtuous Cycle Exists
  • What High Performing Organizations are Doing
  • is
  • What Top Performing Employees are Asking For
  • and it
  • Helps Reduce Turnover of Top Performers
  • and this
  • Leads to Better Performance

15
Strategic Rewards
  • Annual survey of Strategic Rewards
    practices
  • Attraction retention - HR programs that make a
    difference
  • Employer practices survey among 400 companies in
    North America
  • Survey of top performing employees among 3,600
    star performers

16
ALL Companies are Having Difficulty Attracting
and Retaining ALL TALENT
  • 83 have difficulty attracting critical skill
    employees
  • 65 have difficulty in retaining critical skills
    - regardless of industry
  • But now significant increases have resulted in
  • Over 50 of employers having difficulty
    attracting non-critical skills and
  • 43 having difficulty retaining non-critical
    skills
  • and its now worse outside of high-tech

Source Strategic Rewards 2001
17
And the Trend Will Continue
30 Percent Shortfall of Younger Workers Over the
Next Decade
Change in Labor Supply
Age of Worker
71.3
25 - 34
22.3
-8.6
24.8
35 - 44
55.1
-3.1
Demand for labor is increasing at 2 percent per
year (or roughly 20 percent for ten years),
which, combined with an almost 12 percent drop in
the absolute number of workers age 25-44, yields
a 30 percent shortfall.
Source Strategic Rewards 1999/2000
18
Top Performers Have Accepted the New Employment
Deal in a Major Way
  • New Employment Deal
  • From fixed pay to variable based on performance
  • From lifetime employment to an opportunity to
    contribute
  • From a predictable career to individual
    opportunity and investment in self
  • Top Performers Demand
  • High levels of compensation and ability to build
    wealth
  • Opportunities for advancement, job redesign, and
    new skill acquisition
  • Career development, investments toward business
    literacy

Source Strategic Rewards 1999/2000,
Supplemental Survey of Top-Performing Employees
19
What Motivates Top Performers?
Source Strategic Rewards 1999/2000,
Supplemental Survey of Top-Performing Employees
20
What Managers Dont Know May Hurt ThemThe
Perception Gap in Attracting Pay Approaches
Perceived as Very Effective
72
Paying above market
33
47
Group incentives
15
Exempt overtime (time
35
off)
6
Top Performing Employees
40
Project incentives
13
Employers
31
Exempt overtime (cash)
6
Stock grant
53
30
programs/stock options
44
Technical pay premiums
21
51
Sign-on bonuses
31
0
10
20
30
40
50
60
70
80
Percentage of Respondents
(Percent responding "very effective")
Source Strategic Rewards 1999/2000,
Supplemental Survey of Top-Performing Employees
21
What Managers Dont Know May Hurt ThemThe
Perception Gap in RetainingPay Approaches
Perceived as Very Effective
69
Paying above market
29
54
Spot bonuses
18
38
Exempt overtime (time off)
5
Top Performing
46
Group incentives
Employees
20
Employers
44
Project incentives
24
Stock grant
51
programs/stock options
32
41
Technical pay premiums
26
26
Exempt overtime (cash)
9
36
Retention/stay bonus"
35
0
10
20
30
40
50
60
70
80
Percentage of Respondents
(Percent responding "very effective")
Source Strategic Rewards 1999/2000,
Supplemental Survey of Top-Performing Employees
22
Effectiveness of Non-Compensation Reward Plans in
Attraction and Retention
Percentage Responding Percentage of
Companies Reward Plan Very Effective
with Plan
76 ? 68 ? 27 ? 45 73 ? 43 ? 27
? 8
79
Opportunities for advancement
30
65
Learning new skills in current job
26
53
Use of competencies for career path/development
16
57
Career development (non-promotional)
20
56
Flexible work schedules
29
36
Work at home
28
36
Reduced work week
30
29
Sabbaticals
26
? Significant Increase 10
? Moderate Increase 5
Employers Opinions
Top Performing Employees Opinions
Source Strategic Rewards 1999/2000 and 2001,
Supplemental Survey of Top-Performing Employees
23
Do Technology Companies Do Anything Different?
Source Strategic Rewards 2001
24
Top Performing High Technology Employees
Source Strategic Rewards 2001, Supplemental
Survey of Top-Performing Employees
25
Top Performing Employees Responses Vary
All
Secretarial/Clerical/
Professional/
Managers/Directors/
Men
Production
technical
Sr. Managers
1.

Compensation
1.

Benefits
1.

Opportunity to
1.

Compensation
1.

Compensation
develop skills
2.

Benefits
2.

Job security
2.

Compensation
2.

Benefits
2.

Benefits
3.

Opportunity to
3.

Compensation
3.

Benefits
3.

Type of
3.

Opportunity to develop
develop skills
people/culture
skills
4.

Opportunity for
4.

Vacation/PTO
4.

Freedom to work
4.

Opportunity to
4.

Opportunity for
promotion
independently
develop skills
promotion
5.

5.

Opportunity to
5.

Vacation/PTO
5.

Opportunity for
5.

Freedom to work
Vacation/PTO
develop skills
promotion
independently
Women
Earn 100K
Earn Under 30K
Age 50
Under Age 30
1.
Opportunity to
1.

Benefits
1.

1.

Job security
1.

Benefits

Compensation
develop skills
2.
Opportunity to
2.

2.

Type of
2.

Benefits
2.

Compensation

Opportunity for
develop skills
promotion
people/culture
3.
Compensation
3.

Compensation
3.

Benefits
3.

Compensation
3.


Freedom to work
independently
Opportunity to
4.
4.

Vacation/PTO
4.

4.

4.


Vacation/PTO
Opportunity to
Job security
develop skills
develop skills
Type of
5.

Freedom to work
5.


5.

Opportunity to
5.

Opportunity for
5.
Vacation/PTO
independently
develop skills
promotion
people/culture
Source Strategic Rewards 2001, Supplemental
Survey of Top-Performing Employees
26
Technology Companies are More Strategic!
  • Despite the traditional view that technology
    companies place an inordinate premium on speed
    over thoughtfulness
  • 65 of Technology companies have a formal
    recruitment strategy
  • Compared with only 47 of non-technology
    companies
  • But only 25 of Technology companies have a
    retention strategy
  • This still exceeds the 16 of non-technology
    companies with a formal approach to retaining
    employees

Source Strategic Rewards 2001
27
Are High Performing Companies Different?
  • High performing companies are winning the war for
    talent
  • Turnover rates are decreasing
  • Recruiting costs between 70 and 200 of annual
    salaries
  • Resulting in a median 17.8 five year return
  • High performing company program designs are based
    on
  • Performance Improvement
  • Communication
  • Flexibility
  • Involvement
  • Measurement

Source Strategic Rewards 2001
28
Performance Improvement
  • Significantly more high performing organizations
    approach their reward programs as a means of
    engaging people in improving business performance
  • Starting from this clearly articulated premise
    helps prevent programmitis - ie. programs du jour
    that dont drive results

Source Strategic Rewards 2001
29
Performance Improvement
  • Performance measurement measuring
    performance against a specified set of
    job-related
    competencies
  • Providing tools for employee
  • development tied to rewards and geared
  • toward enhancing organization success
  • Rapid identification of performance issues
  • Coaching and mentoring programs
  • providing non-direct report with contacts
  • within the company to assist employees
  • with direction and career-planning
  • Inplacement/Redeployment
  • Retrain to learn new skills
  • Utilize systematic web-based staffing processes

Best Practice
Wal-Mart focuses intensively on how employees
adapt during their first 90 days by assigning
veteran employees as mentors. They go on to
assess each new hires progress at 30-, 60-, and
90- day milestones. Results reduced attrition
rates by 25. Chevrons IT unit provides
efficient web-based staffing reallocation
databases designed to match skills, growth
opportunities and project team needs
30
Communication
  • The best reward strategies and programs will not
    achieve their full potential if they are not
  • Clearly articulated and
  • Understood by employees

Source Strategic Rewards 2001
31
Communication
  • Communication systematic strategy and processes
    for keeping employees in the loop
  • Making sure they believe the value the company
    places on them
  • Making sure they understand the value of what the
    company provides to them (benefits,
    opportunities, development, etc.)
  • Exit interviews conducted by department
    managers, focus on underlying issues, find
    trends, implement recommendations

Best Practices
  • Scient appointed a Chief Morale Officer who is
    responsible for fostering a positive culture,
    bringing people issues to the top of the
    companys agenda, leading morale-building
    efforts, organizing company rallies, roundtable
    luncheons, employee recognition and awards.
    Results a low 11 percent turnover compared to
    the 35 percent industry standard and a great
    recruiting-oriented website.
  • .
  • Toys R Us identifies listening and acting upon
    their employees dissatisfiers in exit
    interviewers as one of the key reasons they were
    able to reduce turnover by 35 percent.

32
Flexibility
  • The most successful firms are more likely to
    report reward plan flexibility
  • The impact of the need to operate at internet
    speed requires a nimble response

Source Strategic Rewards 2001
33
Flexibility
  • Multiple Incentives
  • Its not just about options
  • Adjust to evolving conditions through other forms
    of incentive
  • Vary short-term objectives vs. mid and long-term
  • Adjust to People Needs
  • Flexible scheduling/ Job shares
  • Floating hours at either end of the business day,
    split workday, shift, work week
  • Address demographic changes
  • Virtual office/telecommuting
  • Productivity generally remains the same or
    increases - overcome hesitancy to provide

Best Practice
Rockwell instituted a new innovation program
designed to celebrate and reward with stock
options not only patents but business process
improvements. A key goal is to harvest the
innovations currently unidentified. Silicon
Valley Bank developed a concept of an full
lifestyle portal for their employees on the
company HR-intranet. Designed to address all life
events - it acts as a concierge on the web for
employees. The result is a closer relationship
between the Bank and its employees, a better
understanding across functions of many of the
banks services and improved productivity due to
reduced distractions and hassles in trying to
resolve problems.
34
Employee Involvement
  • Employee involvement in reward plan design is
    essential if programs are to be customized to
    target audiences
  • This approach is utilized by a minority of
    organizations - but it is much more common among
    high performing companies

Source Strategic Rewards 2001
35
Employee Involvement
  • Recognition and rewards usage and design
  • Employee design of cash and non-cash awards given
    to individuals or teams based on performance
  • Implement innovative employee ideas
  • Recognition motivates top performers
  • Social communities
  • Encouraging the development of social ties among
    key employees binds employees to a social network
    at work
  • Separate locations for technical/creative groups
  • Off-site, think tank environment

Best Practices
Harley-Davidson increased employee participation
and challenged employees at the same time when it
asked them to take an active part in building a
better motorcycle. Through this effort, many
innovative worker-designed items are now utilized
throughout its plant. Scitor, near the top of
the Top 100 Best Places to Work, communicates its
unique environment internally and externally.
Scitor takes the position that all benefit and
reward programs belong to the employees and
should provide the best possible benefits. Scitor
seeks thorough employee input in all proposed
changes.
36
Measurement
  • High performing organizations are much more
    likely to measure their reward plan results
  • The old adage of what gets measured gets
    accomplished is directly relevant

Source Strategic Rewards 2001
37
Measurement
Best Practices
  • Measurement - Asking early and often
  • Retention is a critical business measurement but
    it is rarely a part of a managers performance
    metrics
  • Company culture, people practices, policies shape
    an employees commitment level and retention
  • Research consistently validates the significance
    of managements role in employee retention
  • Find out what issues exist before the turnover
    begins, make adjustments based on the feedback to
    the work environment and to management style

Prudential established their Building Management
Capability program, centered around a planning
model that projects skill/talent needs and
attrition rates. This program enables managers
to develop targeted retention initiatives and
more cost-effective succession plans for filling
skill/talent gaps. UPS identified their drivers
as hot skill employees and expensive to bring on
board due to the huge learning curve in getting
familiar with their routes. After analyzing the
reasons drivers left, it determined that the
number one reason was the task of loading
packages before each run. To reduce turnover,
they eliminated the loading task from the
drivers job and hired a new group to load them.
Driver turnover rate fell dramatically. Of
course, turnover in this new position is
astronomical, but it is fairly simple to learn
and recruit for this position.
38
Key Strategic Rewards Messages
  • Top performers are self-motivated and recognize
    their value as free agents.
  • Take money off the issues table by paying above
    market for top-performers - engage them through
    their primary motivators.
  • They will leave for money but it isnt the
    primary driver.
  • Competitive differentiation comes from
    understanding and capitalizing on individual
    employees needs.
  • Non-Technology companies are closing the gap in
    the war for talent
  • The old advantages of stock and casual,
    non-bureaucratic work styles have been adopted
    across industries
  • Technology companies lead by maintaining a
    strategic people vision

39
Key Strategic Rewards Messages
  • Play to win
  • The future will be created by Human Capital
  • High performing companies have gained competitive
    advantage by insuring their compensation programs
    are
  • Performance-Oriented
  • Well-Communicated
  • Flexible
  • Based on employee involvement and
  • Measured.

40
The New Economy is heavy on intellectual
capital. The sharing of knowledge is what really
makes it go. Today, teamwork and empowerment are
crucial to success. John Chambers Chairma
n CEO Cisco Systems 1995Present
1995 Market Cap 9 billion 1995Present
has created 480 billion in
shareholder value
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