Saturday, June 26, 2010

4 “Tricky Nuances” in Talent Management

On the heels of my last post on the careful use of predictive tools in screening job candidates, I have included some musings below on 4 other “tricky nuances” in talent management.

1. One of the predictors of “employee retention risk" that I’ve used in models is “recency of training.” Just like a prior ‘job-hopping’ pattern can foretell whether a job candidate might be EITHER a good or bad hiring decision (depending on the job), training an employee could have polar opposite effects on employee retention -- based on the broader "work experience" context.

The degree to which training increases/decreases the odds of an employee leaving (voluntarily) is often related to whether the skill(s) they are being trained in are valued more internally vs. externally. Presumably, something valued more internally (e.g., being skilled in a company-proprietary technology) means the employee will likely be compensated, engaged and generally treated better than if they were to leave … so better retention usually ensues. Conversely, if an employee picks-up a new skill or set of skills (e.g., Six Sigma Training) when the market is hungry for those skills –AND the organization is not expending much effort (or money ) to engage and secure that employee, the training offered can certainly result in creating an “employee retention risk.”

2. A tricky scenario that relates to compensation is where an excellent or above-average performer gets a very modest (or even meager) salary increase due to being on-top of the range for their salary grade. In an organization of say 10,000 employees, it’s certainly conceivable that 3-5% (or 300-500 employees) will be in this situation. If the average salary for this group is $70,000 and the average (small) increase given is 3% … that company has doled out $630,000 to over $1 million and will likely derive very little if any benefit from that! [Refer to #3 below for a possible way to mitigate this situation.]

3. A more technical situation where compensation can serve as a dis-incentive … Take the case of a married couple in the U.S. filing a joint tax return with a combined taxable income of $65,000. One of them then gets a nice 10% salary increase for being a great contributor -- cause for a nice dinner out -- or is it? Well, for married couples filing jointly, $68,000 is the cutoff between the 15% and 25% tax brackets. Consequently, this couple’s income (after taxes) is actually decreased by $8,000 after one of them gets a healthy 10% raise! How does an organization avoid rewarding employees well but getting the opposite of the desired effect?

One answer is to have an HR manager and a corporate accountant review a list of all employees potentially in this situation; and perhaps offer a non-monetary reward if the employee so chooses; e.g., flex hours or non job-specific training. At the very least, they should communicate with those employees to advise them of the consequences (e.g., short and longer-term) of this year’s comp adjustment.

4. I’ll end with an example in the realm of competencies … specifically, what might occur when the value an organization attaches to a certain competency changes in a material way? Case in point from investment banking … I suspect a few Wall Street firms (the ones that seriously signed-up for less risk-taking) have been thinking a lot lately about how to re-tool their workforce from a competencies standpoint. With “risk management” and “sound judgment” likely being valued much more in these firms, they must quickly transition to these “newly valued” competencies in a way that is minimally disruptive to the business.

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