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KEPNER-TREGOE

Business Issues Research Group


Research Monograph One

January 1999

Avoiding the
Brain Drain
What Companies Are Doing
to Lock in Their Talent
Executive Summary
Summary
Executive

uring the past several years a


growing number of executives have
become concerned about their organization's ability to retain the best and
brightest employees. Unemployment
reached a 20-year low this past summer
and, as The New York Times reported at the end
of October:
despite economic crises in Asia and Latin America,
plummeting exports and manufacturing job losses in the
United States, the labor market has not loosened as much
as might be expected. Help wanted advertising has
slipped, the Conference Board reported, but it remains
strong initial jobless claims, which had jumped two
weeks in a row, are back down near a 10-year low, the
Labor Department said. Probably most important,

the unemployment rate remains nearly a full percentage point below the level of three years ago4.6 percent versus 5.5 percent
And, according to most of the analysts, new
jobs, particularly in the infotech and telecommunications sectors, will continue to be created. The competition for experienced, talented workers is likely to continue, if not intensify, as we enter the new millennium.
That competition has already brought about
a shift in the attitude of many corporations
toward their workforce. In an attempt to win the
loyalty and commitment of their workers,
employers are holding focus groups and "town
meetings," administering "pulse" surveys to get
instant feedback on employee attitudes, and

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offering a wide variety of special perks to convey the message that they really care about their
people. This new sensitivity to employees' needs
doesn't stem from altruism or a new great awakening of the corporate conscience. Rather, it is

Allowing employee turnover to


continue uncheckedespecially
among the ranks of high performerscan have disastrous results.
based on a growing hard-edged, dollars-andcents understanding of the economics of
employee turnover. It is an issue with significant bottom-line impact.
The loss of experienced, talented employees
can cripple even the best-managed organization.
Hiring replacements and training new employees takes time and costs money. In the interim,
resources that might have been deployed to
grow the business must be devoted to simply
maintaining it. The loss of talent, as we will see
from this report, often results in fewer ideas and
not enough people to implement them. Allowing
employee turnover to continue unchecked
especially among the ranks of high performers
can have disastrous results, as many companies
have learned.
Turnover can feed upon itself and breed
what might be called "psychological disloyalty"
in the workforce. In 1997 pollster Lou Harris
and Associates reported that 53 percent of all
working people expect to quit their job within
five years. Last year the National Research
Bureau published even more alarming statistics:
Mobility in the workplace had reached an alltime high; on average, employees were changing jobs every three to four years. And the U.S.
Bureau of Labor Statistics recently revealed
that a typical American holds 8.6 different jobs
between ages 18 and 32, with most of the changes

Research Monograph One

coming before age 27. In fact, among many


recent college gradsespecially those with a
technology backgroundjob hopping has
become an obsession and they "never stop job
hunting."
In the national survey on employee
turnover conducted by Kepner-Tregoe, 60
percent of the 1,290 respondents admitted that they themselves think about leaving their job one to two times a year or
more. More than 60 percent of both the
managers and workers told us that their
coworkers frequently discuss leaving.

The Anatomy of Turnover


It appears retention has overtaken reengineering and
rightsizing as the No. 1 "R" word on the radar screen.
-HRFocus, November 1997

nd with good reason. In October


1997 the U.S. turnover rate rose to the
highest level in nearly a decade. When
completing the Kepner-Tregoe survey early
in 1998, nearly two thirds of both the managers and hourly workers who responded said
that voluntary turnover has increased in
their organization in the last three years, and
more than 60 percent of both groups said
that too few employees remain to get the job
done.
Published statistics place the current average annual turnover in U.S. companies
between 10 and 15 percent. Turnover in
"established" companies is said to be around
6 percent, while in new companieswhich
include most of the high-tech communications and computer industryit runs as high
as 30 or 40 percent. At the other end of the
spectrumin low-level service positions such
as fast-food workerscompanies are also
experiencing a significant retention crunch,
as turnover regularly runs between 100 and
140 percent.

Executive Summary

January 1999

1.1

Industry and company averages don't tell the


whole turnover story, however. For example, low
turnover among senior employees skews the
total turnover rate. This may well lull management into a false sense of security, as they are
unaware that younger employees are leaving at
a much higher rate and taking much of the
future with them. To stem the loss of its most
talented people, management must deconstruct
voluntary turnover statistics and segment them
in a number of ways: for example, by level, position, department, and length of tenure. Only
then can the true causes of turnover be isolated and effective corrective actions be taken.

Industry/Company

Position

Fast food chain

Store manager
Kitchen or counter person

$21,931.25
$1,520.50

Information systems
(software for hightech operations)

Technical project leader


Systems engineer

$32,215.00
$34,397.00

Insurance

Administrative staff person

$85,556.90

Skilled manufacturing
(machine works)

Journeyman machinist
(salaried)
Journeyman machinist
(hourly)

Automobile manufacturer

The Consequences of Employee Churn


The Cost of Replacing One Employee

hurn costs. Replacement costs alone

are staggering. Research by the Saratoga


Institute, a leader in H.R. measurement, has revealed that the loss of an exempt
employee costs, on average, between one and
two times that persons annual salary and
benefits.
Kepner-Tregoe asked a number of companies, in a cross-section of industries, to calculate the replacement cost of various positions.
We asked each company to complete the Saratoga
Institute Turnover Costing Model, which
includes three major categories: cost of termination, cost of hiring, and cost of new hire.
Not surprisingly, the last category is by far the
most costly. Brian McQuaid, executive director of human resources for MCI, recently shared
some startling figures with the Wall Street Journal:
A new hire can accomplish only 60% as much in the first
three months as an experienced worker, and serves customers
less well, MCI learned from studying its employees. And
even a 5% drop in overall employee efficiency cuts annual revenue by "a couple of hundred million dollars."
The data that was returned to us bore this out.
The completed worksheets can be found in

Research Monograph One

The Cost of Losing an Employee, but here are


the bottom-line figures the companies arrived
at:

Human Resources manager

Replacement Cost

$102,796.00
$58,732.00
$133,803.24

Statistics for other positions, in other industries, have been published in many places. Here
is a sampling of what our research uncovered:
It costs at least $100,000 to train one
licensed nuclear power plant control room
operator. (Cost Engineering, April 1997)
In the light industrial market, it can cost
$5,000 to replace a typical employee. In
middle management, it can cost $40,000.
(Tulsa World, June 22, 1997)
The cost of replacing one nurse has been
estimated to range from $2,000 to
$10,000. (Moneyclips, May 24, 1997)
The turnover problem costs the [automobile sales] industry as much as $8,000 a
person or about $968 million a year.
(The Detroit News, February 21, 1997)
A major insurance company recently conducted a thorough analysis and found that
its average cost per hire was $35,000,
which resulted in company-wide replacement costs of tens of million dollars a year.
(HRFocus, March 1996)
One database company realized it was costing it $70,000 every time it had to replace
a $48,000 employee. (Seattle Post-Intelligencer,
September 29, 1997)

Executive Summary

January 1999

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Organizations are spending an average of


$30,000 to $50,000 per new hireFor
every 10 employees who dont have to be
replaced, therefore, $300,000 to $500,000
falls directly to the bottom line. (Across the
Board, July/August 1998)
The Cost of Replacing Many Employees
In an August 1997 article in Workforce magazine, Dr. Jac Fitz-Enz of the Saratoga Institute
suggested a way in which companies can estimate
their minimal cost of turnover. Dr. Fitz-Enz
gave the example of a company with 1,000
employees, 50 percent of whom are exempt, and
an annual turnover of 8 percent among this
group. Since SI's research has shown that it
generally costs at least one year's salary and
benefits to replace an exempt employee, if the
average annual salary and benefits package for
exempt employees is $82,000, the minimal
cost of exempt turnover to the company is
$3,280,000:
Total workforce
x percent of
multiplied
exempt employees
by
(1,000 x .50=500)

Percent of
turnover
(500 x .08=40)

multiplied
by

Average
exempt yearly
salary & benefit
(40 x $82,000= $3,280,000 )

The "Hard" Costs of Turnover


As high as they are, direct replacement costs
comprise only a small portion of the total cost
of turnover. Employers need to look at the total
potential costs of turnover if they want to
determine how costly it really is. To do this, Dr.
Fitz-Enz recommends looking at two additional areas.
The first area is that of lost customers.
Inexperienced personnel make a greater number of errors, work more slowly, and are less
familiar with customers' needs than experienced workers are. Dr. Fitz-Enz suggests that
organizations use the following formula to esti-

Research Monograph One

mate the cash value of each customer that may


be lost as a result of turnover:
Total
Annual
Sales

divided by

Average
Number of
Active Customers

equals

Revenue
Per
Customer

Because lost customers must be replaced if the


business is to continue to meet goals, Dr. FitzEnz also recommends attempting to calculate the
additional marketing and sales expenditures
needed to win replacement customers.
Calculating the "Soft" Costs
There are many additional costs of turnover
that are not so easily measured. One of the
most damaging is the loss of intellectual capital. When seasoned employees leave, they take
with them intimate knowledge of the internal
workings of the organizationof its procedures, systems, equipment, personnel, and
customers. This is especially dangerous when
such knowledge is transported to competitors.
Some other less-easily-measured but potentially crippling costs of turnover include: lost
opportunities, particularly in the development
of new technologies and products; a decrease in
the "bench strength" required for effective succession planning; the advantage your competitors gain if your employees join them; decreased
morale and increased stress among remaining
employees; and the negative effect on your reputation.
Losing High Performers Means Higher Losses
It's a fact of life that not all employees are of
equal value to an organization. Winners count
most, and their loss costs most:
More than three quarters of both the managers and workers who responded to the
Kepner-Tregoe survey said that in their
organization the loss of high-performing
employees had caused a loss of experience
and knowledge.

Executive Summary

January 1999

1.1

Over 60 percent of each group said the loss


erwise would have been, Sears executives wrote in a
of high performers has made it difficult to
Harvard Business Review article in January
meet goals.
[1998].
More than half of each group said losing high performers had caused a loss
The loss of high performers costs
of competitive edge and a decline in
quality and customer service.
more than money. It tends to
47 percent of managers and 38 percent
impair the organization's memory,
of workers said the organization had
dilutes the ability to perform, and
suffered financial loss as a result of
the departure of high performers.
compromises the will to win.
And it is becoming more difficult to
replace these highly skilled, creative people. In a recent survey of CFOs by Duke
The Low Turnover-High Returns Connection
University's School of Business, 51 percent of
Fortune magazine has studied the correlation
those polled said they have to hire less qualified
between satisfied employees and profits. Its
people today than they did five years ago. And
January 1998 issue announced its choice of the
the demand for talent will continue to increase
"100 Best Companies to Work for in America,"
faster than the supply.
all of which were chosen because of their high
The loss of high performers costs more than employee satisfaction ratings and low turnover
money. It tends to impair the organization's rates. The same issue carried an article entitled
memory, dilutes the ability to perform, and "Happy Workers, High Returns."
compromises the will to win. In short, it saps
In this article, Fortune's analysis revealed that
the organization of its vitality.
of the 61 companies in the 100 Best that had
been traded publicly for the previous five years,
The Rewards of Reducing Churn
45 had yielded higher results than the Russell
3000, an index of large and small companies
Happy Employees Create Happy Customers
that mirrors Fortune's 100 Best. The 61 compand happy customers create higher nies averaged annual returns of 27.5%, vs.
profits. An article published in the Wall 17.3% for the Russell 3000. "Ten-year patterns
Street Journal last July referred to an 800- tell the same story," the article stated. "The
store study by Sears Roebuck, in which Sears Russell 3000 racked up annual returns of
14.8%, while the publicly traded companies in
executives concluded that:
the 100 Best averaged 23.4%. That's a huge dif employees' attitudes about their workload, treatference."
ment by bosses and eight other such matters have a measKepner-Tregoe's research into the strength
urable effect on customer satisfaction and revenue. If
of Retention Leadersthose companies that
employee attitudes on 10 essential counts improve by
have been at the forefront in developing inno5%, Sears found, customer satisfaction will jump
vative approaches to employee retentioncor1.3%, driving a one-half-percentage-point rise in revroborated these findings. Kepner-Tregoe studenue. If we knew nothing about a store except that
ied 11 companies in depth. Nine of the 11 are
employee attitudes had improved 5%, we could preamong the most recent Fortune 500. And,
dict that its revenue would rise 0.5% above what it othamong the Fortune 1000, an examination of

Research Monograph One

Executive Summary

January 1999

1.1

average earnings per share and total return to


investors for the past 10 years shows that our
Retention Leaders were at or above the industry median in nearly all cases where information
was available.
We were also interested in gaining insight
into the Retention Leaders' relative position in
the marketplace. To accomplish this, we went to
this year's Business Week Global 1000, which
ranked 2,700 public companies by market
value/capitalization as of May 29, 1998. Two of
our Retention Leaders are among the top 100
companies globally (Johnson & Johnson is
number 20; Hewlett-Packard is number 42).
Four hundred and eighty of the Global 1000 are
based in the U.S. The nine Retention Leaders
received the following rankings on the global and
U.S. lists:
Global

U.S.

AlliedSignal

165

84

Corning Incorporated

476

229

Hewlett-Packard

42

28

Johnson & Johnson

20

14

Marriott International, Inc.

488

232

Motorola, Inc.

118

64

Steelcase Inc.

885

425

TRW Inc.

642

313

Xerox Corporation

107

61

In nearly all cases where data was available, the


Retention Leaders' rate of growth was in the third
to fourth quartile compared to competitors.
Complete financial statistics relating to the
performance of Retention Leaders and competitors can be found in What Makes a
Retention Leader? The message these statistics
deliver is simple: Controlling turnover results
in both immediate savings and increased longterm growth.

What 's Being Done and How Effective Is It?

iven the dimensions and impact of


employee turnover, it is not unreasonable to expect that most organizations would move quickly to resolve the
issue. Surprisingly, this is not necessarily the
case. Fifty-two percent of the managers and
64 percent of the workers who responded to
the Kepner-Tregoe survey disagreed that
their top management initiates programs
to reduce turnover.

The Activity Buzz


Among the organizations that are taking
actions, there seems to be a frenzy of activity. Our
survey respondents told us that a wide variety of
actions has been taken by organizations trying
to stem the tide of turnover:

The tenth Retention Leader, our anonymous worldwide retailer, was within the top
100 in the U.S. and the top 150 globally. The
eleventh, Hallmark Cards, Inc., is privately
held and therefore not eligible for the list.
When we compared our Retention Leaders'
change in market value from 1993 to 1997 to that
of some of their competitors, in all but one case
where Bristol-Myers Squibb outperformed
Johnson & Johnsonthe Retention Leaders'
increase, in dollars, was higher.
A look at both earnings per share and sales per
employee over the past 10 years reveals a similar trend.

Action

Made salaries/financial rewards more competitive

67

Improved benefit packages

62

Given employees more authority/responsibility

64.5

Provided more recognition for superior performance

52

Instituted a flexible work schedule

57

Provided day care facilities

38.5

Provided services to meet personal needs


(e.g., laundry, auto repair, pets at work)

37

Allowed employees to work at home some or all of the time


Provided greater on-job training
Established well-defined career paths

Research Monograph One

% of Respondents
Whose Organization
Has Tried It

Executive Summary

43.5
51
39.5

January 1999

1.1

Yet, when we asked how effective these actions


had been, even the one that was rated most
effectivemaking salaries and financial rewards
more competitivewas judged to be ineffective
by more than one third of respondents.

as at-desk massages, laundry or concierge service, dog grooming, and the like. Thirty-eight
percent of our survey respondents reported
that their companies have tried such frills, yet
over 53 percent said these add-ons have not been
effective in reducing turnover.
Why? Because such actions are peripheral and
don't go to the heart of the matter. Joseph
Hammill, manager of staffing and strategy at
Xerox Business Systems, is convinced of this. He
told Kepner-Tregoe that, "I don't think these
are the fundamental things that turn an employee on. I do think that we have to be sensitive to

The Financial Panacea


Not surprisingly, over two thirds of our survey respondents said their organization had
tried to find a monetary solution to the turnover
problem. While no one would be foolish enough
to argue that money doesn't matter, much of the
recent researchincluding our ownshows that
when it comes to employee retention
money is not necessarily the deciding
he most fundamental thing is
factor.
to create an environment that
When Kepner-Tregoe asked workers
and managers what they believed were
will motivate people, that will
the three most common reasons that
make them excited and enthusihigh-performing employees had left
their organization, 56 percent of our
astic about the work they do.
respondents did not select money as
one of the three.
If there's one group touted to be motivated the need for what I'll call flexible work practices
by "lucre lust," it's the techies, given the high in the environment because we do have a very
diverse workforce today. But the most fundademand for their services. But data published
mental thing is to create an environment that
in the June 29, 1998 issue of ComputerWorld
will motivate people, that will make them excitbrings even this widely held belief into question.
ed and enthusiastic about the work they do in
Preliminary results from a study by researchers
the organization that they're part of."
at Drexel University in Philadelphia and Rider
By providing perks management is trying to
University in Lawrenceville, New Jersey show that
deliver
the message that it truly cares about its
"technical people in information systems departments tend to rate career development and peoplebut often what is not being done speaks
far more eloquently than what is. While an
nonmonetary compensation as more important
increasing number of organizations is concenfactors in their job satisfaction than money."
trating on peripherals, our research findings
And a ComputerWorld survey of 500 IT professuggest that many are neglecting the basics.
sionals yielded similar results: "Respondents said
salary was important, but they would trade a big
When we asked if their organization probonus for flextime, greater intellectual challenge vided the following, a substantial number of surand training."
vey respondents said it did not:
Fair, uniform performance standards: 40
Frills vs. Fundamentals
percent of managers and 49 percent of
At the other extreme, many companies are
workers said they do not have them.
showering employees with fringe benefits such

Research Monograph One

Executive Summary

January 1999

1.1

Enough resources (equipment, time,


employees, etc.) to do their job: 49 percent
of managers and 56 percent of workers said
these are not sufficient.

providing them with enough resources to


do their best job; with fair, uniform standards; with continuous, useful feedback;
and with appropriate rewards and recognition. Rather than resorting to stop-gap
retention initiatives, these companies
Retention Leaders focus on the
lay a solid foundation that supports
work environment and ask:
human performance in every way.
How can we manage our environIn addition to managing within context, Retention Leaders know that every
ment to better leverage our human
employee, from custodian to chief
assets?
executive, occupies a certain point on
a continuum. This continuum began
Financial rewards tied to good performwhen the person interviews for a position;
ance: 47 percent of managers and 69 percontinues through his or her orientation,
cent of workers said these are missing.
training, attainment of job proficiency, and
progress along a career path; and ends when
An effective performance system: 51 perthe person leaves the organization. In their
cent of managers and 63 percent of workrelationship with each employee, Retention
ers told us this does not exist.
Leaders take into consideration the person's
Such neglect delivers a powerful implicit
specific needs at every point on the continmessage that, in spite of the at-desk massages,
uum and do their best to fulfill them.
pets at work, valet service, and other attempts to
2. RETENTION LEADERS HAVE A CULTURE OF
win employees over, management still has a
CARING, BALANCED WITH A TRADITION OF
long way to go to prove that it really cares.
EXCELLENCE.
The Key Drivers of Retention Success
On one hand, these companies are value
driven. They place a high value on integriThe third dimension of Kepner-Tregoe's
ty, ethical behavior, and truth in all their dealresearch focused on known Retention Leaders:
ings, including their treatment of and comcompanies that are at the forefront in keeping
munication with their employees. They put
their people motivated and their talent from
their money and effort behind their rhetofleeing. We conducted interviews in 11 such
ric when it comes to demonstrating how
organizations to learn what accounted for their
important their workers are to them.
successful track record. From this research, we
isolated seven key drivers of retention success:
On the other hand, these companies all
have
a rock-solid tradition of holding
I. RETENTION LEADERS DON'T MANAGE RETENemployees to a standard of business excelTION, THEY MANAGE PEOPLE.
lence. The Retention Leaders we spoke to do
By managing people, we mean managing the
not emphasis caring at the expense of busientire context in which people perform.
ness results or vice versa. To them, caring is
Retention Leaders manage people in situ.
good business. They realize that employees
They focus on the work environment and ask:
who are motivated and satisfied with their
"How can we manage our environment to betworking conditions are more likely to proter leverage our human assets?" Retention
duce satisfied customers. They treat people
Leaders also support their human assets by
well, hold them to high standards, and share

Research Monograph One

Executive Summary

January 1999

1.1

the resulting rewards with those who helped


it compares to competitors'. Nor do they
attain them.
have a clear picture of which of their employees are leaving: high or low performers,
3. RETENTION LEADERS HAVE A STAIRSTEPPING
skilled or unskilled workers, "old-timers"
PROCESS FOR CONFLICT RESOLUTION.
or "whiz kids."
In the best of all possible worlds, people
Retention Leaders know that overall turnover
would be trained to avoid conflict. But organfigures are rarely as useful as those for speizations are human environments. Conflicts
cific sub-populations within the organization.
are bound to arise from time to time, espeTherefore, they segment turnover data in a
cially at certain flashpoints, such as the intervariety of ways: by education level, peraction between employees and their immeformance level, age, sex, race, job classificadiate supervisor. A problem here can easily
tion, length of service, unit, department,
result in the loss of a good employee. (In fact,
division, to name just a few. This very spe16 percent of those who responded to the
cific information serves as an effective earlyKepner-Tregoe survey identified conflict
warning system, enabling Retention Leaders
with their supervisor as one of the three most
to search for individual causes and solutions
common reasons high performers had left
in "pockets of turnover."
their organization.)
Retention Leaders also make extensive use of
A common practice among Retention Leaders
employee attitude surveys, not simply as a
is to offer legitimate alternate avenues that
thermometer, but as a lightning rod for
allow employees to circumvent their immediate supervisor, if necessary, in
order to get their problems
16 percent of those who responded
resolved. Our worldwide retailto the Kepner-Tregoe survey identier, for example, has set up a special telephone line that employfied conflict with their supervisor as
ees can use to escalate their conone of the three most common reacerns to the area or regional
sons high performers had left their
level, and they can go as high as
the office of the vice president of
organization.
employee relations if necessary.
Employees at Steelcase can go
change. Subscribing to the adage that, "If you
even furtherto the office of CEO Jim
can measure it, you can manage it," they
Hackett, who maintains an "open-door polkeep their finger on the pulse of the organicy." Mr. Hackett sees about 10 employees a
ization, looking for early-warning signs of
month; all they have to do is call his secretary
turnover and related people problems.
for an appointment, and he will sit down
Perhaps what distinguishes Retention Leaders
with them and discuss any problems, sugmost is the use they make of the feedback they
gestions, or ideas they might have.
receive from their employees. It is never
4. RETENTION LEADERS FIRST TAKE STOCK,
solicited only to be ignored. Johnson &
THEN TAKE ACTION.
Johnson uses the results of the credo surveys
Even with all the fanfare surrounding employits employees complete in its strategic action
ee retention, many companies continue to be
planning. Each time Motorola's Individual
unaware of their true turnover rate and how
Dignity Entitlement survey is conducted,

Research Monograph One

Executive Summary

January 1999

1.1

10

supervisors are expected to construct action


iment with new ideas and techniques, and
plans to correct deficiencies. Ninety days
recharge their creative batteries. The result:
later the survey is conducted again and their
a stable, committed staff that doesn't feel
progress on the plans is evaluated.
the need to go elsewhere to grow professionally
5. RETENTION LEADERS KEEP THEIR EYE ON THE
HIGH PERFORMERS.
All organizations face resource conRather than tightening the
straints. There is simply not enough
golden handcuffs by offering
money, time, or management attention to devote to every business
across-the-board pay raises and
issue. Retention Leaders focus their
perks, Retention Leaders tie their
efforts on their high performers,
rewards to performance.
where payback is greatest.
Retention Leaders do not need to be
reminded that their "stars" set the tone and
6. RETENTION LEADERS VIEW PEOPLE MANAGEcarry the load for the rest of the workforce.
MENT AS A STRATEGIC BUSINESS ISSUE.
They are always vigilant in monitoring the satAs we pointed out earlier, there is mounting
isfaction level of high performers and
evidence that lowering turnover increases
responding quickly to evidence of discontent
profits. Organizations are also becoming
among this group.
increasingly aware of the truth of the stateAll the companies at which we conducted
ment that, "Knowledge is the only sustaininterviews also ensure that superior results get
able competitive advantage." Saratoga
recognized and rewarded in a way that holds
Institute's 1997 Retention Management
the greatest value for the employees involved.
Report commented on the need for busiAnd, rather than tightening the golden handnesses to begin looking at their people in an
cuffs on their least productive employees by
entirely new way:
offering across-the-board pay raises and
Viewing employee selection and retention as a strateperks, Retention Leaders tie their rewards to
gic business issue is a recent process for the global and
performance. Both TRW and Hewlettgrowth-oriented organizations of today. Companies
Packard distribute stock options as rewards to
now have to focus on these issues as business imperhigh performers. At HP such options are
atives and build a culture that views its employees as
also offered to star performers who are condrivers of financial performance. The seamless unity
sidering leaving the company, as an incenof both the human capital strategy and the business
tive to remain. Xerox Corporation rewards
strategy provides the linkage between the organizaemployees who acquire new skills and comtion's human assets and its bottom line.
petencies. It also gives financial rewards for
The Retention Leaders we spoke to have
outstanding individual efforts, work-group
already made this shift. In each of these comefforts, and overall business success.
panies, the high value placed on employees
Retention Leaders also know that high perand the attention paid to their needs begins
formers must be nurtured and allowed to
at the top.
develop their talent. Hallmark Cards, Inc.
offers its creative staff a variety of opportunities to get away from the daily grind, exper-

Research Monograph One

Executive Summary

January 1999

1.1

11

7. RETENTION LEADERS

ARE RELENTLESS IN

THEIR PURSUIT OF CONTINUOUS IMPROVEMENT.

All of our Retention Leaders approach their


relationship with their employees as a "work
in progress." They keep asking questions,
soliciting feedback, and taking actions to
maintain a high level of satisfaction among
all their workers. They also keep looking for
new and innovative ways to reward and recognize their best people.

Conclusion

Retention Leaders manage human


assets with the same caring eye, skill,
and rigor that they manage their
financial and capital assets.

hese seven variables are not


a panacea or quick fix for solving the issue of employee
turnover. Taken together, they represent a disciplined, progressive way
to manage a crucial corporate asset.
Retention Leaders manage human assets
with the same caring eye, skill, and rigor that
they manage their financial and capital
assets. And because they do, they have been
able to leverage the brainpower of their
employees to achieve impressive results,
rather than standing by and watching that
asset drain away.

Research Monograph One

Executive Summary

January 1999

Office Listings
Headquarters United States
Kepner-Tregoe, Inc.
P.O. Box 704
Princeton, New Jersey 08542
609-921-2806
Fax 609-497-0130
Australia
Kepner-Tregoe Australasia
Level 8
50 Berry Street
North Sydney, NSW 2060
Australia
61-2-9955-5944
Fax 61-2-9955-1625
Canada
Kepner-Tregoe Associates, Ltd.
45 Sheppard Avenue, East
Suite 305
North York, Ontario
M2N 5W9
416-221-5522
Fax 416-221-9376
France
Kepner-Tregoe Srl
91, rue du Faubourg St-Honor
F-75370 Paris, Cedex 08
+33-(0)1.44.71.36.05
Fax +33-(0)1.44.71.35.72
Germany
Kepner-Tregoe Deutschland
An der Alster 17
D 20099 Hamburg
Germany
49-40-28 40 75-0
Fax 49-40-28 40 75-28
Hong Kong
Kepner-Tregoe
4th Floor, Dina House
Ruttonjee Centre
11, Duddell Street, Central
Hong Kong
852-532-8348
Fax 852-845-3485

Ireland
Kepner Tregoe Ireland Ltd
Orania House
97 St. Stephens Green
Dublin 2
Republic of Ireland
+353/1/2834030
Fax +353/1/2836230
Japan
Kepner-Tregoe Japan
Moto-Akasaka Kikutei Bldg.
7-18 Moto-Akasaka 1-chome
Minato-ku, Tokyo, Japan 107
81-3-3401-9521
Fax 81-3-3479-0745
Malaysia
Kepner-Tregoe (M) Sdn. Bhd.
Unit 607, Block D
Phileo Damansara 1
No. 9, Jalan 16/11
Off Jalan Damansara
46350 Petaling Jaya
Malaysia
60-3-460-9128
Fax 60-3-460-9138
Singapore
Kepner-Tregoe,
Southeast Asia, Ltd.
18-06 United Square
101 Thomson Road
Singapore 307591
65-256-6494
Fax 65-256-6500
Switzerland
(Serving Belgium)
Kepner-Tregoe, S.A.
Rue de la Porcelaine 13
B.P. 90
CH-1260 Nyon 1
+41-(0)22-361.21.31
Fax +41-(0)22-362.12.81

Copyright 1999 Kepner-Tregoe, Inc. All Rights Reserved.

Thailand
Kepner-Tregoe
(Thailand) Inc., Ltd.
10th Floor
Thosapol Land Building 2
230 Rajchadaphisaek Road
Huaykwang, Bangkok 10320
Thailand
66-2-274-0646
Fax 66-2-274-0728
United Kingdom
Kepner-Tregoe Ltd.
Bentley House
13-15 Victoria Street
Windsor
Berkshire SL4 1HB
England
44-1753-856716
Fax 44-1753-854929
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Or visit our Web site at


www.kepner-tregoe.com

700-21-P076098B

KL457.a

003458