Friday, June 30, 2006

Attrition... What is it Good For?

Until recently (late-2003), our base of Hong Kong had suffered several years of economic downturn brought on by, primarily, the SARS epidemic, weak regional economies and, to a lesser extent, local government mismanagement. Recently (early-mid 2004), the economies of SE Asia began to rebound and by 2005, it was full steam ahead.

One such negative is attrition, or staff turnover - whether through retirement or resignation. In our town the attrition rate is approximately 15%.

Historically, most companies view employee attrition as a human resources problem, which is clearly not the case. By having your managers pay attention to their best staff not only helps retain expertise and long-term experience within the company, it also reinforces stability. High staff turnover, at least until recently, has been a fact of life for local firms. But, although it is taken for granted by many, this occurrence is, in essence, a form of ineffectiveness, as new staff have to be trained from scratch.

Companies with low attrition rates generally agree that to succeed, human beings must remain the main asset and human resources practices must reflect as such. Hong Kong, for instance, has little, if any natural resources and, as such, people are its main reserve. Any firm that fails to take care of its workforce is guaranteed to be unsuccessful.

People are our engines and it is absolutely critical to have a stable workforce. Good companies value staff that have been with the organization for three or four years as being much more valuable than those hired a few weeks before. No matter what their qualifications are, the latter lack specific inside corporate experience and knowledge.

Money is NOT the End All
Why do staff stay? Good companies do not look to hire people because they are cheap. A ten or twenty percent additional cost equals the value of two cheaper people. Bonuses are always very much part of a good remuneration package and very much part of any incentive that will keep the commitment and allegiance of employees.

Financial compensation is generally based on entire company performance, while base pay should be kept at market levels. Whereas some firms give staff a very low base salary, rewarding staff with performance-related bonuses, good companies pay ‘good’ salaries (mid- to higher-market range) and a generous year-end bonus.

However, the main factor for high staff retention is seldom just money. Rather, the culture of the company as a whole and the importance it accords to employees as people is often a more decisive factor decisive. At the heart of most employee-focused philosophies is the concept of employee empowerment – allowing employees to take responsibility for their actions. Empowering people means giving them authority, defining well what the company expects and compensating them accordingly. If staff is to perform well, it is vital they are clear about what is expected of them. Good companies, therefore, ensure that everyone has a well-defined job description and understands their targets. Companies that adhere to this philosophy have seen the advantages of empowering employees to discover and develop what they are good at.

Two-Way Street
From the beginning, it is essential to select and nurture employees likely to stay with the company.

Who do good companies look for? Unique people - people who think outside the box and perform flawlessly… creative, earnest and committed people, with a will to excel.

To secure the commitment of these employees, companies needs to demonstrate it is committed to them too. One of the many functions of any companies HR department is to make life at the company more convenient for staff.

Under the initial healthcare scheme of one company we know of, staff was instructed to pay cash in advance when seeking medical treatment. However, key management felt this method was problematic, therefore, the firm readjusted the scheme to give staff the option of paying through credit card.

Higher levels of attrition in Asia have resulted in increased pressure on organizations to retain key talent. Today, HR practitioners are taking more focused initiatives by developing cohesive and meaningful HR retention programs.

Containing Attrition
• Give employees accountability for actions and permit them to develop their strengths;
• Provide succinct and exact job descriptions so staff are clear as to what is expected;
• Ensure workers are compensated in line with market; and
• Individualise development: different staff react differently to training methods.

Performance Appraisals – Can’t Live With Them, Can’t Live Without Them

For most people, the thought of swimming across Victoria Harbour (Hong Kong pond) for an all-day session of LegCo (Hong Kong's government), followed by an evening with Celine Dion (skeletal-like French-speaking Canuck) - as presented by endless parades of tourists in a Wan Chai karaoke bar - is not something we could endure.


Nevertheless, for most Hong Kong managers, an afternoon with Long Hair (you don't want to know) and an evening with Celine-wannabe’s is considerably more acceptable than conducting the dreaded employee performance appraisal.

Practically every firm conducts performance appraisals – even if managers (and employees) detest them so much they will do practically anything to avoid participation. Even personnel – who invented them - dislike appraisals as they spend most of their time chasing reluctant managers for the results.

How can we make reviews more endurable? Try this:

Reinforce Positives... Regularly
Ongoing feedback is considerably more effective than yearly feedback. One of the least-used management principles is that of reinforcement: ‘reinforcing positive behavior will increase the probability of that behavior.’ Managers need to note employees in the act of performing positively and immediately reinforce them. Appreciation and a ‘pat on the back’ are powerful reinforcements that lead to further positive results.

De-link Employee Development with Compensation
The performance and salary review have become synonymous in most companies. However, there is nothing more demoralising for employees than to say their performance is terrific but there is no money on hand for raises. Performance reviews should assist employees develop and grow; salary reviews should occur separately on a yearly basis.

Ensure Clarity and Achievability
Manpower research indicates that only 50% of employees actually understand the measures used to assess performance. As such, performance measures must be clear - and relevant - to each particular employee. For example, ‘billable hours’ may be pertinent for project workers in a professional service firm but not for someone whose sole responsibility are sales. Employees should also participate in establishing objectives, as they often know their job better than managers.

Team and Customer Feedback
Performance feedback from team members and customers is frequently more useful than managerial feedback. Organised appropriately, 360° reviews including team and customer feedback is especially valuable to employees.