Successful Retention Strategies (Part 4 of 4): Organizational Design
It’s finally here – the end of 2022. What a wild and crazy ride it has been. As business leaders, we have had a lot to contend with and still do. Our work is far from over. More layoffs have been announced beyond the FAANG companies and broader tech sector, inflation persists at uncomfortably high levels, and the labor market remains the tightest in recorded history. Finding top talent is still more challenging than ever. Quit rates remain high, and ghosting by candidates continues. November’s labor statistics reflected continued increases in employee compensation over the 5% mark on average squeezing company budgets and frustrating employer hiring decisions.
What is the secret to reducing the harmful impact of all of these challenges, you ask? RETENTION STRATEGIES.
The previous articles in this series addressed the role that Onboarding, Recruitment, and Total Rewards play in retention. This article will explore Organizational Design and Development strategies, specifically internal mobility, that will help reflect the vision of the future and the career path for the long-term success of your people. With concerns of a potential recession in 2023 looming large, we will also touch on retention when restructuring your company includes a reduction in force (RIF).
Defining the job
Not every business can build robust tiered structures for all roles, functions, and departments. For example, many small companies often have departments of just one person. For the medium and larger business, it may seem easier for them to structure tiers for employees and chart a career path. Still, they often run into pay compression and bottlenecks leading to too much bulk in the middle, a reverse hourglass that is thin at the top and bottom but nice and plump in the center. It is easy to see that this is a complicated issue with different challenges facing companies of various sizes. But there are still commonalities that businesses of all sizes can implement, which will aid in retaining top talent.
The best place to start, regardless of the company size, is defining the job. What do you want them to do? I know some leaders are disappointed in the obviousness of this but bear with me. This is about more than building an effective and compliant job description. That is part of it, but defining a job begins with understanding your company’s strategic plan. It starts with asking, “how does this role fit?” and “how will it help achieve my business strategy?” These questions get right to the heart of necessity. Sometimes, a role is created not because it advances the business strategy but because it is convenient for someone, a way to shift responsibility onto someone else. While that could be helpful to business strategy, it may not be. However, defining the role in terms of business strategy rather than convenience is critical to ensuring strategic alignment.
It’s also important to remember that you are hiring human beings. People. Again, some may roll their eyes and think, “um… yeah…” but keep in mind that as business leaders at organizations of many different sizes, it is easy to get caught up in the daily grind, the strategic struggle, and even the business viability worry and forget that we employ people. They have hopes, dreams, and desires. Employees support their families, contribute to their communities, and most genuinely care about the company’s success. When hiring people, some may be very content doing the same job the same way and producing the same result. Many more are happy to do this job now but want to know what comes next.
This is a KEY driver for the great resignation. The old saying, “people don’t quit businesses, they quit managers,” is typically a true statement. But people with internal mobility will often find ways to leave the managers they want to quit and remain with the company. So, you have to have options internally to retain top talent.
Here is where we inevitably receive pushback from many small business leaders. Addressing the elephant in the room, yes, only some small businesses will be able to create the same level of mobility as medium and large companies. Every small business, however, will be able to generate SOME mobility. And for mid-sized and larger companies, internal mobility is KING at retaining top talent. Many books have been written demonstrating that investment in the training and development of people, creating lateral and vertical growth as well as realigning responsibilities to expand a role’s sphere of influence and strategic importance leads to employee retention and outperformance of competition no matter the industry or market in which they exist. This could only be accomplished if you first define the role in terms of your business strategy.
Up, Left-Right, Hold, Down
When talking with leaders about career advancement, nearly 100% latch onto the word “advancement” and take only two of the Webster’s Dictionary definitions of the word literally— “promotion or elevation to a higher rank or position” and “progression to a higher stage of development.” In addition, nearly all forget there is a third definition -“an improved feature: IMPROVEMENT.” Improving someone in your organization is perhaps the greatest advancement any business leader can aspire to achieve with their employees. And this is something that can be done at organizations of every size.
Some people want vertical advancement. Ask them, and they will speak in terms of moving up from an individual contributor to a supervisor, manager, director, VP, and into the C-suite of a company. Small family-owned businesses may have the greatest challenge here, with limited structure and family owners filling the highest positions. Larger companies may have more layers, but every business has bottlenecks at the top. While there are limits, there is still opportunity. Evaluating your business growth and regularly reviewing your strategic plan may reveal the point where a new level/layer of management is appropriate or necessary. Even in small businesses, upward mobility happens. However, if employees are frustrated by a lack of upward mobility, share with them alternative mobility options.
Other people will benefit from horizontal movement. For this group, it is not about vertical advancement. It’s about providing them more exposure to different areas of the business, helping them become more aware of how all the puzzle pieces work together or building new skill sets. This could be a stepping stone to what they genuinely desire, vertical advancement, but they may not be ready for it, or the opportunity is not yet available. The greatest harm to business longevity is type-casting or pigeonholing people in one area of the business. Talk with your people, listen to what they want, consider their impact and how they may fit in other business areas, and plan strategically to expand their capabilities. Sometimes you have to share your vision and inspire them with opportunities they may not have thought about.
Still, other people want to hold tight, to stay where they are. This can be beneficial for an organization of every size. We all need constant and consistent performers, those who hold and train others on institutional knowledge. However, the one constant in business is CHANGE. So, while this group may want to hold tight and continue to do the same thing the same way and produce the same consistent results, that may hold your business back. It does not mean you have to look at replacing these people. It may mean that the pace of change for them comes slower. If you plan it right, making changes at a measured pace, you will find far greater acceptance from this group. The point is that there is room for people who generally want to hold in place to experience career advancement. Ask any 30-year veteran employee how their job today compares to how they did it when they were hired. You will be pleasantly surprised when they realize just how far they have “advanced.”
Finally, some may benefit from a step backward. It sounds counterintuitive, but if you look deeply into your own life, you will find many situations where you had to take a step back to take several steps forward. No business, and no person for that matter, walks a straight path. We all meander and loop back on ourselves many times. Losing a person because a role is going away, a business contraction happens, or a strategic directional shift is made, whatever the reason, can be the right or wrong reason to lose them. Look to see who may be willing to take a step back for a time to help them remain a valued contributor to the business and help the business reposition itself. There may be personal reasons to want to take a step back too. If they are good for the company, find ways to help them remain and contribute to the business strategy.
Internal mobility depends on inspiring a shared vision, a key tenant of leadership shared in Kouzes & Posner’s The Leadership Challenge. You defined the role in relation to your business strategy. Now you have to show your employees this vision, how the role fits, and how their career with the company is enhanced by the mobility choices available to them. Your vision needs to solve their career growth problem as much as their contribution needs to advance your business strategy. A well-crafted vision drives employee engagement.
Job descriptions do play a critical role. Unfortunately, too many companies create job descriptions without an appropriate job evaluation. As a result, the document lacks important details, or the job evolves well beyond the last iteration of the job description. As companies grow and evolve or more headcount is added, the job descriptions must also evolve and accurately reflect the essential duties for each role while laying the foundation for professional growth and development.
Even small businesses need to create and update their job descriptions regularly. Regardless of size, some functions will likely have more than one tier or layer. For example, sales may have administrative support, local sales account managers, and national account sales managers. These people may report to a director of sales or even the business owner themselves. Other flat structure businesses may have an office manager position that requires strength in accounting to handle job costing, accounts receivable, and accounts payable. They may not need the strength of accounting chops to put together an income statement or balance sheet and are likely to work closely with in-house accountants or external CPA firms. Larger companies may have multiple people in their accounting departments. These are all examples where tiering the skill set and providing a path for career growth will help employees feel directionality and mobility in their careers.
Differentiate the skill set needed to advance from a sales administrative role into their first local account management role or from an office manager to a staff accountant position. When shifting people in operations from one area of a manufacturing plant, a greenhouse, or a service channel in an office setting, identify their transferable skills and new skills they will have to learn. Openly talk about needs – the employee’s needs and the company’s needs. Focus on value— the value the employee brings to the business and vice versa.
It is simply planning and conversation. This is how you will find the right opportunity for mobility that benefits both the company and the employee and retain them when they may otherwise look for mobility outside of your company.
Training and coaching your employees will be the glue that holds it all together. Small businesses often lack the internal resources to provide training in new skills. There are, however, many external resources that may be very cost-effective. Look to industry trade associations, the universities or colleges where employees graduated from, or even professional associations. Many colleges and universities provide free webinars that graduates can check out from the institutions’ online libraries. Coaching by incumbents, managers, or other skilled team members are other ways to provide this development at all company sizes. Some industries or roles may require very specialized compliance training. If that’s the case, you may have to build in the cost of course training into the budget. Larger companies may have a dedicated training department with specialists in Learning & Development skilled at creating curricula. Whichever fits your company, ensure alignment with your strategic plan and plan your workforce development.
Retention During RIFs
Economic downturns happen. As Sir Isaac Newton said, “what goes up must come down.” It is as true of gravity as it is of economics. However, as the late Louis Rukeyser, author of How to Make Money in Wall Street, once said, “what comes down must go up.” It is common for business strategies to shift into protection mode, where holding on and avoiding losing ground becomes more important than growth. Headcount that is built on the assumption of growth may have to be adjusted to weather the short-term storm (likely coming in 2023), but some important keys will drive employee retention even when reducing your headcount.
First, be aware of the Federal Worker Adjustment and Retraining Notification Act (WARN) and if your state has a mini-WARN act. If your company meets the company size and reduction qualifications, this will have a big impact on implementing your Reduction in Force (RIF).
Second, among the many important steps, communication is most important to retaining the top talent you want. The secret formula is That-What-How.
- That you communicate is of paramount importance. In the absence of information, people will make up their own facts. Chasing ghosts and wild imagination has led to some drastic negative impacts on business. So don’t let false information circulate. Get out ahead and control the messaging.
- What you communicate will make all the difference. First, you should address the elephant in the room. Is the business going under? Likely the answer is no. But the employees you need to retain need to know that this is necessary to reposition the company for future growth. Stress the gratitude for the hard work of those leaving the organization and the appreciation and importance of those who will remain. Assure them that there is a bright future and inspire a shared vision.
- How you communicate this will determine the messages’ believability. Communicate in a highly positive but authentic way. As you implement the RIF, do so with compliance and compassion. Express empathy, not sympathy, and communicate clearly, confidently, and consistently. There is no such thing as overcommunication, only not enough communication.
This only scratches the surface of retention during a RIF, but if you can do the messaging and the communicating well, retention of top talent will remain extremely high. It is the single biggest reason that top talent leaves when selected to remain during a RIF— there was just not enough communication.
2022 has been a tumultuous year. Many of the challenges started even before the pandemic but were exacerbated due to it. While some relief appears to be on the horizon, new challenges are coming. The key will be the retention of top talent, now and into the future. Retention reduces the stress and strain on recruitment, helps keep institutional knowledge in-house, and makes training and development more accessible. This year we have shared the four secrets to retaining top talent – Onboarding, Recruitment, Total Rewards, and Organizational Design and Development. While there is no silver bullet, use these tools to prop up your business and be in the driver’s seat as the winds of change blow in. If you do, your business will be in a much better position to propel future growth.
From all of us at BEST Human Capital & Advisory Group, we wish you the BEST of holiday wishes and a very Happy New Year.