Mr. Redington

Human Resources, Recruitment & Training

Why Acquisition and Retention Strategies Don't Work

By Neale Redington, Partner, Deloitte

Resumes abound, yet hotels still feverishly search for the people who make the difference between 10 percent and 20 percent annual growth, or between profit and loss. Critical talent is scarce, and about to become much more scarce because of two looming trends: the retirement of the Baby Boom generation and a growing skills gap. By "critical talent," we refer to the groups and individuals that drive a disproportionate share of their company's business performance and generate greater-than-average value for customers and shareholders. A hotel's critical talent possesses highly developed skills and deep knowledge-not just of the work itself but also of "how to make things happen" in the organization. They also have a deep respect for customer relations and see the value in excellent service. Without these people, organizations could not achieve their strategies.

When the knowledge and skills of critical talent become scarce, recruiting wars erupt. Many leading companies fight these wars differently. They do not succumb to bidding wars, knowing that the "star" who chases high offers will be out the door as soon as the next higher one rolls in. Nor do they bribe talent to stay, knowing that monetary incentives do not foster long-term commitment; worse still, they can mask discontent that infects others. Rather than focus on acquiring and retaining talent, talent savvy organizations support their key people on the issues they care about most: doing work that engages them, learning how to do it even better, encountering fresh challenges, and interacting with people in positive ways.

When labor gets tight, most organizations hunt for external candidates to fill their most critical jobs ("acquisition") and try to convince current employees to stay ("retention"). These companies offer money, perks, and new challenges. But this is more of a knee-jerk response than a clear strategy.

Sometimes it works. But more often it delays, or even fuels, the inevitable churn of good people.

In particular, companies place too much attention on "acquiring" talent, the front-end of the process. The typical U.S. company spends nearly 50 times more to recruit a $100,000 professional than it will invest in his annual training after he comes aboard. In part, this is understandable. It is far easier to phone an executive search firm or post openings on a Web site than it is to "grow" someone into a position or to deal with the internal politics of redeploying people from within. But such shortcuts are costly. The average cost to replace an employee is one and a half times her average salary.

New candidates can take a year or more to master their jobs. Moreover, a company that focuses on external talent can erode the commitment of internal candidates who perceive a bias against them. Common retention approaches are problematic, too. Often, they are driven by simple metrics such as employee turnover. But while churn at a company may fall from 10 percent to 5 percent from one year to another, it may hide the fact that critical employees are pouring out the door. Furthermore, the numbers say nothing about why people leave.

In exit interviews, those leaving frequently resist giving the true reasons for their departures for fear of burning bridges. Finally, turnover does not measure people's commitment to the company. When jobs are scarce, it is easy to retain a noncommitted workforce. As a result, by focusing on the end points of managing talent (acquisition and retention) rather than on the middle ones (deployment and development), organizations ignore the things that matter most to employees. When this happens, companies set themselves up for inevitable churn, which becomes especially hazardous in a tight labor market.

A growing number of successful companies, such as Microsoft and Southwest Airlines, are taking more than their fair share of the talent marketplace and cultivating high performers in key positions through a very different method. Rather than starting with recruiters, they first look inside to match employee experience and aspirations to the company's evolving strategic needs. This doesn't mean that they ignore external talent. They take recruiting seriously, in large part to achieve ambitious growth targets. But their historically low turnover rates let them spend much less time battling churn - and a lot more time outmaneuvering the competition.

As the competition for critical talent heats up, organizations must rethink the ways they manage these people. To begin, they must identify the segments of the workforce that drive their current and future growth. Then, rather than focus on metrics and outcomes ("acquisition" and "retention"), they must concentrate on the things that employees care about most: developing in ways that stretch their capabilities, deploying onto work that engages their heads and hearts, and connecting to the people who will help them achieve their objectives. By focusing on these three things, attraction and retention largely take care of themselves.

The Develop-Deploy-Connect model is interconnected and virtuous. An improvement in one area naturally leads to an improvement in another. For example, people develop better skills when they are deployed in stretch assignments and connected with others from whom they can learn and grow. Likewise, effective deployment occurs when people have the knowledge, skills, networks, and relationships they need to succeed. Finally, effective connection happens when people are deployed in work that engages their curiosity. In these circumstances, they are more likely to learn from and teach (i.e., develop) others. Important benefits result from this virtuous circle. One is capability. When highly capable individuals work together, they build organizational capability. The second is the alignment that occurs when the right people are in the right jobs. A third result is commitment. People are more likely to master work that engages them, fosters their growth, and encourages productive relationships. When people feel the organization takes a keen interest in their interests, skills, and connections, they are far less tempted to look for challenges outside.

When a company's talent management process evolves in the manner described in this article, companies will be reluctant to go back to the stop-gap measures of recruiting and retention. Managers may be amazed by how often the talent they need resides right under their noses-or the noses of colleagues a continent away. Rather than fight a futile "war for talent," leaders should look within for the critical skills and knowledge required to execute the company's most important jobs. By developing, deploying, and connecting these people the right way, leaders can raise their performance-and the performance of the entire organization-to a whole new level.

Neale Redington is National Partner in Charge of Hospitality for Deloitte & Touche LLP. He can be reached at 213-688-4762 or via nredington@deloitte.com

Neale Redington is National Partner in Charge of Hospitality for Deloitte & Touche LLP. He has been an advisor to major real estate firms for more than 17 years in the REIT and hospitality sectors. He brings opportunities for wealth creation to hotel owner/operators and management companies through performance of annual audits, operations reviews, due diligence procedures, and assistance with initial public offerings. Redington is co-author of the Hospitality chapter of the Real Estate Accounting Handbook. He frequently speaks on hospitality issues at trade events and with the media. Mr. Redington can be contacted at 213-688-4762 or nredington@deloitte.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.