Why Acquisition and Retention Strategies Don't Work
By Neale Redington Partner, Deloitte | August 03, 2010
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.