Thursday, October 20, 2005

Retention of top managers

“There is no doubt that when we lose a key manager the whole organization suffers. ...”

In last few months we lost a couple of key top managers and we really hurt ourselves. This forced me to learn & write about how to retain the best managerial talent.

Many organizations have a great deal of experience in dealing with turnover in the top ranks of employee. In some cases, losing personnel might be described as simply a cost of doing business or as something that happens with few, if any, consequences. For small organizations employee turnover produce devastating results, damaging both organizational performance as well as its operating capabilities.

Industry experts suggest that organizations should manage top management personnel turnover and retention as a market-driven process because of the financial and organizational costs associated with losing people. A recent industry study estimates that the minimal replacement cost of an employee is 1 to 2.5 times their annual salary. At the same time, turnover can have a damaging effect on project completions, morale, teamwork, workloads, group stress levels, and a host of intangibles.

In recent years, a wealth of research has emerged that has identified the primary causes of why employees leave their employers. These factors fall into five broad categories:


  • Poor quality of work life

  • Compensation below market level

  • Lack of training and development opportunities

  • Bad management

  • Inability to advance one’s career

Many organizations have put together systematic approaches to address these concerns in an attempt to reduce employee turnover. Little is known, however, about the reasons why top managers leave their organizations.

According to a survey by Mckinsey, the industry turnover rates for management personnel can range between 12 and 38 percent annually. Most people will agree that top IT manager can have a profound influence on both functional and organizational performance.

To further illustrate the point, a vice-president with a Fortune 500 organization stated that, “When you lose your top leadership, the cost is always larger than it initially appears because you are getting hit on both the system side and the people side of your operation. ...”
The leadership is the key to creating competitive advantages.” Thus, it is critically important
for any organization concerned with retaining its top-flight management talent to focus on the key reasons for managerial turnover and retention.

Survey

Survey was done by a McKinsey to identify factors related to employee turnover and retention. Study participants were asked to answer each of the following open-ended questions as part of the survey:

  1. Have you considered leaving your current employer in the past 18 months?

  2. What factors are most likely to cause you to leave your current employer?

  3. What happens when turnover is high among managers?

  4. What factors cause you to stay at your current organization?

  5. What level of impact do managers have on the overall performance of their staff?

The responses to each of these questions were summarized using frequency counts and are
presented in the next section. The remainder of this article discusses these findings and their
implications with respect to the issues of managerial turnover and retention and organizational
Practices.

Survey Results

A starting point for this discussion is to determine the extent to which managers in this study would consider leaving their current employer. A willingness to leave an organization is the seed that may eventually grow into the actual act of organizational departure. Approximately two thirds (68 %) of managers in this study stated that they had seriously considered leaving their current employer in the previous 18 months. This sizable proportion should cause concern to any organization that is increasingly reliant on managers for both operational and, consequently, organizational success.

Another important question asked managers to identify the factors that would most likely cause them to consider leaving their current employers. Responses to this open-ended question are:


  1. Lack of resources/staff (46%)

  2. A better job opportunity/salary (42%)

  3. A bad boss (39%)

  4. Too much stress/unrealistic performance expectations (37%)

  5. Lack of advancement opportunities (35%)

  6. A negative organizational culture/feeling unappreciated (30%)

  7. Lack of teamwork and cooperation (27%)

  8. Professional stagnation/lack of development (26%)

  9. An inability to take time off/get away from work (22%)

  10. Politics and infighting (19%)

A key finding of this research is that the factors most likely to cause a manager to leave his or
her enterprise involve organizational rather than operational issues. Almost one half (46 %) of the managers considered leaving their current employer due to a shortage of resources and staff needed to get the job done. A better job opportunity or salary (42 %) or a bad boss (39%) can also make leaving seem quite attractive. These two factors result in a manager experiencing both a “pull” and a “push” to leave the organization. Approximately one third of managers find themselves “under an avalanche” of ongoing stress and unrealistic performance demands (37%), have a pronounced lack of advancement opportunities (35 %), and feel unappreciated in a negative organizational culture (30 %). All these factors significantly diminish a manager’s willingness to stick with their current employer and should cause employers to consider an assessment of their work environment.

Organizations should also take note of other factors that cause top managers to leave their current employer. Among these are lack of teamwork and cooperation (27 %), professional stagnation and a lack of development opportunities (26 %), an inability to feel that they can take time off or get away from work (22 %), and too much politics and infighting (19 %). These factors have little to do with the actual work of the manager but everything to do with the organizational culture and politics in which the work is being performed. This is a very important finding for those organizations and leaders who have a serious problem with turnover in the management ranks.

The next research question addresses the consequences of top management turnover; i.e., what happens when turnover is high among top managers?


  1. Greater difficulty in achieving performance goals (34%)

  2. Communication breakdowns (30%)

  3. Loss of focus and direction (28%)

  4. An increase in unresolved problems (27%)

  5. Morale/motivational problems among staff (22%)

  6. Increased workload for others/stress (21%)

  7. Loss of teamwork and cooperation (19%)

  8. Additional turnover among staff (16%)

  9. Chaos/disorganization (11%)

The research also concentrated on factors most likely to cause managers to stay with their current employer:


  1. Challenging work (51%)

  2. Loyalty (43%)

  3. Having organizational influence/clout (38%)

  4. Job security (34%)

  5. Being part of a team/co-workers (33%)

  6. Advancement opportunities (31%)

  7. Money/benefits (30%)

  8. Development and growth opportunities (25%)

  9. Recognition and a sense of achievement (21%)

  10. A good boss (17%)


Conclusion from the Survey



  • A significant number of managers do consider leaving their organizations.

  • The primary factors that cause management turnover are not simply monetary but include a host of support and organizational issues.

  • The problems associated with managerial turnover damage organizational performance and negatively affect remaining workers.

  • The majority of the factors that drive managerial retention are controllable for most organizations.

  • The participants in this study strongly believe that managers have a significant impact on the performance of personnel.

Thus, it is imperative that organizations should minimize unwanted turnover in the top management ranks if they were to create and sustain a competitive advantage.

What needs to be done?

Based on the findings of this study, a number of key practices are detailed below that can be used to improve management performance while at the same time minimizing unwanted turnover.


  1. Provide managers with clear direction and priorities

    A primary cause of turnover is stress and unrealistic performance demands. When managers have clearly defined duties, priorities, and goals, they can perform their job effectively and contribute to organizational efficiency. Enabling leaders to keep up with the everchanging demands of the workplace is critical to improving workplace performance. Stress must be properly managed and managers must be kept properly focused on the duties and prioritiesthat are critical for organizational success. A failure to do so results in unnecessary stress and causes managers to be busy without being effective. Challenging and stimulating work, which was a key to minimizing turnover, must not become “overwhelming work.”

  2. Provide top managers with the support they need to get things done

    Support can come in many forms, all of which can have an impact on a manager’s ability to get things done. Managers must be given the physical and staff resources needed to achieve their goals. In addition, they require support from their leaders, which includes ongoing and balanced performance feedback, being kept in the communications loop on issues that impact their operation, and help in removing organizational roadblocks and barriers to performance. It is important to note that a bad boss and operating in a negative organizational culture/feeling unappreciated were primary factors that encouraged management turnover.

  3. Make management development a priority

    While advancement opportunities are not always a possibility, an organization can promote effective management development activities. Research shows that management development is key to job satisfaction and can include a myriad of practical activities. These activities can and should include formal training, effective performance appraisal and review, cross training, special assignments, formal career development planning, mentoring, and on-the-job coaching. The key issue is that an organization should help its managers expand and develop their current skills so that they have a sense of “continuous improvement” on a personal level. An organization should have development plans that have been tailor-made for its IT managers in order to help them improve their performance and expand their repertoire of skills.

  4. Keep salaries and benefits competitive
    This is self-explanatory.

Conclusion

The survival of an organization may depend on its ability to deal with the issues of turnover and retention among its top managers. In today’s business environment where it is increasingly important to create and sustain a competitive advantage, the loss of experienced and capable managers, can be profound. An organization should adopt an aggressive strategy to address those factors causing turnover In short, a firm can improve its organizational health by taking good care of its managers.

2 comments:

Vrushali Deshpande said...

u spoke about the survey conducted by Mckinsey. Can u tell me this happened in which year?

u can email me at deshpande.vrushali@gmail.com

deon said...

Hi

Tks very much for post:

I like it and hope that you continue posting.

Let me show other source that may be good for community.

Source: Performance appraisal factors

Best rgs
David