A Round Table Discussion: How to create the Sticky Organisation

The subject of our latest round-table discussion, in association with Investors in People, is close to the heart of every HR director, and most chief executives: retention. In an age of unprecedented staff mobility, in which talented people will up and leave if they aren't getting what they want, how do you encourage them to stay? Given the relative costs - financial and managerial - of hiring a new person versus developing an existing employee, there is clearly a business case for improved retention.

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Last Updated: 31 Aug 2010

But what are the components of a 'sticky' organisation, how do you spot people who are thinking of leaving before it's too late, and just how much stickiness do you actually need?

MATTHEW GWYTHER: Our discussion today is about people like Helena Brett, and about how to hang onto them in organisations both large and small. Helena is only 25, but she has already worked at McDonald's, initially on the shop floor and subsequently in one of the regional centres. She has also worked for Phones4U founder John Caudwell in the Midlands and is now at the PDSA (People's Dispensary for Sick Animals).

She is quite typical of the way young people think about work these days, in that she wants to get on - for example, she is doing an Open University degree at the same time as her job. The old days when someone like Helena would have left college, joined an organisation and stayed until the age of 65 are long gone.

RUTH SPELLMAN: There is no holy grail on staff retention, but organisations that spend time thinking about it, and finessing and individualising their approach, are doing significantly better than those that do not. The imponderable propositions, the issues that we tangle with every day, are management myths such as 'If you train and develop your staff, they are more likely to leave'. This is not so. They are more likely to leave if you do not.

Among the organisations we are working with, I'm seeing a move towards jobs being designed around people, rather than vice versa. What we are looking at is job redesign on a much more frequent basis. This means that you do not just reassess a job when you are advertising it. You look at people's jobs on a regular basis, and aim to extend the possibilities within that particular job.

BRYAN SANDERSON: Certainly, it is true that expectations are far higher than they were for my generation. In the post-war era, we did not have any expectations beyond earning a living. It was all about survival. Things have moved way beyond that, and now there are many bewildering options.

Most of the population now has access to a social safety net. They don't really have to worry about having to go down the mines, which was one of the only options available to me. We hear so much about governance, methodology and process, and there was once a need for that, but companies succeed only if they get all that right and make a profit, but then add an extra ingredient, which is intangible but vital. This extra ingredient is culture, and persuading people, by listening to them, that coming to work is worthwhile, that it is not just about satisfying shareholders but about their own stake in society.

GWYTHER: David, you must have one of the toughest jobs in HR when it comes to retention. What can you do about it at McDonald's?

DAVID FAIRHURST: There are continual challenges around staff turnover.

The trick is to get the right people into the organisation in the first place. One of the things that we have put in place is a process for recruiting the right people called 'Hire the Smile'. The core competency of a retailer is that you can smile and engage the customer. We do a very good job, which is why Barclays has tried to target some of our managers. One recruitment trick is that we are one of very few organisations that still have job-sampling. All our graduates stand behind the counter for a day and figure out whether it works for them or not. Very few organisations still do this, due to lack of investment.

I have to say, though, that we do not have a recruitment issue at McDonald's. We do, however, wish to improve retention. We have therefore been working on stickiness at three levels. The first is around functional loyalty - in other words, getting the basics right, measuring it through absence and turnover, and making sure that everybody knows what their job is, their accountability, who their manager is, where their uniform is coming from, when they get paid and what their bonus looks like.

The next level is the emotional loyalty that comes through working with good line managers. We measure this by the level of people's commitment to staying in the business for the next 12 months. We are using the same principles that my grandfather used 50 years ago, which concern how you treat people. It takes an average of 30 hours of a manager's time to recruit a replacement employee. So why not spend two hours having a 'stay meeting', rather than having all these exit meetings? We are putting the one-to-one, the personal touch, and the leadership time back into creating stickiness by encouraging this 'stay time'.

On top of that, you have a level of pride and loyalty. I was shocked to discover that the average tenure for a McDonald's store manager is 10 years. We do not have a huge turnover - 80% of our operations management started as crew, and 38% of our store managers are women. We are capturing hearts as well as minds at a high level. The idea is to get the recruitment right in the first place and spend more time on it. It is all about reducing complexity.

You simplify your processes so that the leaders can lead.

GARY BROWNING: In 2003, we did some research called 'Itchy Feet', which looked at how people behaved just after joining a new employer. Some of the results were quite shocking. For example, 36% of people starting a new job, at all demographic levels, are looking for the next job on day one, or at least thinking about their next step. In addition, 48% of people have no intention of staying in their role for more than two years. When we asked them what prevented them from thinking this way, the top four answers were: training and development, recognition, understanding the company and where it is going, and the nature of its values. This was a very much more intelligent approach to joining a company.

It is also interesting that while people still worry about pay levels, it is now almost a given. If a company cannot be competitive over pay, it will go out of business. There is a lot of talk about work/life balance at the moment. I do not like that expression, because it implies that work is not part of life when it clearly is, but it is those softer factors that are important. Then there is learning and development, and leadership.

I believe we are reaching a level where a lot of people are interested in the meaning of an organisation and its sense of purpose. I think it is no coincidence that corporate social responsibility (CSR) is on the agenda, because people are genuinely interested in working for an organisation they can believe in.

GWYTHER: Helena, does this sound correct? In five years, you have moved through two organisations to the one you are with now. Have you already planned your career five years ahead?

HELENA BRETT: I'm not looking to move from my current role, but I do have ambitions within it. If I could not bring those ambitions to fruition, I would feel stagnant. In my previous roles, I found that when you are new to a company, you join with fresh ideas and, therefore, as far as management are concerned, you are the creme de la creme for a while. However, especially in high-turnover companies such as Caudwell's, where I used to work, your management will leave before you have had time to implement half your ideas.

For me it is not about cars, a nice gym and flexitime. One of my big motivators is that I can go home at the weekend and be proud of what I've done. I feel that the work I'm doing now is actually making a difference to people who are not in the same position as I am. The diversity in my job is what makes it satisfying. If, for example, I was working for Tesco as a buyer or product developer, I might be in charge of frozen peas and I would know everything about frozen peas. But how exciting would it be?

The destiny of my work is under my control. I have the support of my management and they trust my decisions. If they do not trust me and believe that what I'm doing is worthwhile, and if I'm not in charge of my budget plan, and if those who I would like to be working with do not support me in my long-term goals, what is the point of having aspirations within the company? It's what makes people stay or go.

GWYTHER: Richard, how is British business coping with employees like Helena?

RICHARD REEVES: There have been changes, but it is easy to be carried along with all the rhetoric. In fact, the average job tenure rates have been flat for the past 20 years. People are not moving jobs more often than they were, so we need to temper the language. The changes are all about the 'psychological contract' and about levels of expectations. If you ask young, ambitious and talented people whether they want money or meaning from their work, their answer is 'yes', which is slightly inconvenient.

There are a few things that I'm struggling with in this conversation.

First is that we are talking about relationships between people and their jobs, and between people at work. There is MORI data that shows that one of the best and most consistent predictors of job satisfaction is the answer to the question: 'Do you have a close friend at work?' How many companies have 'close friendship' policies?

When asked in exit surveys why they left, people tend to say it was because of their line manager. So we stay for friends and we leave because of bosses. This means that it is all about personalities and conversations.

It has to be dealt with in the thick of everyday life. That this is bad news for policy.

The thinking now is all about 'contingent leadership theory', or CLT.

In other words, 'it depends'. We could almost be talking about how to stay with your partner. It is almost as nonsensical to talk about 'the secret' of retaining people at work as it is to talk about the secret of keeping your husband or wife. Exactly the same way as people's expectations of relationships have risen, mostly to the good, women have become more economically powerful. The threat of exit has risen, just as people's confidence and expectations have increased. There is a Sword of Damocles hanging over every job.

This is very powerful, because it seems to me that the real life force in any relationship is the prospect of its death. For too long in the labour market, we have tended to assume that the contract answers the questions and will cause employees to stick around.

However, they may do so in body, but not in spirit. My final analogy with the personal relationship is that if you really love somebody, you set them free. The only way you are going to hang on to people is by making them incredibly attractive to your competitors.

GWYTHER :Bill, how are the marriages at Capita? You have a lot of people who work in frontline jobs, such as council tax collection, which must be tough.

BILL DYE: We probably have a different set of issues. We have ended up with a set of employees that we did not hire.

We do not always have the chance to pre-screen people; we get who we get, and we get problems in areas of the business where things are not functioning as well as they could. Capita has 24,000 staff. Approximately two-thirds of them - about 15,000 people - came to us via TUPE (Transfer of Undertakings (Protection of Employment) Regulations) or acquisition.

There are cultural issues here, because they might have come from central or local government, financial services, or very entrepreneurial businesses that we have bought.

GWYTHER: So these are, in effect, arranged marriages?

DYE: Exactly. The core of our skill lies in integrating all these people into one organisation and working out how to motivate them to perform better. I think success is a big concept with employees. They can, of course, benefit from organisational success, but most individuals want to feel successful in their own roles. In many organisations, success is not defined, and no-one knows whether they are doing their job well or how to perform it better.

When we inherit a dysfunctional organisation, we need to give it focus, energy and drive, which helps staff retention and allows us to identify talent. The critical issue is about achieving success and clarity in an organisation.

REEVES: It is also about making sure that success is defined on the employees' own terms. There is a danger of assuming, for example, that working for an animal charity is intrinsically rewarding, but that buying frozen peas is not. This is quite a dangerous philosophy, because it writes off the vast majority of the labour market to unfulfilling jobs. The classic example in the US is 'hamburger-flippers', which is a term of abuse, like the word 'McJob'. These jobs are thought to be repetitive, boring and unhealthy, so why would anyone be fulfilled by doing them? The answer is that there is great team spirit, you get to know your customers, you have the chance to develop yourself, and you have the chance to become the boss. One of the occupations with the highest level of job satisfaction in the UK is London sewerage work. So let us be careful, because as soon as we start saying that certain jobs cannot ever be satisfying, we have condemned a lot of people to uninteresting lives.

FAIRHURST: I often hear the phrase 'Treat others as you wish to be treated'. This is wrong. You should treat people how they wish to be treated themselves. The challenge for big organisations is how you create a sense of individualism around these relationships that we have been discussing.

My other point is that in terms of relationships, organisations like McDonald's have to accept that we have fixed-term marriages, and that we are not necessarily a destination employer for life. A lot of organisations struggle with that concept. For 25,000 people in the UK, their first job is at McDonald's, so clearly we are part of a journey. We provide a very good service for people at a certain stage. They come to us, are developed, become socially competent and can answer the phone.

SANDERSON: Are there times when you actually want a high staff turnover?

You can have too low a turnover. BUPA's Spanish sister company, Sanitas, has a staff turnover of 2%, which is too low. We would rather have 6%.

At BP, we had almost no turnover, and we had to use all sorts of voluntary, semi-voluntary and not-at-all-voluntary retirement schemes.

REEVES: One of the companies that I've worked for actually divides its turnover into what it calls 'regretted' and 'non-regretted' turnover.

A 10% non-regretted turnover is very good, it is great for the business, while a 5% regretted turnover is bad. So just having a raw turnover rate tells you nothing.

GWYTHER: Is it, therefore, a size issue? Helena, I imagine that the organisation you are in now is much smaller than the two you were working for before.

Does that make a lot of difference?

BRETT: It is not rocket science to state that communication is very important. If you communicate on all levels and ask everyone for their opinion from the bottom up, you will have a happier and more successful company. One of the biggest frustrations I had in one of the larger companies I have worked for is that one minute you are involved in an important meeting, where your opinion is valued, and then the next day the doors are shut, and you are left wondering what is going on. It might have nothing to do with you, but no-one explains what is going on. Closed-door meetings and lack of communication are very demotivating to staff. For example, when budgets are agreed, staff need to know the targets.

SANDERSON: This is all true, but the problem arises when well-motivated and likeable people do not deliver. People can feel valued and good and warm about coming into work, but they can still fail. This is when it gets very difficult, because somebody has to tell them that things are not working.

TIM MELVILLE-ROSS: Stickiness is not always good; there are times when people really have to go. You are better placed to deal with an employee you know, because the problem may not be incompetence but some other underlying difficulty - for example, a personal one. If you are at arm's length, you cannot know that.

Another simple but vital factor is appreciation; in other words, saying thank-you. We do not do that enough. For example, the chief executive at one of the organisations I am involved with had a bad relationship with the finance director. They were both very bright individuals, but the core problem was that the chief executive never said thank-you or well done to his extremely efficient finance director.

REEVES: A study was done on exactly this subject, and data now exists that proves that just saying thank-you has a greater effect on job satisfaction than many other things. The other issue is the difference between external and internal stickiness. One of the big problems with retention is that people feel, often quite rightly, that they will gain more rapid advancement if they leave. If you are a high-flyer and know that you can advance quickly, one of the first lessons you learn is to get out. Sometimes, you can even come back to the organisation and be four rungs above where you would have been if you had stayed and waited for Buggins' turn.

FAIRHURST: I'd like to take a step back from this and look at a fundamental issue. From an HR point of view, one of the least advanced processes is talent management. By that I mean knowing what you have got, and knowing how to inject the right opportunities at the right time. Organisations are broadly deficient in that area. Secondly, how many are proud of their exit interview processes? These are all critical aspects of the debate we are having. If you cannot manage your talent, getting people both inside and outside your organisation is just a dream. How do you get line managers to give career advice and be interested in giving career coaching? This is also done very poorly.

I am not saying that every HR department is deficient in talent management, but the majority have room for improvement. We just have not got the basics in place yet. I call it 'talent myopia', when an organisation becomes blind to what is right in front of it.

GWYTHER: It is very easy to make this sound much more complicated than it really is. Richard alluded to the fact that people join great brands and leave poor leaders. It is a fundamental fact that 80% of the CEOs of the most successful organisations have very high EQs. They are inspirational people. Good managers and good leaders inspire people. Employees will stay longer than they might have because they have belief, respect and trust in their leader or manager.

DYE: One of the challenges is the use of management and leadership interchangeably.

Often, good leaders are not good managers, and vice versa. It is important to recognise where you have good leadership skills and good management skills, and make sure you have the right combination in areas of the business as needed.

REEVES: Talent myopia is a good expression, and the first stage is to know what you have in terms of skills and competence, or whatever fancy labels you wish to use - which can, frankly, get in the way. I like the idea of just having a piece of paper that should list what skills are available, but the final column should be about what the employee wants.

Their competencies may be only half the story, and in terms of retention they may be less than half the story.

If you ask a line manager what a particular employee wants to do and they reply that the company is near their daughter's school so the employee will be happy to remain at the company for the next few years, you have a fine answer. If they do not know the answer, there is a problem. Every line manager should be able to look down a sheet and tell you not just where someone is now, but where they are going.

BRETT: How do you deal with the people who are dissatisfied? I am talking about the people who think that everybody owes them a living and that they are underpaid. I think if they were actually aware of the market, they would realise that they have got a good deal. We currently have the problem of employees who think they are worth more than they are getting.

The question is whether you want to retain someone who feels like that, or whether you think they should perhaps leave the organisation and come back, having realised what they have lost.

Last year at the PDSA, all the staff received about £50 worth of high-street vouchers. This year they received them again, but they asked why it was not a larger amount this time around. Routines make people ungrateful.

We have a subsidised cafe, and they moan about the food. We suggested that they go to a company where there was only a vending machine selling £5 sandwiches. This would make them want their subsidised cafe back.

REEVES: It is all about habituation, which can occur in any circumstances, whether good or bad. A lovely new house and job will be exciting at first, but after two or three years these things will be taken for granted. People are constantly establishing new norms, and low levels of staff turnover make for collective habituation.

BROWNING: The further you go up the hierarchy, the stickier an organisation becomes. At the lower levels, however, paying someone more is useless, because the effect can last for no more than three months. It is actually counter-productive, because the moment you pay someone more, they are more marketable and they can get another job. When you get to the top and you really believe in the organisation and share its values, you have the ultimate in stickiness - no-one can compete with that.

REEVES: Pay satisfaction is more about relativity than the actual amount that is earned. Hence the brilliant New Yorker cartoon where a man is telling his boss: 'I understand that you cannot give me a pay rise, but I wonder if you could see your way to giving Tompkins a pay cut?'

PANEL Helena Brett, head of marketing, PDSA Gary Browning, chief executive, Penna Bill Dye, executive director, Capita David Fairhurst, vice-president of people, McDonald's Matthew Gwyther, editor, MT Tim Melville-Ross, chairman, Investors in People; chairman, Manganese Bronze Richard Reeves, director, Intelligence Agency Bryan Sanderson, chairman, BUPA; chairman, Standard Chartered Bank Ruth Spellman, chief executive, Investors in People Sponsored by Investors in People.

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