Why Talent Management Investments Generate Poor Returns and What to Do About It: The Retention Problem

In the last issue of The Talent Blog, I talked about how and why organizations with more diverse workforces will have more robust talent pipelines.  In this issue, I look at the second of three organizational habits that sabotage the talent agenda: the retention problem.

Organizational Sabotage: Things Organizations Do That Keep Them on the Talent Treadmill

One organization I know looked back at what happened to their cadre of senior leaders identified as high potential - specifically, those ‘ready for a promotion within 2 years’.  They found 40% had actually been promoted in the last 3 years.  Unfortunately, 58% of those promoted were in more senior roles in other organizations.  In other words, they did a fair job identifying potential and a lousy job retaining it.  And I don’t think their experience was unique.  

Why you have to retain talent

The reality is, many organizations do a pretty good job of recognizing talent but are less successful in retaining it.  Since everyone is on the hunt for these elusive resources, if you don’t pay attention they will slip out from under you.  Per employee, talent management is an expensive proposition.  If you regularly lose 40-50% of those you have already identified as promotable leaders, you are playing an extreme game of ‘catch up’.  

Over time, talent will naturally drift to organizations with the best value proposition.  And while ‘exchanging’ talent with other organizations may not be the worst thing ever,  it is a very expensive way to bolster your pipeline.  The only people who win that particular game are the recruitment firms.  Solution?  Get serious about hanging onto your talent.

What is at the root of talent drift?

A lot has been written about high potential talent over the years.  Let me summarize, very briefly.  High potentials are defined by two very different predictors of success: past performance and future potential.  A high potential leader is someone who outperforms his or her peer group and possesses the ability, motivation and commitment to perform at the next level (Corporate Leadership Council, 2007).  You measure these two dimensions very differently.  One is relatively straightforward - look back at what they have delivered and compare it to peers with similar tenure and goals.  Predicting future potential is the tricky bit, and we’re not always going to get this exactly right.  So what are we looking for?  

Defining characteristics of high potentials are, in a nutshell: an over-developed drive to excel, a keen ability to rapidly and proactively translate new learning into tangible action, an ‘enterprising spirit’, and an innate sense of timing (Ready, Conger & Hill, 2012).  This article isn’t about how to identify talent; it’s about how to keep it when you think you’ve found it.  Can understanding what drives away  high potentials help us retain them?  Looking at their defining characteristics provides some insight.  

1. Boredom.  No matter how interesting something is at the start, jobs become routine.  Talented people get bored.  If you want to keep them, you have to mix things up.  Appeal to their drive to excel by setting different or more challenging goals or tap into their capacity for learning and risk-taking by adding accountability in an area new to them.
2. Having ideas and innovations suppressed.  Talented people often see things others don’t and are energized when they are given the opportunity to translate ideas and insights into tangible actions and results.  When they aren’t allowed to do that consistently, their commitment flags and they will look for more fertile pastures. 
3. Lack of perceived opportunity.  If you let your high potentials sit around wondering when they will get a kick at the next can, they will probably leave to kick someone else’s.  These are individuals who need to feel progress at a pace that aligns with their internal sense of readiness.  One of the reasons high potentials are successful is because they seem to have a sixth-sense about what they are ready for, and when.  Their timing might not jive with yours.  And there is a very good probability that you may be wrong and they may be right.  Organizations were not designed for high potentials - with modest, logical and step-wise progressions every 3-5 years spiced up by the occasional professional development course - they were designed for the rest of us mere mortals.  To keep your high potentials, you are going to have to take some risks with them.
4. Left to fail without a recovery plan.  You don’t send a manned rocket to the moon without a plan to get the the astronauts home.  The probability that high potentials will struggle and sometimes fail is higher than average.  That is the consequence of being compelled to aim high, take risks, and push against the status quo.  When you put them in ‘growth opportunities’ to test and develop them, the potential for failure increases.  High potentials won’t always get it right.  And human nature being what it is, there will be lots of people standing on the sidelines watching and hoping they will fail.  Instead of quickly providing them with an opportunity to recover, they can be left to flail away or sit on the sidelines waiting for their high potential status to be debated at the next talent review.  High potentials know when to cut their losses.  If you don’t help and support them do that, they will find a way to do it for themselves.  
5. Thinking its all about the money.  Organizations often equate money with retention and it is certainly one of the easier motivational threads to pull.  Using compensation as a way to communicate you value employees can be helpful, particularly when growth opportunities aren’t immediately or easily available.  But it has its limits.  Most high potentials do not list compensation among their key motivators.  So while you can use it as a proxy to tap into their real motivators for a while, you will need to deliver the goods sooner rather than later.

When demand is great and a resource is in short supply, we need to think carefully about how we nurture and protect it.  If the optimistic odds are one high potential per 10 employees, every time we lose one we need a generate a pool of 10 to replace him or her.  Or you can steal one from someone else.  In my next article I will talk about how and why recruitment as a talent building strategy is a lose-lose proposition.

Stay tuned for the next Talent Blog issue on this topic: the recruitment problem.

Sources
Realizing the Full Potential of Rising Talent: Understanding the Identification and Development of High-Potential Employees. Corporate Leadership Council, 2007. 

Are You a High Potential?  Douglas A. Ready, Jay A. Conger, and Linda A. Hill, Harvard Business Review, June, 2010.