By Amirali Nourbakhsh
What one company challenge would you have immediately removed, if the genie in the bottle gave you one wish only?
Most CEOs I know would go for retaining top talent in the company.
This article will argue that the main reason for people leaving their company is NOT income, but poor interpersonal relationships and unnecessary barriers to growth. Even “income”, which in most surveys indicate the primary reason for people leaving the organization, is a matter of development capabilities of leaders. Thus income too, is related to interpersonal relationships and people development skills.
This said, it is only through a growth and learning mindset that we can turn a company into a profitable entity with sustainable financial growth. Now, here is the problem: While we are all aware of this “reality”, why is it that many of our talented employees leave our company?
Research shows that this is because most companies’ approach is too focused on teaching/training rather than learning. In other words, we spend huge amounts of money on training and see little results: Surveys show that only 12% of employees apply the skills from the trainings to their jobs. Therefore, ineffective trainings inflict an annual loss of $13.5 million on the economy for only 1,000 employees.
However, by instilling the acquired skills in our managers via a learning-based development approach (as opposed to teaching-based), we can create a corporate culture where leaders coach to grow more leaders, creating a growth and learning mindset. This approach will be more conducive to a winning organization. However, to do so, we have to make sure that 1) we retain employees, and 2) they are willing to grow. This article intends to show why this is important and how this can be done.
Employee Turnover: Reasons, Cost Factors, and Nature of the Problem
According to Society for Human Resources Management (SHRM), one in three employees leave their organization in the first year. The Gallup institute claims that half of employees who leave a company, do so to leave their line-managers. Other reasons, research indicates, are
1) Incompatibility between acquired skills and employees’ duties,
2) Ineffective development of employees throughout the organization, and
3) Non-transparent and inconsistent criteria for growth and promotion, i.e. poor succession planning
Employees’ challenges with their leaders are usually rooted in the latter’s poor soft and interpersonal skills. More often than not, line-managers’ poor development and leadership skills are responsible for the inconsistent growth and poor development of employees. Notably, both fall under the category of leadership capabilities. The result is clear: Higher employee turnover. When an employee leaves a company, various costs are inflicted upon it such as those related to hiring, onboarding, productivity, customer service and errors, training costs, and cultural impacts. It is, therefore, easy to see how interpersonal, leadership, and people skills impact retention and thus profitability.
According to the Bureau of National Affairs (BNA), American businesses lose $11 billion annually due to employee turnover. For Canada, the David Aplin group estimates the cost of replacing an employee between 75% and 200% of the annual compensation: At an average monthly compensation of $5,000, and an annual employee turnover of 10, we are looking at a loss between $510,000 and $1,350,000 only for ten employees leaving the company within a year from joining it. Therefore by 1) improving interpersonal relations between various levels, and 2) training leaders to develop others, we are likely to contribute to our company’s retention and thus profitability.
This is while despite most CEOs’ claim that leadership training is essential to a company’s growth, most CEOs pay more attention to sales than to other skills for a simple reason: These CEOs have experienced teaching-based development programs which usually cost money but fail to bring money into the company, while sales people do. However, Deloitte’s Millennial Survey for 2017, shows that employees are 70% more likely to stay with their companies for five years, if they have a coach. Therefore, coaching (a learning-based approach) seems to contribute to retention, while training-based approaches just cost companies and CEOs money.
With an average of 16%, Canada ranks among top countries in terms of employee turnover, as per a study by LinkedIn. Reasons for employees leaving are lack of opportunity to advance (45%), dissatisfaction with senior management (41%) and work culture (36%): Another proof that interpersonal relationships are the backbone of retention and employee engagement, and thus higher profitability.
From Retention Strategy to Corporate Tragedy
During a job interview, we identify skills and potential in a candidate. So, we hire Joe. If we are lucky, Joe’s existing skills were correctly recognized, and he gets going right away. If we are very lucky, even his potential capabilities were well recognized, and Joe is ready for his personal development. Mission accomplished, or so we think.
The next question is who is to build on Joe’s potential abilities? According to our hiring strategy, Joe’s line-manager, Sally. But let’s take a look at Sally’s career path. From the moment she was hired four years ago, she has focused so much on her own career path that she hardly had the time to acquire competencies to develop others. Of course, she has attended a leadership training, but how practical was this course? We don’t know. At the same time, in her hectic day-to-day schedule, Joe’s development is likely to get short-changed as other priorities take precedence over Joe. Now, Joe’s development and future depend on Sally’s leadership development skills. We know leadership skills are acquirable, but could also be innate. So, this is what we are counting on. We are hoping Sally is a born leader, because if she’s not, who is going to develop Joe? No one. Joe will leave the company because he feels his career has been mismanaged, only to cost on the company more money.
This is what we could call the Corporate Tragedy. It is uncertain why Joe left. More certain, however, is that Sally would have been able to retain him, had she had the right skills. And odds are Joe will probably end up with a competitor who will benefit from everything he learned at our company. Now, the question is: Which side of this equation do we want to be on?
A: Investing on employees which others will hire, or
B: Receiving talented employees whom you will grow to effective leaders?
Solution:
In the aftermath of our failing retention strategy, the question is how we cope with this tragedy. Whatever our solution may be, it has to accommodate two key needs:
· Improve relationships at work between various levels
· Enable people to grow and develop others
As a thought leader in the market, Dale Carnegie carries out regular surveys to identify companies’ trends and challenges. Several Dale Carnegie offices around the world interviewed companies of various sizes and industries to find out what organizational trends they were experiencing. The three trends which surfaced consistently were:
1. Leadership Development
2. Succession Planning
3. Employee Engagement
These macro-trends are reflective of the talent development needs across most organizations regardless of size, geography or industry. The solution to our problem must be an integrated and strategic approach accommodating these trends. The question is not how to address these three challenges in any random order, but what integrated solution can we design which would address these trends among other factors, while making each step meet its very objective at maximum impact.
It goes without saying that employee engagement takes precedence over the other steps because it is more likely to increase retention while we prepare for the other steps which will most probably be perceived by employees as “less popular” change. According to Gallup, high employee engagement can reduce employee turnover between 24% and 59% depending on the industry.
Impact of Employee Engagement on Leadership Development & Succession Planning
A 2018 Dale Carnegie study of employee engagement shows that about 30% of employees in North America are Fully-Engaged, another 51% Partially-Engaged, and the remaining 19% Disengaged. This distribution has remained essentially stagnant in recent years. Our engagement strategy is to turn the Disengaged into Partially-Engaged, fully engage the Partially-Engaged, and keep the Engaged motivated.
Before moving to engage employees, we should ask: “How does the human brain perceive engagement at work?” From a brain perspective engagement is perceived as a surge to the brain’s reward center (ventral striatum). Engagement provides employees with motivation and hope. This is what we think when we are motivated: “If I try hard with my competencies (knowledge, skills, creativity, etc.), given the means and time put at my disposal, I will succeed and will be rewarded.” Neuroscience refers to this perception as “Certainty” in the parlance of David Rock, one of the thought leaders in the human-performance coaching field. According to Rock, the brain treats social threats and rewards with the same intensity as physical threats and rewards. Rock’s brain model, SCARF, consists of Status, Certainty, Autonomy, Relatedness and Fairness. These domains activate the same reward circuitry that physical rewards activate, like money, and the same threat circuitry that physical threats, like pain, activate.
In plain English, providing reward to the Certainty domain in the brain makes the future more predictable. This motivates that person to try harder. Once engaged, employees feel also rewarded in their Relatedness domain and are motivated to stay in the company. Basing our solution on a modern brain model like SCARF is essential. Failing to do so will increase the likelihood of unintentionally posing threats to the brains of employees and reducing engagement. In short, SCARFing up our solution is an insurance policy in terms of human behavior. This maximizes the impact we want our solution to have. Therefore, starting by Employee Engagement backed by a brain-based communication plan is a necessity for our Solution, and scientifically the right thing to do.
In conclusion, if our objective is to create a growth and learning culture, Employee Engagement functions as a binder that will keep together all other pages such as Leadership Development Plan and Succession Planning. After all, if we can’t retain employees, who are we going to develop anyway?
Leadership Development and Succession Planning
Once employees feel engaged and enjoy Certainty and Relatedness, they are motivated and more willing to learn. While a Succession Plan provides vision as to where to grow to, a well-defined Leadership Development Plan can take our employees to the next level. However, development is not a one-size-fits all process. It requires customization. But companies cannot customize the development of each employee, they can only pave the way for it. Leaders are the ones who should develop employees. If Sally had the right skills and attitude, she would have known how to develop Joe despite the day-to-day hectic which a true leader would see as an opportunity for growth.
Having the right skills alone will never enable leaders to grow more leaders. But a well-designed learning cycle will: The challenge is to enable employees to develop others. Dale Carnegie has developed an accelerated learning process which distinguishes our work from those of others: Once the right mindset is in place (growth culture and learning attitude), employees are more likely to understand why they must know certain concepts and master certain leadership tools. Then it is just a matter of 1) practice in real life, and 2) more coaching sessions for the competencies to be instilled in our leaders.
This is why training alone for 1,000 employees cost companies a shocking $13.5 million. Training, if not backed by a learning process, is like prescribing medicine for a flu without telling the patient to rest. The drug needs a calm and resting body to heal the patient. Therefore, our Solution must be focused on learning and not just teaching/training, a delicate distinction that few companies consider.
Dale Carnegie’s Accelerated Learning Process
Conclusion
Einstein believed: “No problem can be solved from the same level of consciousness that created it.” Leaders won’t be able to grow leaders, if they don’t believe in growth or if they don’t have the appropriate attitude, skills, and motivation. Therefore, companies that focus primarily on employees’ skills without creating a paradigm shift in their managers and do so without designing an incubation period, are unlikely to be an exception to Einstein’s rule.
However, incubation is possible only when the right culture is in place. Many CEOs I know consider a good corporate culture just a “nice thing to have”. This is probably the same level of consciousness that Einstein referred to. If top leadership fails to pave the grounds for a growth- and learning-based organization, employees and their supervisors won’t make it on their own. People can only grow in a culture that is conducive to learning and growth.
Of course when it comes to retention, high salaries and attractive benefits work too. However, they are what William Glasser—Choice Theory—refers to as extrinsic motivators. They produce short-term results. In addition to extrinsic, humans need intrinsic motivators such as personal growth and a sense of belonging. As a matter of fact, people are more inclined to spend eight hours a day in a place where they are emotionally more satisfied and brain-wise more rewarded. Human beings are social creatures who are driven by senses of reward to their Status (sense of relative importance: growth & development), Certainty (ability to predict the future: Succession Planning), Autonomy (control over one’s work and life: Delegation skills), Relatedness (sense of belonging to a group: interpersonal relationships), and Fairness (the belief that justice is in place). So, employee engagement, leadership development, and succession planning are not only the three trends that companies have identified as necessary to their people development, they also make perfect sense from a neuroscience perspective.
So, if your one wish for the genie in the bottle is also to maximize retention in your firm, you will probably benefit from a learning plan that engages your employees in such way that they are willing to learn and grow to leaders based on a well-design succession plan. This article shows how we at Dale Carnegie sow the seeds of a growing and winning organization and then just sit back and reap the harvest.
