Retention of talent is one of the most significant business challenges of the 21st century. For many organisations, particularly those in knowledge-intensive industries, human capital is fundamental to competitive advantage. Nevertheless, as a result of increased mobility and greater employment choice, employers around the world report difficulty in retaining key staff.
Failure to retain executive talent can be costly in terms of the expense of replacement (assuming the executive can be readily replaced) and also results in a loss of organisational knowledge, experience and relationships. It may damage organisational morale and lead to external reputation cost. Furthermore, there may be costs (not necessarily financial) associated with retention failure, borne by the departing employee.
Findings of the study
The research findings reveal key motivators, influencers and circumstances underlying the retention decision. The research found that the opportunity and challenge perceived to exist within the executive’s organisation, combined with the personal relationships developed, particularly upward, are the most significant retention factors.
Responses such as, “It is the personal challenge that keeps me here”, and “Organisations retain me when I feel personally fulfilled” were common and related particularly to issues of individual growth, contribution and experience. Equally, more than two thirds of the research subjects felt the connectedness with others in their organisation was a crucial part of retention. There were many comments along the lines of, “A key reason I have stayed is the relationship I have with my Chairman” and, “My upward loyalty has been a strong retention factor in my recent jobs.”
The research found that while culture, reward and lifestyle-balance factors contributed to retention, their impact was neither significant nor uniform across the research subjects.
A number of interesting themes emerged from the study:
- The retention decision is centred at an individual rather than organisational level. This means that rather than the organisation’s actions, it was the personal or subjective attitude, reaction or response by the executive that determined the retention decision. “At a senior level, retention is all about personal relationships and personal factors, but organisations don’t often recognise this – they think they drive it,” one executive noted.
- The engagement or connectedness the executive felt with the organisation was important to retention and this was impacted largely by personal relationships. “A key part of retention decision-making is the extent to which I feel a personal and sympathetic relationship with my employer. This is principally manifested in my relationship with individuals,” another executive said.
- The concept of a ‘natural lifecycle’ influenced retention. Once executives had been with an organisation more than five-to-seven years, retention, regardless of other factors, became a challenge.
- Personal and organisational change was also a determinant of retention.
Some surprising results
Despite the varied backgrounds of research subjects, there was a commonality and consistency to the themes that emerged. The emphasis on the ‘challenge and opportunity’ factor, while not a surprise in terms of its importance, was surprising in terms of the consistency with which it was cited.
The length of an executive’s tenure had some influence on retention. Cultural fit and identification with organisational values was more important the longer an individual remained with an organisation. The research also suggests that ‘fun’ and ‘happiness’ factors were more significant the longer an executive had been with an employer.
The gender of research subjects did not appear to influence retention. No retention theme or concept appeared to be more or less dominant with either males or females, nor did attitudes about retention or its importance vary depending on gender.
Equally, age did not play a significant role in determining or influencing retention drivers or motivators. While the personal factors that influenced retention changed during the individual’s career, with the exception of work-life balance, which was more important for older executives, retention drivers did not vary according to career maturity.
Implications for organisations
Organisations need effective executive retention strategies. Our research suggests that these should be centred on the opportunity and challenge that the executive’s role can provide him or her. This necessitates that the organisation firstly understand the aspirations, interests and goals of individual executives, rather than assuming all executives are alike.
Individual and organisational expectations also need to be aligned. This requires open and honest communication between the executive and the organisation, something that is not always easy to encourage. By establishing an effective internal communication strategy, an organisation will improve its chances of retaining key talent.
Organisations, particularly those in the professional services sector, must promote and facilitate the development of strong personal relationships within the senior executive team. These relationships can be critical to the decision of an executive to stay with an organisation. Conversely, the breakdown of relationships at the top may lead to reduced retention success despite, for instance, the presence of significant challenges and opportunities.
In particular, the upward reporting relationship between subordinate and superior is considered by many executives to be their key relational link with the organisation and as such may require greater recognition. Internal relationship management should be a measured KPI and professional development may be needed, particularly as executives are increasingly required to manage across generations. While many organisations encourage internal competitiveness at a senior executive level in an attempt to improve corporate performance, any positive short-term gain may be achieved at the longer term expense of retention.
Impact of change
Retention factors, drivers and motivators change during an individual’s career and, hence, during their tenure with an organisation. Organisations must therefore recognise the evolving nature of the organisational structure, as well as individual needs and expectations. While the core retention drivers of ‘opportunity and challenge’ and ‘personal relationships’ are fundamental, our research indicates that the importance of other retention factors may vary at difficult stages of an executive’s career and based on personal circumstances.
Any major structural change within the organisation needs to be reviewed to determine how it may affect the senior executive team. Discussions about expectations and opportunity will warn the organisation of potential problems and signal to the individual that there is genuine concern for their impact.
Remuneration
The research cautions against using remuneration as a core element of a retention strategy as in isolation it is not the key driver of an executive’s decision to stay. “Other issue are more important,” was the consistent response when discussing remuneration and retention with research subjects. The equity and transparency of reward setting and achievement-based reward participation are more important, the research suggests.
Recruit on values and focus on early years
Retention factors are individually determined and driven, and hence form part of an individual’s profile. They can therefore potentially be identified at the time an executive joins an organisation. By recruiting individuals who share the organisation’s value set, greater long-term retention success is likely.
If, as suggested by this research, the ‘natural tenure’ of an executive is on average five to seven years, it could be assumed that a failure to retain for this period is primarily driven, for example, by the absence of perceived challenge or a breakdown in relationships. As a consequence, the greatest returns from retention strategies will occur if they are particularly aimed at executives in the early years of his or her tenure.
Are smaller organisations better at retention?
A theme that emerged from the research was the apparent perception among executives that smaller organisations are ‘better at retention’. “I think the easiest way to improve executive retention is to make bigger organisations more like smaller ones. Those large ones that ‘do retention well’ in my experience have a small company feel about them,” one executive noted. Large organisations concerned about starter retention should therefore consider adopting structures and behaviours that enable them to mimic their smaller counterparts. This might include operating along divisional lines, dividing into autonomous subsidiaries or encouraging deeper relational links within their executive teams.
The attraction of talent is vital for an organisation to compete within a knowledge-intensive world. Equally important is the retention of that talent. Research into executive retention is still relatively nascent, however some key themes are becoming clear. Organisations should focus on a number of key motivators and influencers of retention at the individual level as a key part of their human resource strategy. Aligning values from the outset, encouraging open communication and cultivating relational ties in the early years of an executive’s tenure will contribute to maximising an organisation’s ability to retain key talent.
Retaining Key Executives – 8 Tips for Organisations:
- Perceived opportunities and challenges are key drivers of executive retention
- Equally important is the presence of strong internal relationships
- Culture, remuneration and lifestyle balance should not be ignored but are not central to retention
- Change at the individual and organisational level can impact on retention drivers
- Key focus of retention activities should be on early years to be most effective
- Structure an executive retention strategy specifically at the individual level
- Recruit executives with values sets aligned to the organisation to foster retention
- Larger organisations should aim to emulate the traits of smaller organisations to encourage retention