Development as a Retention Tool

John C. Scott, Ph.D. - 1/6/03

In today’s volatile economy, corporations are continually looking for innovative ways to enhance shareholder value and improve bottom-line results. While there have been a variety of strategies implemented to achieve these goals, successful organizations increasingly recognize that survival and growth in the current marketplace cannot occur without an effective talent-retention strategy. The ability to retain high-caliber employees will be a key differentiator between those organizations that profit and those that fail. “Good to Great” author Jim Collins argues that the most critical driver of growth for a great company is the ability to hire and retain the right people.

Organizations with high levels of employee commitment have significantly higher operating margins and net profits than organizations with low employee commitment. This was the conclusion of a three-year study conducted by International Survey Research (www.isrsurveys.com/isr_knowledgeworks.asp), which surveyed more than 360,000 employees in the world’s 10 largest economies. “Commitment” was defined as employees’ intention to stay with the organization and also recommend it to others as a good place to work. The top two determinants of commitment were found to be quality of leadership and the presence of developmental opportunities. Interestingly, it was found that the commitment level of employees in the United States falls significantly below levels in half of the world’s other major economies, which has noteworthy implications for U.S. companies’ ability to compete globally.

Retaining high-caliber employees in today’s competitive labor market challenges organizations to manage and develop talent effectively at all levels. Employees who feel that they are growing and developing in an organization are more likely to stay.

Paul Russell, PepsiCo’s vice president of Executive Learning, put it this way: “The bottom line here is that development has become a demand characteristic for today’s corporation. If your managers don’t feel they are growing professionally, they will, quite simply, go somewhere else where they will.” Russell cites PepsiCo’s recent organizational health survey where the reason most commonly cited for intention to leave the company was the prospect of better career growth and development opportunities elsewhere.