Beyond basic benefits - retention

HR Magazine, Sept, 1997 by Nancy Hatch Woodward

Use these retention practices to keep your best employees.

Human resource managers are increasingly searching for new incentives to entice top employees to remain with their companies. "Retention is an important issue; not one you can turn on or off. You have to pay attention to it for the long haul, consistently day in and day out," says Dave Pylipow, director of employee relations at Hallmark Cards Inc. in Kansas City, Mo., which has 12,000 U.S. employees - and a turnover rate of just over 6 percent. Retention is determined by the way managers treat employees on a day-to-day basis, he says.

Patricia Brown, vice president of strategic personnel issues at First Tennessee Bank, Memphis, Tenn., which has a 20 percent turnover rate (about half the industry average), explains the bank's approach. "You have to look at how you are recognizing and regarding your employees: the culture, the development, the leadership and the key benefits."

INNOVATIVE BENEFITS

Most HR managers agree that the First step in employee retention is to make sure the benefits package is competitive. In the 1997 SHRM Retention Practices Mini-survey, 94 percent of the HR professionals surveyed say their companies offer health care coverage and 85 percent have a 401(k) or 403(b) plan.

"Clearly, if you want to keep key people, you have to make sure all your benefits and compensation programs are competitive and innovative," says Robert Hecker, vice president of human resources for UNUM America, a disability insurance firm headquartered in Portland, Maine.

First Tennessee Bank, Hallmark Cards and UNUM America all offer profit-sharing plans for their employees, but UNUM America has a different twist. It uses an incentive plan. Hecker stresses that it is not a bonus program; instead it is based on company performance and applies to everyone in the organization. About five years ago, the company set goals for 1998, the year of its 150th anniversary. Targeted areas include improved customer service and shareholder value, as well as reduced operating expenses. Each year that the company reaches its annual target goals, employees receive bonuses of 10 to 40 percent of their income, depending on their level in the organization. In 1998, if all goals are met, each person who has been with UNUM since the program began will be fully vested in a stock options package, which is currently valued at $8,000 per employee.

First Tennessee, in addition to its profit-sharing program, has concentrated on benefits to help employees with work/life balance.

"In the early 90's, we started asking our employees what it would take for them to build loyalty and improve their productivity. They told us loudly and clearly that they wanted more flexibility and control of their work. We listened and developed an overall strategy of promoting commitment to work and family, which is probably why we were voted Business Week's No. 1 family-friendly company last year," said Brown. "Right now, 96 percent of our employees say that First Tennessee meets or exceeds their expectations as an employer."

The bank's most popular strategy - Prime-Time - combines elements of part-time and full-time employment. "We developed this as a retention tool," says Brown, "because we saw that we were losing employees who really wanted to reduce their hours for personal reasons, yet still needed to keep some type of benefit coverage. Prime-Time allows full-time employees a chance to work as little as 20 hours a week while retaining full benefits. Of the employees who went into that classification, "we retained about 85 percent," says Brown. "That's how many told us they would have had to leave First Tennessee if we hadn't offered them that option."

OPEN COMMUNICATION

After making sure the company has competitive benefits, the next strategy is to establish "good communication between the company and its employees," says Jim Wilkerson, senior vice president of human resources and administration at ABB Vetro Gray, Houston, Texas, an international oil equipment company with a 6 percent turnover rate.

Wilkerson stresses that companies must communicate not only good news, but "be brave enough to communicate bad news. If there is a single key in retaining people, it is open, honest communication." Companies can foster communication in several ways.

Company news. To keep employees informed, Hallmark Cards uses television monitors strategically placed throughout the buildings, as well as a daily newspaper. The newspaper includes cards that invite employees to pose questions to management. Employees do not have to sign the cards, but if they do, they receive a direct answer from the officer responsible for a particular division. Employee surveys. ABB Vetro Gray conducts surveys every two years and, after 20 years of surveys, the company can now compare the current and past situations, in addition to comparing its status with norms for the industry. "We analyze the data and use employee feedback meetings to see where we have and haven't improved. Then we use that data to develop action plans," says Wilkerson.