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Employee Retention of Starz -
April 16th, 2011
Starz (originally "Starz!", before it dropped the exclamation point in 2005) is an American premium subscription channel that features mainly first-run motion pictures, along with some original programming. The channel is the flagship service of Liberty Starz, which also owns its sister channel Encore, which was launched three years before Starz's February 1, 1994 debut; despite this, Starz is considered by the company as the flagship of the Starz Entertainment channels.
The headquarters of Starz and its sister channels Encore and MoviePlex are located on the Meridian International Business Center complex in Meridian, Colorado. As of December 2008, Starz's programming is available to 17.7 million subscribers in the United States.
As Ralph Waldo Emerson famously said, “If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbor,…the world will make a beaten path to his door.”
As Emerson’s quote indicates, life is indeed good for high-performing employees. (Wouldn’t
we all like to have the world beating a path to our doors?) It also suggests that retaining star employees is a continuous struggle, because top performers will always be in demand. It’s a critical issue, because competitive advantage through people,
a common mission statement mantra, is largely dependent on the composition of the workforce. And workforce composition is a function of exactly who quits and who stays. Quitting by high performers constitutes “dysfunctional turnover” that can pose a large threat to business success. Understanding why star employees leave is the initial step in creating a strategy for retaining them.
star employees leave
is the initial step in
creating a strategy for retaining them.
The intuitive notion that having better individual employees ultimately results in better company performance underscores the importance of retaining stars. Two elements are important to remember. First, perpetual outside recruitment of our stars is a splendid problem to have. Not easily resolved, but splendid nevertheless, as the alternative is managing people who are not worth luring away. Second, retaining top performers is a widespread concern.
A recent Manpower study of almost 33,000 employers across 23 countries revealed that 40 percent of companies worldwide are struggling to find adequate talent to fill jobs. Meanwhile, a recent Towers Perrin study of roughly 86,000 employees in 16 countries found 58 percent of employees actively looking to change jobs or open to leaving if a good opportunity emerged. Together, these two studies suggest that when the supply of talent is low, and a majority of employees (including stars) are open to leaving, retention of stars is even more important.
Yet, rather than focus on the retention of stars, companies and researchers frequently are more enamored with investigating general turnover rates. Overall turnover rates do, in fact, yield useful information, particularly when examined relative to a company’s industry, competitors or its own past experience. They are crude tools, however, compared to what performance-specific analysis can yield.
Following the Stars
Management consultants and authors from the popular and academic press seem to delight in presenting bulleted laundry lists that chronicle why employees leave or what can be done to keep them. These lists usually are filled with valid ideas, but the crucial identification of performance differences is often lost. Simply reducing overall turnover is not enough. Here are a few suggestions for how to emphasize employee performance in retention strategies:
Know who is leaving. Companies frequently calculate turnover rates for the entire organization and may break the overall rates out by such factors as job categories, locations or protected class (i.e., sex, race, etc.). Turnover rates, however, are rarely broken down by performance levels. Without knowing the extent to which star performers are leaving, we cannot even conclude that there is a problem, let alone devise a retention strategy.
Look for patterns/reasons. Exit interviews are not without problems, but can provide valuable information about why employees leave. Rather than ask employees why they quit as they are walking out the door (which, for a variety of reasons, may yield inaccuracies), some companies have found more success by contacting departed employees a month or two later. Additionally, asking those who did stay why they decided to stay may provide important data. Both survey approaches will be much more valuable if employees’ performance data are linked to their survey responses. Similarly, linking performance data to demographics and employee records on pay, training and development and promotions provides a rich source of information. All of these methodologies allow more sophisticated analyses of what best predicts the turnover behavior of employees at different performance levels.
Address the reasons (if economically appropriate). Take a cost/benefit approach. While retaining stars is critical, it is also costly. And at some point, the benefits may no longer outweigh the costs. Attempting to find this tipping point is difficult, but even a ballpark estimate of what the company can afford to do will pay off; as will the attempt to identify costs and benefits associated with various efforts to retain stars.
Let the rest of HR work for you. Paying employees what they deserve bodes well for the retention of stars. Other aspects of HR, however, also can be leveraged to keep the best and brightest from leaving. A valid performance assessment system is a necessary condition for effective pay-for-performance. Hiring well, with an eye toward finding employees who fit the culture and values of the company is important. Providing employees with mentoring early on, interesting and challenging work, development opportunities, advancement potential, flexibility and fair treatment will also help to prompt commitment, engagement and satisfaction.
Do not rely on the market. Stars are always in demand, so assuming a tight job market can take the place of a more focused retention strategy can be a costly mistake.
Consider companies A and B as two very similar competitors, each employing 1,000 people. A and B both have turnover rates of 15 percent per year. Now let’s assume that in each of the previous two years, B lost 50 low performers, 50 medium performers and 50 high performers, while A lost 100 low performers, 40 medium performers and only 10 high performers. In contrast to what the turnover rates tell us, this performance-specific analysis clearly indicates that A is developing a talent advantage over B, as A’s dysfunctional turnover is very low (and A’s “functional turnover,” which is the loss of low performers, is very high). Given research linking human capital levels to organizational performance, we would expect that, all else equal, A will soon be parlaying its high-performer retention advantage into outperforming B in terms of financial performance.
Before addressing what can be done to retain stars, it is worth taking a moment to ask whether we should do anything at all. That is, rather than cater to those with an urge to roam, shouldn’t we instead use our resources to reward the loyal employees whose commitment is unquestioned? While there is something to be said for the “good riddance” approach of letting talented but discontented talent go, it is shortsighted. For one thing, turnover is quite expensive. Estimates vary widely (as does the true expense), but several authors have placed total costs (which include various aspects of recruitment, hiring, training and lost productivity) at somewhere in the vicinity of one to two times the yearly pay of the one who leaves. That means a thousand-person company with a 10 percent turnover rate per year and an average individual pay level of $40,000 might be expected to spend between $4 million and $8 million per year on turnover-related costs. Further, those whose commitment is unquestioned are not necessarily the employees who may be most pivotal to company success. Indeed, those being tempted by other firms are more likely to be the stars who can drive company performance.
What then, can we do to avoid the “brain drain” and to attempt to “win the war for talent,” which are terms commonly used to describe the struggle to keep the best employees from going elsewhere? First, we need to understand how stars differ from everyone else. For decades, conventional wisdom held that higher performers were less likely to leave the company than were their low-performer counterparts. More refined analyses in the last 20 years, however, have provided compelling evidence that, on average, very high (star) performers tend to leave more often than do average or good performers.
One reason for this finding is that stars are more mobile and sought after than are others in the labor market. But research that Professor Barry Gerhart and I have conducted suggests that it is the interplay between this characteristic and three other factors that reveals the most intriguing information about retaining stars.
First, compared to their co-workers, employees with more ability and stronger signals to send to the job market appear to be more sensitive to dissatisfaction. In other words, in terms of turnover behavior, stars are more likely to react to diminished happiness or satisfaction than are others. Thus, keeping stars is particularly difficult because, as a result of top performers always being in demand (i.e., Emerson’s beaten path), troubling events at work that would merely serve as irritations to less mobile employees can prompt stars to jump ship.
Second, and related to the previous point, pay-for-performance is, by far, of greater consequence to the retention of stars than to the retention of all other employees. Paying stars well keeps their turnover likelihood low, while failing to reward them for their high value inevitably, and understandably, leads stars to capitalize on their mobility. Although stars might also be more sensitive than co-workers to other aspects of employment (e.g., an equitable boss, challenging work, etc.), it is clear that paying stars for being stars is almost a necessary condition for their retention.
Finally, the availability of other jobs, often measured with unemployment rates, is relatively unimportant for employees with the most human capital. As Emerson suggested, there is always a market for stars. In contrast, the turnover behavior of other employees is considerably more dependent on a friendly job market.
What then to do? At one level, the equation seems strikingly simple: Keep stars happy by paying them well and thus avoid incurring the high costs of their voluntary turnover. Although there are a number of credible strategies for trying to retain employees, money appears to be the most powerful retention tool with regard to stars. High pay-for-performance not only gives stars the level of pay they deserve and desire, but it also provides substantial recognition and status.
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Last edited by pratikkk; April 16th, 2011 at 07:13 PM..