“A leader will only command the level of loyalty he or she is willing to give to others.” — Winston Churchill

Attracting and retaining talented people is a growing challenge for many organizations. Demographic projections show that this issue will become ever more critical as the large group of people in the “baby boom” begins to retire. Competition for the best people will intensify. The most successful organizations will be those “magnet companies” that attract and hang on to good people. Their management reputation or “leadership brand” will become as critical to their success as the company brand they are selling in their marketplace. Internal-cultural and external-marketing brands will become ever more intertwined.

Many managers badly underestimate the high costs of turnover. However, reducing turnover boosts profits. One trucking company found that it could increase profits by 50 percent by cutting driver turnover in half. And one study entitled “Costly Turnovers,” published in The Globe & Mail estimated it costs a typical information technology company $34,100 for each lost programmer, $10,455 to replace a specialty store retail clerk, and $6,926 for a call center representative.

Other estimates of the cost of turnover range from 25 percent of salary to as much as a full year’s pay. (This wide variation can be attributed to the difficulty of estimating the impact of customer dissatisfaction and retention and the lowered efficiencies for everyone who works with, trains, and supports the new replacement.) In high-turnover organizations, the problem is complicated and compounded by a vicious circle: On the one hand, they don’t invest heavily in people because they might leave and take all that expensive training with them; on the other, if they don’t invest in people, the chances increase that they won’t stick around when a better offer comes along.

In Love ‘Em or Lose ‘Em: Getting Good People to Stay, Beverly Kay and Sharon Jordan-Evans write about creating commitment cultures:

After 20 years of research and 60,000 exit interviews, the Saratoga Institute reports that 80 percent of turnover is related to unsatisfactory relationships with the boss. Talent retention and engagement will remain one of management’s highest priorities over the coming years. Indeed, in the so-called new economy with its ever-increasing reliance on talent and technology, retention and engagement are critical to an organization’s survival.

Organizations therefore need to focus on three areas to retain and engage their talented people:

Employee development – Support learning and growth.
Find ways to continuously develop and grow workers’ talents. Enrich and enliven employees’ work, making every effort to increase the time they spend on desirable and innovative work. Help workers identify opportunities for moving laterally and vertically. Link workers to mentors, coaches, leaders, or colleagues who can offer guidance and support.

Management style – Inspire loyalty.
Ask employees what they want from their work and what it takes to keep them. Provide constant feedback – clearly, truthfully, and respectfully – and, in return, listen closely and carefully. Look for creative, meaningful ways to recognize and reward workers. Create a culture of inclusion – valuing not only differences of race and gender, but thoughts, experiences, and attitudes as well. Hold managers accountable for retention and then give them the training and the tools to do it.

Work environment – Create one that people love.
Let fun happen. Share information freely and regularly. Give people space – providing the freedom to get the job done in ways that work best for them, from their schedule and attire to their approach and process.

There are many complex reasons why some organizations are more successful than others in attracting and retaining the best people. However, studies reveal some common patterns. The most significant of these clearly boil down to questions of leadership.

A WorkLife Design survey reviewed the characteristics that made organizations employers of choice. Only 34 percent named pay. About 56 percent said flexible benefits were a major factor. A whopping 80 percent of respondents said the work environment was the biggest factor. This was described as servant leadership, trust and cooperation, family friendly policies, work-life balance, and credible and fair management.

Curt Coffman, co-author of First, Break all the Rules: What the World’s Greatest Managers Do Differently and Follow this Path: How the World’s Greatest Organizations Drive Growth by Unleashing Human Potential, reflects on key findings from the Gallup organization’s massive study of leadership practices in hundreds of companies: “So, how do we build loyalty among our most productive and talented people? It begins and ends with the manager. Gallup research shows that people join companies, but they leave managers and supervisors.” He explains that great “world-class” companies create work environments that are “more profitable (44% higher), more productive (50% higher), and have higher degrees of customer loyalty (50% higher).” Based on a study of over one million employees in 330 organizations worldwide, Ernst & Young concluded that “ineffective managers are a major factor in the increasing departure rates… poor managers have a huge impact on employee turnover.”