The Chemistry of Strategy tm Newsletter May 31, 2013

Will there be a great employee migration?

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Two companies, two stories from the trenches about the looming danger of "grass is greener" syndrome.

"Turnover is over 50% in my department. It seems no one we hire has the right work ethic." Dave, the director of operations at Company A, was responding to a team discussion of morale. "I don't understand it. With unemployment so high, you would think people would be happy to have a job." As we drilled down, it became clear that the labor market had changed and a career at Company A was no longer viewed as competitive. With its current weak mix of compensation, work environment, and expected growth, the company was reduced to hiring the best available rather the best people for the job. Dave commented: "God help us when landscaping jobs open up this summer. I don't know what we're going to do then." The team set a strategic goal to dramatically improve employee recruitment and retention.

Over at Company B, the director of business development commented: "Morale is the lowest I've seen in years," noting widespread employee dissatisfaction with ownership. Low morale was the elephant in the room. Every member of the team knew it was an issue, but felt powerless to act.

The CEO responded, as he had in the past. "The last five years have been exceptionally challenging. The sudden economic collapse at the end of 2008 put our customers and us in survival mode. Only by exceptional management have we been able to make it through the Great Recession. We furloughed workers, deferred capital investment, froze compensation, suspended 401K matching, and dramatically increased everyone's productivity. Our people must understand that we need to rebuild financial reserves before we can increase pay and restore benefits. They should also recognize that their increased productivity allowed us to meet our customers' demands for lower prices. It didn't make more money for the company. I'm suffering from the same stagnant wages as everybody else. We all just have to wait."

The media is reporting good economic news in May 2013. All-time highs in the stock market, double-digit increases in housing prices, and the best consumer confidence numbers in five years. As consumers start buying and the Fortune 500 companies start investing, business will increase for the 600,000 "small" businesses with 20 to 500 employees. Increased demand will lead to more revenue and profit. That's good news.

But do your employees see increasing demand as good news for them? Employees have seen five years of frozen pay, no annual bonus checks, and reduced benefits, along with the fear that they could be next on the chopping block. Meanwhile, over the past five years their cost of living has increased 8 percent. Now they are being asked to work even harder to support increased demand and continue waiting for recognition of their increased productivity until some time in the future. Because they are tired of waiting, employees will be increasingly tempted to act once other companies start hiring and they feel they again have the freedom to relocate.

A recent Wall Street Journal article quoted a 2009 survey that found 60% of employees planned to quit when the economy improved. They are now reporting that firms are seeing that wave of resignations happening.

It isn't just the rank-and-file employees. I hear similar talk from senior employees who wonder if the only way they will see restoration of earning power is to change companies. When the strategic focus is survival, it is appropriate to defer capital investments -- in both assets and human capital. As businesses come back from the brink, they need to "catch up" with both sets of investments. When prioritizing where to put your money, first consider that equipment is bolted to the floor while your human assets walk out the front door every day.

Recognizing and responding to changes like this is one of the reasons for utilizing an ongoing strategic planning process. Companies have two major products -- the products/services that attract good customers and the jobs/careers that attract outstanding employees. Your strategy needs to address each one.

Create a strategic plan with your team

"Management is doing things right,
leadership is doing the right things." -Peter Drucker

Designing the best strategic plan requires balancing competing considerations such prioritizing investments in assets and people. The more issues that go into the plan, the higher its integrity. The best way to raise, understand, and balance issues is through a facilitated strategic planning process.

How long have you been saying that you are going to develop your strategic plan, but you haven't yet done so? Why? Perhaps it remains on your to-do list because it feels like a huge, laborious process and you haven't the time to spare to do it. Peak-performing companies have a clearly defined strategic plan…and it doesn't have to take long to create an effective one.

Your executive team costs you over a million dollars a year. Are you fully utilizing them? It's a waste of time and money to create a plan that they don't own and implement.

John W. Myrna

is co-founder of
Myrna Associates Inc


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John Recommends
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Gung Ho!
by Ken Blanchard

How do you engage all your employees?

Ken uses his distinctive narrative style to communicate three secrets for motivating your employees: The Spirit of the Squirrel, the Way of the Beaver, and the Gift of the Goose.

Every manager can benefit from this easy- to-read book.


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