The employee perspective: 3 case studies
A few years ago, Toyota Motor Manufacturing North America almost fell victim to the classic "say/do" trap, where employee feedback provided through employee surveys (what they say) does not match their actual behaviors and actions (what they do).
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FleetBoston Financial, a large regional U.S. bank with more than 40.000 employees, has grown substantially in recent years, mostly through an aggressive merger and acquisition strategy. (It was recently acquired by Bank of America.) In 1998, Fleet was experiencing a surge in voluntary turnover - by some measures, almost twice the industry average, exceeding 40% in some occupational groups.
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Profit models have been evolving rapidly in the telecommunications sector. Several years ago, BellSouth recognized that much of its once high-margin business was becoming a commodity. Seniors executives mobilized to preserve profit margins through process efficiencies and cost-reduction tactics, including several rounds of layoffs. Finally, in early 2003, they turned to an in-depth analysis of how and where their payroll dollars were being spent on the remaining employees, in terms of current expenses and the present value of future promises such as retiree medical obligations.
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Toyota: Confirm the facts, even when everyone agrees
A few years ago, Toyota Motor Manufacturing North America almost fell victim to the classic "say/do" trap, where employee feedback provided through employee surveys (what they say) does not match their actual behaviors and actions (what they do).
Toyota offered extensive training and career management designed to improve employees' skills and give promising individuals the opportunity to broaden the scope of their know-how through moves within the company. Through a combination of internal labor market mapping and an employee survey, Toyota identified an important mismatch between how employees perceived the talent management system and how it actually operated. Survey responses showed that few employees saw the link between the completion of company-sponsored training and either pay or promotions, as well as the link between higher performance ratings and either pay or promotions. But the quantitative analysis revealed a strong link between both factors and subsequent pay and promotions. The system actually was working well.
So although the perceptions were consistent among both the executive and employee populations, they were consistently wrong. Had senior executives known only the survey results, they might have tried to fix a performance management system that wasn't broken. Instead, the remedy was a different and more modest type of intervention built on employee education and communication: making sure employees understood the talent management program and what was being delivered.
FleetBoston: The value of data and analysis
FleetBoston Financial, a large regional U.S. bank with more than 40.000 employees, has grown substantially in recent years, mostly through an aggressive merger and acquisition strategy. (It was recently acquired by Bank of America.) In 1998, Fleet was experiencing a surge in voluntary turnover - by some measures, almost twice the industry average, exceeding 40% in some occupational groups.
The company's Human Resources department relied on exit interviews and employee surveys to determine what kept people with the company and what encouraged them to leave. Those traditional methods pointed to two primary causes of employee turnover: excessive workload and inadequate pay. Fleet responded with policies aimed at relieving stress and adjusting pay where possible. Nevertheless, turnover continued to rise. The company was eager to try something else.
Using data from Fleet's database and extensive analysis of internal labor market, we identified and quantified the impact of various workforce characteristics and management practices on turnover. To the surprise of many managers, the findings revealed that pay had the weakest impact on turnover. Retention had more to do with factors related to careers, such as promotions, pay growth, number of jobs, and breadth of experience at Fleet.
These revealed facts helped Fleet avoid costly and ineffective solutions. They encouraged management to focus on the real drivers of employee retention. Within eight months of launching a new retention initiative, Fleet experienced turnover reductions of 25% among non-exempt employees and 40% among exempt employees. The company's own estimates of return on investment were an annualized cost savinigs of more than $50 million.
BellSouth: Directing rewards where they are most needed
Profit models have been evolving rapidly in the telecommunications sector. Several years ago, BellSouth recognized that much of its once high-margin business was becoming a commodity. Seniors executives mobilized to preserve profit margins through process efficiencies and cost-reduction tactics, including several rounds of layoffs. Finally, in early 2003, they turned to an in-depth analysis of how and where their payroll dollars were being spent on the remaining employees, in terms of current expenses and the present value of future promises such as retiree medical obligations.
Our analysis revealed that overall BellSouth was paying its employees near the market rate. But a different picture emerged when the data was segmented by business unit and employee level. Premium base pay was going to under-performing people and units rather than to those likely to promote future growth. Relative pay levels ignored future talent requirements and the need to preserve essential institutional knowledge, function critically, and the cost of turnover. This compensation misalignment was not only hurting margins, it also set an unsustainable trajectory for future costs.
BellSouth moved to an analytical, fact-based approach shaped by aligning rewards with workforce segments. Management was better equipped to prepare for the company's future by focusing on the programs and policies that would help attract, retain, and motivate employees who were critical to future success, not just to short-term performance.
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