SOA Blog

The many sides of retention

In economics, there is a saying: “If you lined up all the economists end to end, they still couldn’t reach a conclusion.” While the field of enterprise risk management (ERM) is not laden with as many philosophically divergent views as economics, those responsible for reducing risk at organizations certainly do not think homogeneously. With that in mind, stay tuned for a series of posts that offer up common scenarios faced by management teams and how to view those issues through the lens of people in different occupations. Through these posts, we hope you will gain a better understanding of the general thought processes and backgrounds that professionals from different walks of life bring to solving the complex problems related to risk mitigation.

For the first post in this series, we chose to look at the all too common problem of employees leaving an organization en masse. Let’s consider the hypothetical situation of an advertising firm experiencing employee retention issues due to a series of leadership changes and, consequentially, low morale among those who felt loyalty to the former management regime. In addition, the firm recently decided to cut back its contributions to employee retirement plans because of continuing effects of a down economy on its bottom line. In exit interviews, employees frequently cite both of these events as reasons for leaving.

What should the new management team prioritize in addressing the retention issue? Here is how people from various occupations might frame the starting point for improving retention.

Human Resources (HR) Consultant
Those versed in hiring, firing, paying and training generally view employee engagement and retention as a successful match of incentives with intrinsic needs and desires. So the HR consultant may recommend starting out with salary software which can be used to create a successful compensation program to help attract, retain and reward top talent. In addition, the consultant may wish to conduct a comprehensive survey of existing employees to measure job satisfaction, engagement, morale and client feedback. The difference between success and failure in retaining employees, for many HR consultants, comes down to effectively listening to the employee base as a whole and incorporating that feedback systematically into the organization’s incentive programs and culture.

Public Relations (PR) Consultant
While you may equate retention more with HR than PR, think of the communication issues inextricably linked with retention: perception about the company, buy-in from employees on strategy and change management; to name just a couple. A PR agency might be called by the company to assess the effectiveness of internal communications and address the emerging divergence between management and rank-and-file employees. The PR professional is probably well attuned to the emotional triggers that cause employees to question their employment situation and, consequently, can provide informed recommendations on getting people on board about the broader mission of the company beyond profits.

As actuaries, we tend to view the issue of retention a little differently than the previously mentioned professionals generally do. Society of Actuaries fellow, Rudy Karsan, who is an actuary and CEO of HR consultancy Kenexa, recently shared with us his insights on the skills an actuary brings to the HR table. Rudy has started over a dozen businesses focused on risk mitigation, and articulated the value his actuarial background has brought him and his clients throughout the course of his career.

Traditionally, HR professionals come from psychology or organizational development-related backgrounds. They use fairly simple models to predict the future, which do not always yield accurate results. Conversely, an actuary’s training is very much based on math, economics, statistics, human behavior and finance. Actuaries have the unique ability to translate complex data recommendations that will inform and guide strategic decisions. So, when addressing retention issues, actuaries are consistent in their use of the appropriate data models, which essentially take into account more variables when analyzing historical performance and projecting into the future.

Rudy stressed the importance of not only focusing on the accuracy of one’s calculations, but also knowing how to tie key learnings to one’s understanding of business issues to propose better solutions and, ultimately, yield superior results.

If you currently work in any of the above fields, we’d love to hear your thoughts. Stay tuned for the next installment in this series.

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2 responses to "The many sides of retention"

  • Shiraz Jetha says:

    I have often wondered about the retention issue. And right off the bat I should mention that I am not talking as an expert in this area.

    But it seems to me that compensation, while an important element in an individual’s decision to be part of an organization is not exclusively so. If it is, in other words if talent is motivated solely by financial rewards, then as an organization you want to be careful in setting a framework around compensation because you will always be dealing with, in the extreme, situations involving people moving for money. Also a compensation centered staff policy creates a certain type of organization – for example where aggressive behavior persists, where there is finger-pointing, politics are rampant, ethics may be off-center, super-star status is valued, etc. And thats ok too. If thats what you want. Its just not an organization for everybody!

    I feel that the issue of talent requires a very deliberate hiring framework that syncs the organization’s operating philosophy with its HR policy, recognizing what it values in the areas of good work product, ethical behavior, work/home balance, high quality talent, team performance, employee stake in the organization, etc in its hiring. And it seems to me that understanding what motivates an indiviual and how a specific individual would fit in the organization are key.

    This approach would make the hiring process longer – but the end result will be stable, better values different skills and strengths and can produce explosive work product!

    So I would say (i) understand what has happened in the company and why the managment change occurred with subsequent staff actions; a survey should be carefully thought through and implemented (simple surveys won’t get to the core issues) (ii) see how HR acquisition framework needs to be changed to build the type of organization you want (iii) implement short term solutions (iv) if the HR system is significantly out of sync with organization’s aspirations, then implement long term fixes.

    I would be interested in knowing how different organizations like Apple, Google, etc approach the talent issue. It would seem to me that at least for some of these organizations, the staff would never move irrespective of compensation as other factors come into play – job satisfaction, pride in being in an organzation with superb products, etc. But perhaps I am naive?

  • Society of Actuaries says:

    Thank you for your perspective, Shiraz. We agree that it would be interesting to see how companies like Apple and Google address talent and retention issues. As this Forbes piece on motivating and retaining employees states, “the key is to remember that when the employee’s career goals match what the company is trying to achieve, they stay and effectively contribute to the team effort.” At top companies like Apple, Google and Facebook, employees take pride and are rewarded by the very fact that they’re on the winning team and, as you mentioned, creating superb products. That said, it’s likely Google and Apple would not doubt that compensating employees with above market salaries also has a lot to do with retaining top people.

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