Is everybody happy?

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Magazine Article, Source : The Manufacturer
Zone : People and Skills
Published : October 2007

The cry that well heeled larger companies have the power to poach valuable staff, may not necessarily be true. Debbie Giggle discovers how SMEs can engage and retain good staff without breaking the bank

Who fares best when it comes to retaining employees – the SME or the multi-national? The answer to this simple question may be something of a surprise.

“The SME can offer flexibility,” said Jim Smith, managing director of Rencol. “We can treat people as individuals and, without rigid HQ procedures, we can adapt quickly to changing situations.”

And coming at the question from a different angle, Chris Lakin of global polyester manufacturer Advansa, said: “There are pros and cons on both sides. Big companies have traditionally had the advantage of enabling employees to be more mobile. But today, many large companies are networks of highly autonomous sites, without the ability to move people sideways. And all pyramids have got flatter, whatever the business, so upward progression can be difficult too.

“SMEs score because a single role can encompass a variety of aspects and job satisfaction can be high. But it can be difficult to release that valuable member of staff to progress to something more challenging if there’s nobody to fill the gap.”

More important than company size, perhaps, is continuity of ownership. High levels of churn are often associated with businesses in a state of flux. So do privately-owned and family businesses find staff retention easier to achieve?

Norfolk-based Structure-Flex has been family-owned since its inception. “Rural Norfolk isn’t the easiest of places in which to recruit,” said sales and marketing manager Matt Doughty, “but we have an above average retention rate. A number of our workforce have been with us for over 25 years, and a lot of our new recruits are family members of people who already work here. We’re honest and open in the way we do business with customers and suppliers, and the same applies to communicating with employees. We have a consultation period once a month to keep employees abreast of business issues, and are still small enough to treat people as individuals – not as numbers. We recently had a new sales guy join us and he says it’s like ‘finding his place in life’. After being part of a big, chaotic organisation, being part of a family business is like coming home.”

So does good staff retention have to evolve naturally, or can you create it?

“When I joined Rencol, several years ago, staff turnover was horrific,” Smith admitted, “but in some ways this helped to turn things around. The company’s financial team was so aware of the costs of high churn that investments to improve staff retention could very easily be justified.”

Rencol has since introduced a host of HR related initiatives. Staff retention levels have improved drastically and the company’s success in this area has attracted numerous awards.

“Early on we recognised that the people involved in recruiting had no HR training. That meant we often had new people join us who were unsuitable from the outset. We recruited an HR manager, which was a significant cost to the business at the time, but the higher level of professionalism soon made a difference, and the move paid for itself.”

Retention at the company is assisted by a proactive strategy to promote from within, with all jobs advertised internally first. The company also has a ‘job swap’ scheme, which allows employees to try out other roles within the business, and the progress of employees is monitored more frequently than average. Full development reviews are held every six months, and every month there is an informal chat with each employee, lasting from 30 minutes to an hour to find out how things are going. There are 360 degree reviews for supervisors on a bi-annual basis.

Smith continued: “The size of our workforce is such that we don’t have to have a works council, but we’ve formed one anyway. There’s a monthly newsletter and monthly full company meeting, and we’re working with ACAS on job evaluation across the workforce to establish pay bands and iron out any anomalies.

“Finally, we invest heavily in training and development. Each member of staff receives a £100 voucher for training in any subject, not just work-related. We promote NVQs and have our own internal assessors for continued learning, as well as modern apprenticeships. Our internal ‘academy’ sees about half of our staff taking a couple of courses a month, and this is going so well that we’ve opened up our courses to other local businesses. We capitalise on all relevant government initiatives and have moved to very popular flexible working patterns for employees at all levels.” In addition to training and motivating employees, many manufacturers use incentive schemes and profit sharing to improve staff retention.

“In the last 12 months, we’ve introduced a new profit sharing scheme which benefits every employee equally, irrespective of the performance of their specific division of the company,” Doughty said. “This is fairer, as some of our product lines are sold into highly competitive markets while others are more ‘added-value’ and lucrative.”

The food company Ginsters, based in Cornwall, also has a profit share scheme, but believes it’s the total package that makes the difference.

“We never seem to have a problem attracting new staff,” said production director Ray Hanly, “and at the moment we’ve got a waiting list of 35 people who want to join the company. The early stages of a new employee’s career with the company are particularly important. We have an intense two to four week induction period and, when that’s completed, we try out the new employee in different roles to see where he or she will be happiest. We’re lucky in that Cornwall is a lovely place to live, but we offer a good package including things like private healthcare, final salary pension scheme and a free on-site gym.”

So what’s the best way to incentivise staff and improve staff retention?

Lakin commented: “The messages you convey about employee reward will ultimately drive certain types of behaviour, so you have to be careful what you incentivise, and how. Across UK industry there have been examples over the years of reward and recognition schemes that have gone horribly wrong. The problems are exacerbated if the potential financial reward is high. Offering a percentage of a kaizen cost-saving as a reward, for example, can be problematic as this could add up to thousands of pounds. You can run into problems of plagiarism and ownership of ideas. If industrial relations are poor, the incentive scheme might become a negotiating chip for the unions. You also don’t want to establish a culture where it’s the ‘overtime heroes’ who are rewarded, as this can discourage certain people from wanting to finish work within standard shifts.

“The same applies to the messages about what it takes to get promotion. Often, higher roles are linked to having a team of people reporting to you, or managing a large budget. This could inadvertently give the message to your key technical people that they won’t ‘get on’ unless they move away from what they’re good at, into operational roles. To prevent this happening at Advansa we’ve created a ‘technical ladder’, which structures upward progression for technical people independently of the traditional commercial and operational routes.”

Providing new opportunities for ambitious employees is often tricky because of the conflict of interests. An employee is most valuable to an organisation when he or she is well-established in a role, but that is the exact time that an employee is most likely to want to move on.

“The Dupont HR model treated an individual’s performance in a job-role as having four separate stages,” commented Lakin (whose company Advansa was previously owned by Dupont). “The first stage was about learning the ropes. The second phase was where you were conversant with the job and were adding value to the organisation. The third phase involved being at the top of your game and beginning to decide on the next step. The fourth phase involved training up your successor to enable you to move on. It worked very well because it encouraged people not to get too territorial. The ‘knowledge is power’ syndrome, in which people limit open communication in order to safeguard their existing position within the company, can be divisive. The acknowledgement that everyone is expected to move on, and needs to groom a replacement in order to do so, creates a more effective culture. If you want to work this way, however, the approach has to come right from the top.”

Lakin has a final theory about staff retention. “In discontinuing final salary schemes I wonder whether UK manufacturers have inadvertently caused the workforce to be more mobile. I bet if we analysed the money saved by closing final salary pension schemes we’d find it’s a false economy when costs of staff churn are taken into consideration.”

This might explain why Ginsters has 35 people waiting to join its workforce. But then again it could be the Cornish countryside, the profit-share, the private healthcare, or the free gym. If we asked ten different employees we’d get ten different answers. And that is where the real challenge of staff retention lies.