December 29, 2006

What Do You Do When An Outstanding Employee Announces She Is Leaving The Company?

Assume you manage a team that has an outstanding employee. This individual earns $45,000 a year, and is a great candidate for a future management position. Unfortunately, there are no management positions available for this person to progress toward.

As a leader, you have done as much as you can to help this person grow, professionally. At this time, the individual is compensated outside of the salary band your compensation department set for this job title. In other words, the individual is no longer eligible for significant salary increases.

This morning, the employee enters your office, and tells you that she has accepted a job with a competitor of yours. This is a lateral move for the employee, the job is not a management position. She will earn $60,000 a year.

As a leader, how would you respond to this situation? How do you deal with this threat? Do you promote the individual, and if you do, why didn't you promote the individual before the threat existed? Do you match or beat the salary, in spite of the stated salary band for this job --- and if you choose to match or beat the salary, why didn't you fight for this prior to the employee threatening to leave? Do you simply wish the employee the best in her new endeavor, weakening your department and weakening your company?

What are your thoughts on finding creative ways to keep your best talent, ways that mitigate the risks of a salary structure and promotional structure that limits career development within your company?

I see this problem as a huge challenge in the multichannel retail industry, over the next several years. Are there clever ways to combat these challenges?


  1. Anonymous5:45 PM

    Interesting post Kevin, I look forward to hearing responses from managers across the industry.

    Question for you- why do you see this as such a huge challenge for the multichannel retail industry in particular? confirms that there's a sizeable demand for the employees like you mentioned - but, in your opinion, what is it about this industry that poses such a challenge?

  2. Hi Ray, thanks for the insightful question.

    The number of people who are well trained at managing an online/catalog operation are too few for the demands of these businesses. The ideal future leader is a person who is fluent in online marketing, yet has to thoroughly know all of the principals of direct marketing and database marketing from the 1990s. This person understands multichannel logistics, the strengths and weaknesses of selling in each channel, and understands how to creatively executve multichannel campaigns that truly drive sales in each channel.

    There aren't many of these individuals out there.

    Folks are either specialized in old-school tactics, or hip, new tactics learned in online marketing. Going forward, folks must have experience doing both.

    I believe multichannel retailers will figure this out, and will begin searching for these unique individuals. They will pay handsomely to fill this need.

    This will leave other companies in a dilly of a pickle. Do they promote the individual, match salaries, or let the person go? In any of the three cases, the company the candidate worked for loses.

    By matching salaries, they create internal inequity. By promoting the individual, they potentially muck-up the career path of more-deserving individuals. By letting the individual leave the company, they weaken their organization.

    During the past five years, this hasn't been a huge issue. But with a complete lack of true multichannel, analytical and management talent existing in the marketplace, this becomes a big problem going forward.

    We leaders need to pre-think solutions to this problem now, so that we are ready to deal with it when it happens.

    Seriously --- think about all the folks you've come across in your career. How many are fluent in online marketing, old-school catalog marketing, analytics, multichannel logistics, creative strategies and multichannel integration?

    When you identify a few people who match that criteria, please send me their resume!!

  3. Anonymous4:07 AM


    Once again, you are spot on. Part of my consulting practice is in the recruiting of direct marketing executives. The demand--right now--for the combination of old-school and new-school direct marketers is huge, and the supply is scarce. A person with 5 + years of proven online and search experience, coupled with 5+ years of proven circulation, database, analytics, creative and catalog production experience is worth her/his weight in platinum. I am seeing the demand force up the salaries; recently offers have been topping the $150,000 level for individuals with these qualifications. As the demand continues to grow, either the supply or the salaries must also grow, and--as we all know--there is no viable formal training supply for these positions. Today, I have at least 8 clients looking for one of these "hybrid" marketers and most are willing to pay "whatever it takes" to get the right combination of talent, experience and new-old-school marketing understanding.

    Don Libey
    Libey Incorporated

  4. Anonymous8:33 PM

    My suggestion is run your business so as to maximize the personal growth of the employees. Make that about on par with maximizing value to customers. If you do those two, the returns to shareholders will take care of themselves.

    Notice how your question is answered if one runs the business on that basis. It means that you would have known that the other company was paying more for a lateral job, and you would have faced the decision to either do something about it in terms of competitive pay, or otherwise made the case for staying for non-economic reasons.

    More importantly, this would not be an issue at all. If you're truly committed to the personal development of your employees, then you would be happy to have them leave for a better job. Period.

    And before you knee-jerk respond that that's a great way to lose employees, notice what effect it has on people if management actually cares about them. They stay!

    If the goal is to keep people at all costs, then that goal doesn't have much to do with the people. It only has to do with how the people can help the company. If you reverse the priorities, a miraculous thing happens. If you're willing to help people get the best jobs possible, even if it means your turnover potentially goes up, then you become a very desirable place to work. Which means turnover goes down.

    In a business run for the sake of employees and customers, every time an employee sees a better offer and leaves, managers should be happy for the employee, and ask themselves whether they want to do anything about why the employee left, or whether they're OK with it. And every time an employee looks at another job and decides to stay, you have a very motivated employee who has decided to re-enlist. Both ways there is value.

    The issue you state as a "problem" is a problem only if your objective is to get people to do things not in their best interest. If you focus on their best interest, the paradox happens: they then begin to do things for you.

    Some companies have figured this out with customers: helping customers for their own sake then helps you. Fewer companies have figured out the same thing with respect to employees: help them and they will help you.

    Especially in retail, it should seem clear--happy motivated employees make a business sing. But it is amazing to me how many retailers get sucked in to the same objectifying language of "sustainable competitive advantage," "attraction and retention," and "human capital."

    Human capital is a financial term, meant to show how people are valuable to the company. How about showing how the company is valuable to people?

    "Attraction and retention" gets used as a rationalization for keeping people from search firms, non-compete agreements, golden handcuffs and many other varieties of practices that are built to help the firm, not the employee.

    It shouldn't be a radical suggestion at all, just commonsense, that the best way to run a profitable business is to treat customers and employees right. If you do that, shareholders win. But if you mix up cause and effect--if you start measuring every little thing in terms of its impact on the bottom line--it is the bottom line that suffers, because employees walk, or are not dedicated, or are unproductive--all the things that people do when they are not appreciated and when they are treated as valuable only insofar as they can do something for an organization.

    On a more mundane level, my advice boils down to this. Congratulate the employee on their new-found raise, and wish them well. Then figure out if you mind repeating the experience ad infinitum to save $15K a year--which is just fine if you're running a low-cost strategy--or to enrich the economics or the job, which is critical if you're running a more service-oriented strategy. Either strategy is fine: in the first case, quitcherbellyachin', and in the second, raise your prices and add more value.

    Then establish an alumni network, because as long as you treat people as objects with no meaning past the W-2 impact on the bottom line of the company, you're running and endless loop.

  5. Thanks for your insights, Charles. I appreciate it that you took the time to think about the challenges, and solutions.

    It would be interesting to have you, a compensation director from a large corporation, and a human resources director from a large corporation have a "town hall" style discussion about employee retention and compensation.

  6. Thanks for a great post. Finding and keeping good people is the #1 challenge I face as a manager. If I learn any insights (beyond what others here have mentioned) I'll let you and our readers know!


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