By Erik Cassano
For centuries, employee compensation revolved around one phrase: “A day’s pay for a day’s work.”
But today, approximately 60 percent of employed Americans work at desk jobs in climate-controlled offices, surrounded by creature comforts. The American standard of living is high enough that most people’s basic necessities are met – and as a result, middle-class Americans of the baby boom, Generation X and millennial generations want more from a job than just a living wage.
What does this mean for companies looking to hire and retain the best employees? In short, financial compensation isn’t the differentiator it once was. In addition to earning a living, Gen-Xers and millennials, in particular, are seeking career advancement, professional fulfillment and a sense of purpose from their jobs. And they’re looking to their employers to provide those things, because if your company doesn’t offer them, they know another employer will.
Your reputation at stake
You want your company to be known as one that develops talent and helps people build careers. It’s an investment in the betterment of your business, in more ways than one.
“Employee development helps a business by developing people who have versatility and leadership skills,” says Brent O’Bryan, vice president of learning and development for metro Philadelphia-based security services provider AlliedBarton. “Even more fundamentally, a company that advances careers becomes a destination for employees. Seeing those opportunities for career growth is motivating for individuals well beyond just the financial motivation.”
A 2016 survey of millennials conducted by Deloitte found that 40 percent of those who plan to remain in their jobs beyond 2020 said their employers have a strong sense of purpose beyond financial success. In addition, 71 percent of millennials expecting to leave their employer in the next two years reported being unhappy with how their leadership skills are being developed.
Still, some companies are concerned about investing significant money and resources to develop employees’ skills, only to have them take those skills to another employer. But even if that happens, O’Bryan says the benefits outweigh the potential losses.
“You might lose someone you invest in, but you should think about the bigger picture,” he says. “If you’re seen as an organization that believes in career development, you’ll attract qualified new people to replace the ones you do lose.”
And it’s not necessarily a bad thing when other organizations benefit from your investment.
“Other people go to other companies, word gets around that you have a great place to work, and more people get interested in working for your company,” O’Bryan says.
Making it official
Saying you value employee growth is one thing, but showing people that you are truly invested in developing employees requires a formal commitment of time, money and personnel.
To take the first step, designate one person to be in charge of employee development for your organization. Whether it’s an HR specialist or someone else in management, this program coordinator will need to work closely with department managers and supervisors to design and implement your formal program.
“No matter the size of the organization, it’s critical for someone to take on that defined role,” O’Bryan says. “You need someone who is going to decide how all of this is going to look, whether you bring in an outside firm to help you or do it all in house. Someone needs to look at things from that high level and make the initial decisions.”
One job of the program coordinator is to implement systems to measure employee performance – and potential. Although direct supervisors are typically in the best position to identify skills and capabilities within their team members, you need ways to quantify employee potential in order to develop it.
“You can’t just say, ‘That person would make a good sales manager,’” O’Bryan says. “There has to be data to back that up – data that everyone in the organization agrees is valid. It’s up to your point person to develop a means of measuring performance, reviewing performance and identifying the areas in which a person might best be suited to help the company long term.”
Once you have metrics in place, your coordinator can also identify partnerships and external resources to support your employee development efforts. Examples include industry-specific software or training modules, certification programs and courses or programs offered through local colleges or universities.
“Many local colleges have leadership development programs, and some can be customized to the specific needs of your business or industry,” O’Bryan says.
While an employee development coordinator is responsible for creating and honing your employee development program, he or she isn’t the most important person when it comes to influencing the development of individual employees. That all-important role falls to each employee’s direct supervisor.
“The supervisor is the primary gateway for employees to get to where they want to go,” O’Bryan says. “That’s the person who should have the clearest picture of my skills and abilities as an employee, and the clearest idea of how to work with HR to help me reach my goals. Or, if my skills clearly aren’t a match for my aspirations, he or she will steer me in another direction where my skills will be better served.”
Supervisors need to build a thorough understanding of their team members’ talents, skills, performance and future aspirations, enabling them to mentor and coach people in their career paths. Part of this understanding comes from having regular conversations with employees about career advancement.
“These conversations need to happen all along the chain of command, on a regular basis,” says Deb LaMere, vice president of employee engagement and HR strategy at Ceridian, a Minneapolis-based HR software and solutions provider. “There should be an ongoing dialogue around the goals of the employee, their performance in their current job and how to keep them engaged.”
Letting people know how they fit into your organization and its future success is an important component in preventing turnover. If employees feel they have reached a dead end in your organization, they may look elsewhere for career opportunities. However, 66 percent of employees first look to see if there is an interesting open position at their current company before looking elsewhere, according to a 2015 survey by Cornerstone OnDemand.
“That’s not to say you develop and promote people just to keep them from getting bored,” LaMere says. “They still have to show competency at their current job – and a desire to get better. But if they’re consistently doing those things, your people along the leadership chain need to be having the conversations about how to keep that person engaged, and in your company.”
Why develop from within?
Growing companies often look to hire managers from outside their organizations, figuring it’s easier to bypass the development stage and hire ready-made leaders. There is a time and place to bring an outside perspective on board, but if you rely too heavily on outside hires, you’ll never allow your existing team members to realize their potential.
You’ll also spend a lot more money.
It almost always costs less to develop a career path for an existing employee than to hire and onboard someone from the outside.
“You’ll invest quite a bit in money and time in an external search,” O’Bryan says. “You have to go through the recruiting process, whittle down the stack of resumes, decide who you want to bring in for an interview, then who gets a second interview, and so forth. It takes a lot of time.”
A comprehensive study by the Center for America Progress places the cost of losing an employee at from 16 percent of salary for hourly, unsalaried employees to 213 percent of the employee’s salary for a highly trained position. In addition, it can take a new employee as long as two years to reach the same level of productivity as an existing staff member, according business expert Josh Bersin, principal of Bersin by Deloitte.
And then there’s the question of cultural fit. Your staff is already well versed in your company’s core values and the principles by which you do business. But even if you thoroughly vet an outside hire, you won’t really have a read on whether that person fits into your culture until he or she has been on the job for several months.
“Chances are very good that you have people already in house who have the raw ability you’re looking for,” LaMere says. “It’s a much better investment to take those people and mold them, build those relationships and empower them. You’ll develop a workforce that is more motivated, more productive – and if you’ve selected the right people to groom – more on board with the long-term vision for the company.”
Developing your employees ultimately requires a long-term investment of money and other resources. However, when you’re ready to begin building your employee development systems and processes, there are low-cost and free resources to get you started.
“There are many programs that can help you get the ball rolling,” LaMere says. “There are free webinars and a lot of literature you can consult. You might also look at low-cost memberships in HR professional organizations, which can help your HR staff start a dialogue with HR professionals in other companies who have experience developing their own career pathing programs.”
There is no secret formula to building an effective employee development program. It’s the product of a lot of conversations among employees, managers and HR, and some common-sense investments in the future of your company.
You won’t become a destination for career-minded employees overnight, but over time, you can build the type of culture and reputation that attract people to your company and make them want to grow their careers there.
“Every person in your company has potential in some area,” LaMere says. “Your company is going to be at its best when it can unlock all of that potential, and when you know that you can do the same for anyone new who walks through the door. When you have a plan for developing all of your employees to their fullest, that’s when your company as a whole will reach its full potential.”