Company Leaders See Competitive Advantage Threatened by Employee Retention and Commitment Discrepancies, According to Korn/Ferry International Study.

Business Editors

DAVOS, Switzerland--(BUSINESS WIRE)--Jan. 30, 2001

As many as 86 percent of employees cite work/life balance as the top priority in their career, yet in reality strategic clarity is the

strongest driver of employee retention

Research launched at the World Economic Forum's Annual Meeting 2001 in Davos, Switzerland, by Strategic Partner Korn/Ferry International, shows that there is a large discrepancy between what employees say they want and the actual drivers of their behavior, reinforcing competitive challenges for company leaders struggling to retain and motivate an increasingly diverse workforce.

With the spiraling demands on firms and their employees, as many as 86 percent of employees rate work/life balance as `very important' or `extremely important' in their careers. However, company leaders face the reality of strategic clarity being the top driver of management and employee retention - in these times of economic change and projected turbulence, an increasingly tough challenge. This is according to a new global study from Korn/Ferry International, the world's leading executive search firm, and the University of Southern California's Center for Effective Organizations at the Marshall School of Business.

The research was carried out by Professor David Finegold and Senior Research Scientist Susan Mohrman, at the Center for Effective Organizations. The result, What Do Employees Really Want? The Perception vs. The Reality, is one of the most penetrating studies to date that seeks to define the key drivers of retention and commitment across a broad spectrum of employees - including a focus on preferences of men versus women, over-50s, the Internet generation and international executives.

Speaking from the World Economic Forum's Annual Meeting in Davos, Michael D. Bekins, Chief Operating Officer of Korn/Ferry International says, "What employees want depends very much on the stage each one is at in their career, generational factors, gender, old versus new economy preferences, cultural dynamics and managerial versus implementation roles. This requires companies to personalize their retention efforts, catering to individual needs and tailoring the employment package".

Professor David Finegold at the University of Southern California's Center for Effective Organizations at the Marshall School of Business, comments, "Despite relevant advances in technology, our research shows that most companies are failing to mine their employee data, falling into the trap of using the Intranet to standardize, rather than customize, their human resource policies".

All respondents in the study say that their priorities are first work/life balance, and then job security, followed by financial reward. In analyzing behavior patterns however, these priorities provide a misleading indication of how retention and commitment may be achieved. Instead, common to retention in all employee subgroups is a focus on strategic clarity - with employees identifying more closely with the company if they believe it has a viable and well-communicated strategy for success. In terms of financial reward, pay-for-organizational performance has a positive impact on commitment for all groups except Europeans. Rewards such as stock options or profit sharing do increase how much individuals identify with the company. In contrast, pay-for-individual performance does not affect the commitment of any employee group, except for men under 30 years of age. The only group for whom job security drives retention is the late career group - those over 50 years of age.

-- For early career employees - those aged 30 and under - job security does not have a positive effect on either retention or commitment, whereas career advancement is very significant to the retention of this group. Their ability to influence the organization and their satisfaction with their professional work environment also help build their commitment to the company. Being part of an innovative organization is important both for retention and commitment.

-- For mid career employees - those aged 31 to 50 - commitment to the company increases if they are able to manage their own careers, and professional satisfaction results in greater retention for this age group than for either their younger or older colleagues.

-- For late career employees - those aged over 50 - professional satisfaction relates to neither retention nor commitment. This is the only group for whom job security drives retention.

Creating an Employment Brand

"With human capital ever more essential to sustaining growth and creating shareholder value, company leaders need to create an employment brand that attracts the best talent, just as they create a consumer brand that builds customer loyalty," says Korn/Ferry's Michael D. Bekins.

What Do Employees Really Want? indicates that this entails much more than offering competitive pay packages of stock options. Findings show that there is a discernable set of common organizational features that impact the behavior of most segments of the workforce, enhancing the organization's effectiveness and employee satisfaction and motivation:

1. A clear and compelling strategy;

2. An innovative environment low in bureaucracy;

3. Challenging work assignments that enable employees to grow

their capabilities; and

4. Rewards based, in part, on how well the organization performs.

David Finegold adds, "Just as the leading business-to-consumer and business-to-business companies are continuously mining the data they collect from the Internet and building personalized portals to allow them to build much closer relationships with individual customers, companies too can harness their own Intranet's capacity to develop a much more sophisticated understanding of their business-to-employee relationships."

Findings show current challenges in achieving this to be:

1. Many human resource departments view the Intranet as a way to

reduce costs and automate the delivery of employee

transactions, rather than a chance to build richer

relationships with individual employees;

2. Most human resources departments lack the staff and data

mining skills needed to analyze the data effectively; and

3. Too often, the focus is on standardizing human resource

policies, rather than creating options that allow for

customizing to individual needs.

Mike Bekins counsels, "As leaders seek to build an employment brand, they need to resist fashionable perks that make the company seem attractive to work for. It is the core features of the employment contract that are important - such as providing exciting work in an innovative and winning environment, creating ongoing opportunities for skills development and giving employees a financial stake in the company through broadly based stock options."

With career advancement high on the agenda, continuous learning is a crucial part of any retention program. The University of Southern California's David Finegold says, "Our research shows that many leading firms are pursuing innovative approaches to developing employee skills, such as e-learning, online simulations, project-based learning using new electronic tools and the creation of online corporate universities".

About the Study

The study is based on data collection from 10 leading technology-intensive companies operating across a range of sectors in North America, Europe and Asia and Israel. The research includes analysis of a survey completed by more than 4,500 knowledge workers and managers; interviews and focus groups with more than 500 business and technology leaders; and written documentation of the knowledge management, human resource practices and performance of these 10 companies. A regression analysis was also conducted to analyze the attitudes and behaviors companies are concerned about, covering many different areas of the employment relationship to determine the strongest predictors of commitment and retention.

---------------------------------------------------------------------- Definitions

Retention: measured according to the desire of workers to remain with the company and their willingness to change jobs.

Commitment: measured according to the emotional commitment to the company and its success, based on inspiration-driven job performance and pride in being associated with the company. ----------------------------------------------------------------------

See page 5 of this release for a 10-step approach to creating a successful talent strategy. Reproduction permitted with attribution to Korn/Ferry International.

About Korn/Ferry International

Korn/Ferry International (NYSE:KFY), the world's leading recruitment company, works closely with clients to provide human capital solutions throughout North America, Europe, Asia/Pacific and Latin America. The firm focuses on senior-level executive search, identifying CEOs, board members and other top executives; on middle management recruitment through Futurestep, which combines the power of the Internet with proprietary assessment tools and search expertise; on college recruitment through JobDirect, the leading online company to help fill the demand for college graduates and entry-level professionals; and on evaluating senior management teams through its Management Assessment business.

For more information, visit the Korn/Ferry International website at www.kornferry.com, the Futurestep website at www.futurestep.com and the JobDirect website at www.jobdirect.com.

About the Center for Effective Organizations

The Center for Effective Organizations (CEO) is based at the University of Southern California's Marshall School of Business. For over 20 years, the CEO has conducted action research in partnership with its more than 50 global sponsor companies. The CEO's research covers a wide range of topics related to organizational effectiveness, from the design of firms to their knowledge management and human resource practices.

Based on the results of the research and the practices from companies that have built some of the world's leading employment brands, Korn/Ferry has developed a 10-step approach to creating a successful talent strategy:

1. Create a clear and compelling strategy and vision for the

company.

2. Identify the core capabilities needed to excel at this

strategy and to continuously improve

performance--distinguishing between those skills available

externally from those that must be developed in-house.

3. Seek out the best sources of these skills wherever they are

available globally--and offer these individuals opportunities

to advance and contribute, regardless of nationality.

4. Understand the factors that are most important in attracting

and retaining individuals with these key capabilities and in

gaining their commitment to the enterprise.

5. Recognize that different groups of employees want different

things from work and that their priorities are likely to shift

as they progress through the various stages of their lives and

careers.

6. Create multiple career paths (e.g., technical ladders,

rotational assignments, opportunities to join new internal

ventures) to replace the declining number of managerial

promotion slots in today's flatter organizations.

7. Craft individual development opportunities so employees can

build the capabilities that create maximum value for

themselves and the company.

8. Hold both employees and management accountable for meeting

development objectives and sharing the knowledge they gain

with the organization.

9. Tie rewards and recognition to organizational and team

performance and enhancement of skills, rather than placing too

strong an emphasis on pay-for-individual performance.

10. Seek opportunities to enhance rapidly the company's talent

through strategic acquisitions, recognizing that these

acquisitions need to be managed differently to traditional

mergers.