Holding your own.

Once you've got good people on board, what do you have to do to make them stay?

During a merger, Bruce Abbott, senior vice president at Bank of America, tried to induce a four-person technology support team at the target bank to move to San Francisco to join the finance department of the new parent. None would make a commitment, and Abbott couldn't understand why. When he realized each really enjoyed working with the others and preferred to be treated as part of a unit, rather than as an individual, he sat down with the group and negotiated a four-way employment package. The quartet wound up sharing relocation expenses, moving vans and even temporary housing. And, Abbott says, "They're a great team."

The lesson to be learned, he thinks, is, to retain good people, "You've got to get out of your head and into employees' heads to help them make decisions."

In the five years he's been CFO of Vinyl Plastics in Fond du Lac, Wisc., Richard Blamey has seen one member of the finance department leave the company: a young man who decided to pursue an MBA and become an investment banker. Other employees have revolved out of finance into other areas (one went into MIS, for example, also after obtaining an MBA), but stayed with the firm, which employs over 900 people and has about $202 million in annual sales.

What inspires such loyalty? One factor, Blamey thinks, is the company's lifelong learning policy. "We pay just about anybody to go just about anywhere to study just about anything, from scuba diving to an MBA, with no strings on it," he says. "Three people got MBAs while I've been here."

Retaining top financial talent is, at best, an inexact science. As these anecdotes indicate, there's no one-size-fits-all formula. So, to get a fuller picture of how finance departments retain the best and the brightest, Financial Executive magazine and Watson Wyatt Worldwide recently conducted a survey of over 4,000 CFOs, then several low turnover finance departments, to identify some secrets of retention success.

Seventy percent of survey respondents say their annual turnover rate is less than 10 percent; 7.1 percent indicate zero turnover. "That's a surprising piece of data," says Jamie Hale, regional practice leader in Watson Wyatt's Human Capital Group, "because turnover in general is between 10 and 20 percent and finance is a hot area. It could be the discipline itself; finance people are more stable and risk-adverse versus an area like IT, where people will go to a more exciting opportunity."

Why Do People Leave?

"If you look at this holistically, several factors come into play," says Kenneth Kutcher, CFO of the polyester business of Hoechst formerly known as Trevira. "It's more psychological than tactical. You have to ask, 'What makes individuals make decisions?'"

One perhaps surprising answer is that it isn't always money. Bank of America's Abbott says, "I'm not a believer that money is a motivator, although the absence of money is a dis-incentive. What people want is camaraderie and a feeling that they're being challenged and growing. I don't think people job-hop by nature; something causes them to want to move."

Thus, it's no shock that the most common reason people give for resigning from a finance department, according to over 55 percent of respondents, is "better opportunity elsewhere." Abbott agrees, to a point. "That tends to be why higher-level people move," he says. "Lower-level people tend to leave because of stress and workload" [the third most frequent reason respondents indicate].

The second most prevalent reason employees leave, according to over 12 percent of respondents, is salary and compensation issues; "lack of advancement" and "outside circumstances" tie for fourth place, at 5 percent. In descending order of importance, other factors include a desire to relocate, unhappiness with the corporate culture and personal differences with one's manager or coworkers. Five percent of respondents don't track why people leave; over 6 percent indicate "other" - including poor performance, downsizing and returning to school.

Looking for Longevity

Is it possible to pre-screen for retention? Traditional benchmarks - cultural fit, family stability, a good work ethic, solid employment record and good references - are what most CFOs look for when hiring finance department talent. But are there other indicators to help predict whether a candidate will stay with the company for an extended period?

Watson Wyatt's Hale thinks survey respondents "go beyond the hard data to softer things, like energy level." In other words, they try to see whether candidates match up with what they have to offer, rather than relying solely on historic information.

Average Salary Increase to Finance Staff Members

(in the past year)

% of             % of
increase     respondents

0.0%             0.8%
1.0              0.8
2.0              0.8
2.5              0.8
3.0              7.0
3.2              0.8
3.5              3.1
4.0             22.5
4.5              6.2
4.8              0.8
5.0             28.7
6.0              8.5
7.0              5.4
8.0              3.1
9.0              0.8
10.0             5.4
11.0             0.8
12.0             0.8
12.5             0.8
15.0             2.3

"Residence" is a word that crops up with surprising frequency: CFOs want employees who live nearby. "What part of the country they grew up in" is a factor for one. And family matters. One respondent cites "family relationships in the area" as a criterion; another looks at the number and ages of the applicant's children. Still another looks for personal stability amid professional instability - a candidate with a "history of infrequent job hopping [and a] history of coping with change."

Gary Meisner, CFO and CIO of United Dominion Door Products in Brentwood, Tenn., says, "We benefit from geography. We're not in a high-turnover area, and most people working in the financial side tend to stay there. They tend to work longer hours and are dedicated to deadlines. That probably keeps them from looking aggressively."

Lawrence Call, senior vice president, CFO and treasurer of Grand Rapids, Mich.-based Amway, which is privately owned by two families, also cites location and a good local work ethic as factors. "Amway is one of only three large companies in the entire western Michigan area," he notes. "We're a beneficiary of location and competitive in the marketplace. People here have retained very strong family values in the community and the company evidences strong family values itself. The fit is perfect."

Many CFOs evaluate the questions candidates ask as a way to gauge their insights, values, goals and expectations. They want well-thought-out and researched questions. Talk of long-term benefits wins points. Of course, many look at length of service with a candidate's prior company and the reasons he or she left.

Some bring in outside assistance. About 18 months ago, to ensure retention, according to Call, "Amway started to use a firm for top hires that's developed a series of practical tests, interviews and team simulations based on our culture, expectations and community. It's similar to a leadership skills inventory workshop." To date, fewer than 10 people have been screened in this way, but Call says he's pleased with the preliminary results.

And industry-specific experience is valued. One respondent, who works for a government agency, says he wants someone with more than 15 years of government service under his belt. "[We] can't keep good people who don't have a government background," he notes.

But there's no universal, infallible crystal ball; as United Dominion's Meisner says, "No matter how good the interview process is, it's a small snapshot." Still, one respondent wants a candidate who gives "forthright responses," while one company relies on handwriting analysis. One CFO says, "The carriage of the person [suggests his] loyalty to an organization"; a second looks for "personal chemistry"; a third wants evidence that a "candidate has already made the major decisions in life." And one doesn't hire at all. He explains, "All of our people in the finance department have moved up from within."

This raises the question of whether it's better to recruit from outside the company or hire from within to help with retention? The answer seems to be both, because a company needs balance. "We bring in talent we haven't had and skills we need from without," says Abbott. "You can't be completely internal; you need fresh talent with their eyes open. But you can't do that too much because people get a sense that there's no opportunity internally."

"I'd give an internal person every advantage I could," Hoechst's Kutcher adds. "But we're in business to secure the greatest talent. If I'm comfortable with an internal candidate, I'll use external standards as a benchmark. If he or she is pretty close to the external world, I'll give the internal candidate the opportunity. It's a reward."

Keeping an Eye on Retention

Once you've successfully recruited a new member of the finance department, you want that person to stay; it's time-consuming, stressful and expensive otherwise. Fifty-two percent of respondents say it costs between $20,001 and $50,000 to replace a mid- to high-level employee (that's someone with a U.S. salary of between $70,000 to $150,000). This figure includes such items as search fees, lost time and productivity and retraining. Almost 19 percent say it costs less than $20,000; 16.5 percent indicate it costs from $50,001 to $75,000; nearly 12 percent say it takes between $75,001 and $100,000.

"Turnover isn't high, so the result is that financial executives don't focus a lot of time on retention. But you need to keep an eye on it," says Hale of Watson Wyatt. "You need to keep an eye on having a good work environment, so if turnover does get out of hand, it doesn't take a long time to get back on track. You're paying a lot when somebody turns over - usually about 60 percent to 75 percent of annual pay. If you haven't thought about what's working and what's not, you have to approach it more strategically."

One valuable tool, she thinks, is the exit interview. "It's better done by an objective third party," she notes, "with the ability to add follow-on questions. Couple that with interviews of people who stay, and ask them why they don't pursue other opportunities that look attractive to them."

But if an employee does tell you an attractive opportunity has presented itself, should you try to entice him or her to stay?

Nearly 15 percent of respondents say never; 40.3 percent each say rarely and sometimes; 3 percent say frequently and 1.6 percent say always. Sixty-one percent of respondents who would do so say they'd match the potential employer's offer; 18 percent would exceed the offer by up to 5 percent; 16 percent would exceed the offer by 5 percent to 10 percent; and 5 percent would exceed the offer by 11 percent to 15 percent.

Kutcher is a member of the never camp. He says, "It's bad practice. Invariably, it sets the wrong precedent and breeds a certain character I don't think is healthy." Hale thinks the economics can get out of hand: "You shouldn't match an offer because there's more to the reasons people leave than compensation. Even though the survey says people aren't leaving for compensation, a new hire's salary is higher than an existing employee's salary, because when people leave an organization there's a risk, and companies have to pay up to make them make that leap. There's going to be some compression that could increase future turnover if other organizations do the same thing."

Meisner says you should try, "if they're good people." Abbott agrees. He says, "If a manager says, 'I've got a really good person getting ready to leave,' we go into full-court press mode. We woo the whole family and make it personal." Blamey says, "We try to encourage people to stay, even if that means finding a position that's a better fit for his interests. If it's a good employee, we want to clone him."

And, if an employee does leave, then wants to return, should you let him? Abbott says there's a check box on his bank's exit interview form indicating whether - absent performance deficiencies - that person would be available for rehire. "There's no black mark for people who leave, no stigma," he says. Blamey says yes, "if he's performed." Meisner also votes aye, "under the right circumstances. The person is a known commodity at that point."

Sweetening the Pot

When it comes to offering goodies beyond a regular paycheck, a company's provisions may extend from the prosaic - Christmas gifts, performance bonuses, stock options, flex time and attendance awards - to the downright zany - like free skiing. (We've even heard a rumor of company-sponsored nap times.) While many firms offer employee discounts, one cosmetics company wants its staff lookin' good: It offers products below cost. And some films offer on-site daycare (a perk that - along with long-term care insurance - is growing in popularity among large companies, according to another recent survey).

Some companies provide extremely generous benefits packages - from free medical coverage to the employee with subsidized family coverage and enhanced disability, to 100 percent family healthcare, to same-sex partner benefits. Others offer fully-indexed pensions and immediate vesting in pension and profit-sharing plans.

Generous stock options and compensation work for Speedfam International. CFO Roger Marach, who indicates a 2-percent annual employee turnover, says, "We offer attractive stock options, but to exercise them all, you have to have been here five years. As for our pay scheme, we want to be in the 50th percentile for base salary but 75th for total compensation, exclusive of options."

United Dominion's Meisner says his department's annual turnover is 4 percent. "We take advantage of computer technology; IT and software keep it interesting. We provide the tools to make it fun and exciting," he explains.

Various companies serve up a veritable smorgasbord of free meal options, according to the survey, and one covers multiple bases by offering "Internet access, free coffee, bottled water, casual dress and flexible hours." Another cites brown-bag lunches with the president as a benefit.

Summer features prominently among the responses, with many companies implementing casual warm-weather dress codes. One undoubtedly popular employer gives staff alternate summer Fridays off; another offers summer and holiday cash bonuses.

Vacations are popular lures, too. One respondent says his company has a "liberal vacation policy with payment." Another respondent's company offers discounted travel; a third says his has "eligibility for [a] co-sponsored trip."

Still other organizations rely on intangible carrots on invisible sticks. "No unique benefits - just [a] unique environment that keeps everyone involved," one respondent says. "Nice working space and friendly atmosphere," and "Good communication and telling them they are appreciated," say others.

Abbott thinks the size of the finance department at Bank of America - about 1,500 people - works to his advantage. "People are interested in the ability we have to do so much. They're buying into stability," he says.

What's the Answer?

"There's no magic to this, but we never take time for the basics," Abbott says, citing an example: "Bank of America is a global organization; we try to get people together. We recently had a Latin American regional meeting in Brazil, and its success had less to do with the agenda than with the fact that we gave people the opportunity for face-to-face. It made them feel part of a group. Communication is key. You've got to be faster than the rumor mill. It's amazing how often we don't do the basics to make people feel valued, tell them what's going on and treat them like adults."

"People grow into positions over time," Vinyl Plastics' Blamey adds. "If you hire someone out of college who wants to be CFO in five years, you're going to have some turnover. But two young men we hired right out of college helped us with due diligence on a merger and acquisition and had an incredible learning experience."

So, Kutcher concludes, "It's common-sense management. Treat people like people, give them an opportunity and reward them for what they're doing.

Older Talent, Wide Experience

Roger Marach, CFO of Speedfam International

Speedfam, in Scottsdale, Ariz., had five people in the finance department 10 years ago, when Marach became CFO, and did $17 million in business. Three years ago, it went public. There are now 30 people on two continents in the finance department, and the company, which makes manufacturing equipment for the semi-conductor industry, does $186 million a year. "We've computerized routine tasks, so my focus has been on getting older talent to head up specific areas, like treasury and corporate controllership. We want people with wide experience even if we have to pay up for it, because it benefits the organization.

"I personally like to get involved with the entire crew and know the people who participate in the function. My attitude is we work together, so we tend to talk about human resource issues collectively at the managerial level. We look for good people who work smart, have a sense of urgency and have intelligence and expertise. As we built the function, we wanted to make sure people would stay with us and grow with the company. People who were clerical employees five years ago are now supervisory or management.

"I tend to want my management to be involved in the hiring process, even at the clerical level. It's very important that management participates. If a supervisor is hiring an accountant, that manager would be involved.

"We don't look at people as bodies. We view people with respect, for their talents and for how they fit into the organization. It's expensive, not only to hire somebody, but to train him and then maybe put in money for additional education. Why look at these people as bodies?"

Blue and Red

Kenneth Kutcher, CFO for the polyester business of Hoechst formerly known as Trevira

The polyester business of Hoechst is a $3.5-billion global company with far-reaching financial activities in the U.S., Europe, Mexico, South America, Asia and Canada. Kutcher is based on Charlotte, N.C.

"Constantly asking why people like to work for your company is like asking why they prefer blue to red. People like to align themselves with what they perceive as success. They like to feel they're a part of that success. They don't necessarily have to like all the people they work with, but teamwork is very important. In the process of pulling people together, some are easy to reach and some are harder to reach.

"You have to have open, transparent relations with all employees. For motivation and job satisfaction, teamwork is critical. Employees need a unified vision and clear expectations and guidelines, as well as the resources to accomplish their tasks.

"You learn from experience and just keep working at it. Compensation and benefits are important, but you also need programs geared toward fitting family and business life together.

Mission, Values, Lifelong Learning

Richard Blamey, CFO of Vinyl Plastics

Of Vinyl Plastics' over 900 employees, 20 work in the finance department. The company, in Fond du Lac, Wisc., does $202 million in annual sales.

"Every two years, we have an employee survey and we get feedback. It's anonymous. We find ourselves ranked very high, but when we're not, we would want to try to find out why, and follow up. For example, we were told we were paying under the market rates for union employees. We investigated and rectified the situation immediately.

"We take the treatment of our people very seriously. We have an extensive mission statement and statement of values that hang on the walls of every plant, every office and every conference room. Our core values summarize them; safety, quality, treatment of people, lifelong learning, ethics and integrity.

"We treat people like professionals. We have high standards and everyone agrees with our mission and values. I try to maximize retention and minimize losses. And there's a good work ethic in Wisconsin.

Financial Service

Lawrence Call, SVP, CFO and Treasure of Amway

Privately owned Amway, in Grand Rapids, Mich., had $7 billion in sales in 1997 and employees 14,000 people worldwide. About 300 work in finance.

"While the finance profession itself does have a reputation for a certain twist of personality because of our training and education, the principal influencing factors of an employee's value are his principles and goals in life.

"Our division is called financial services because we're proud of the fact that we're a service organization. We provide information so other employees can do their jobs; we view them as our customers, and customer service has caught the fancy of people in this division. It's the perfect environment to be outgoing, open and empowering.

"Our division's motto is, 'Internally aligned, externally focused, continuously improving.' We recognize and reward people frequently, monetarily and otherwise. People here come up with process improvements on their own.

"Our owners are very dedicated to their employees and have been all along. We have monthly employee meetings, a 'speak-up' where employees can send questions for the owners to answer. They're friendly and go overboard to make sure any employee with concerns can raise them."

Carol Lippert Gray is the managing editor of Financial Executive.