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How to Retain Key Employees

Companies that do a better job of attracting developing, and retaining their talent can boost their performance dramatically.

John K. Borchardt

Dr. Borchardt is a consultant and technical writer. The author of the book “Career Management for Scientists and Engineers,” he writes often on career-related subjects.

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Talent is a critical driver of corporate performance and a potential competitive advantage. McKinsey & Company research indicated that companies scoring high in their ability to manage talent earned, on average, a 22% higher return to shareholders than their industry peers. The 1997 landmark paper called “The War for Talent” involved surveys of 13,000 executives at more than 120 companies and detailed case studies at 27 companies.

This “The War for Talent” report evolved into a 2001 book of the same name authored by McKinsey consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod. Their central premise was that effective talent management is critical to every company’s success. However, the authors found that high performing companies did not have better human resources processes than their lower-performing peers. Instead, what distinguished them was a pervasive talent mindset held by company leaders at all levels that competitive advantage comes from having superior talent.

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The authors state that everyone from the CEO down to line managers must believe that talent is a top priority and that it is part of their job to manage talent effectively. How can companies do this? This issue was explored in a recent symposium held at the American Chemical Society National Meeting (March 2007) and sponsored by the Division of Business Management & Development, “General Papers Relating to Management of the Chemical Enterprise.”

Assessing performance

To develop people, managers must first be able to accurately assess performance. This process should begin with your first discussion with a new hire. Discuss the job description with the new hire. Modify the job description as appropriate to take advantage of the new employee’s strengths and your expectations for this individual.

Discuss your expectations with the new hire. Define a list of action items for each new employee to accomplish in their first six months. This will help them stay focused on their most important goals and tasks. Emphasize that the employee will be evaluated on the basis of accomplishing these goals and mastering these tasks.

Many employees resign during their first few months on the job. Megan Driscoll, President, PharmaLogics Recruiting, advises that it is important for managers to understand the new hire’s expectations and address them effectively while demonstrating that you have their best interests in mind. She suggests, “Have the new employee outline for you what he or she would like to accomplish as an addendum to your list of expectations. If you are aware for instance that gaining experience in lab design and layout is something the employee would like to do, you might come across a project where you could invoke their participation. If you don’t know what that employee is looking to learn, you don’t have the opportunity to expose and develop that candidate in ways that interest them.” This reduces their job engagement and increases the possibility of their departure to work elsewhere.

Put all the mutually agreed upon expectations in writing. Be sure the candidate has a copy. This will serve as a roadmap for both of you assuring that the new hire has an individualized development plan. As the new hire gains experience and progresses in their career, work with them to update the roadmap to reflect their changing circumstances.

Managers must communicate continuously with their employees in order to assess their progress. Waiting until the date of a scheduled formal review may allow problems to develop and erode the employee’s job satisfaction and motivation. For some employees, an open-door policy may suffice to promote this communication. However, for less assertive individuals, the manager needs to take the initiative in “managing by walking around” and engaging employees in discussions to learn how they are progressing in meeting their goals. Indeed, given how busy managers are and that they may often be tied up in meetings, managing by walking around is a good strategy to adopt for all one’s employees.

These informal progress assessments are valuable. However, also schedule a formal six month progress review. This in-depth discussion will let you to assess if candidates are living up to your expectations. It also will allow employees to communicate whether the job — and you as manager — are living up to their expectations. Driscoll notes that at the time of this first formal review both of you can change your approaches to each other before they become counter-productive, ingrained habits.

Developing people

This should be done on an individualized basis by “working with each employee to create a personal path forward for them,” says Lisa Prior, Principal, Prior Consulting. This means setting goals consistent with their current job assignment and what they need master to take the next step in their careers. These goals must also be consistent with what motivates each individual employee. For one, it may be promotion. For another, it might be raises or bonuses. For a third, it might be independence and flexibility. Making each employee’s goals consistent with their “prime motivators” helps assure that the employee’s commitment to mutually agreed upon goals is more than mere lip service.

Managers should then determine the experiences that will enable them to achieve these goals, Prior advises. These experiences could be assignments to specific projects or work teams. It could also be education and training. The manager and employee need to agree upon a timeframe to accumulate these experiences and accomplish these goals. Finally, the employee needs to take responsibility for achieving their goals. While managers should be supportive, they should not have to constantly prompt employees to take the steps needed to accomplish these goals. The number of employees most managers supervise makes this an impossible task.

Prior notes that one has to determine how one measures success. This can be set by the manager or mutually agreed upon with the employee. Either way, the employee must accept the measures for success. These will determine if the employee has met his/her goals. Disagreement on this can be very corrosive to the manager-employee relationship and, should the employee complain to co-workers, cause broader morale problems as well.

Managers can best motivate employees to achieve goals when these goals tap into their personal interests. For example, I’ve long been passionately interested in improving the environment. One of my managers tapped into this by assigning me to a project to develop biodegradable detergent chemicals to remove ink from pulped wastepaper for paper recycling. The alignment of my personal goals with my employment goals was a great motivator.

In developing employees, assessment can determine an employee’s strengths that need to be capitalized on and weaknesses that need to be remedied. Prior comments, “Many managers tell me that there is no time for development because they are stuck in an old paradigm: that sending people to training programs is the way to develop them.” However, a classic problem with many training courses is how to transfer what one has learned from the classroom to the job. Without the manager’s support, it is often difficult to do this due to the press of immediate assignments.

There are also other ways to develop employees. One is “action learning” opportunities associated with one’s job. For example, in developing paper recycling chemicals, I had to learn a lot about paper industry technology. This led to my developing other paper chemicals business opportunities outside of paper recycling. Other action learning opportunities are associated with working on multi-functional project teams — particularly those that include company employees from other departments or suppliers and customers.

For some employees, providing external exposure through visits to customers and suppliers, professional society activities and attending conferences are both educational and motivating. For other, presentations or writing articles for publication is educational and motivating.

Assignment as a team leader can be a first step in developing valuable management experience and developing leadership skills. Job rotation into other assignments is valuable but can be difficult to justify. Reassignment may be good for both the individual and organization in the long term. However, in the short term it can cause a loss in productivity as the transferred employee learns a new job. A lateral shift can make some employees feel less secure as they temporarily lose their expert status until they master a new job and its associated technology.

“Business as usual” can result in substantial barriers to action learning. Prior noted that these include an attitude that there is no time for action learning activities. Some managers will not support these activities for fear of reducing productivity. Others — and their employees as well — may lack the imagination to devise constructive action learning opportunities.

Coaching and feedback

Prior observed that for employee development to succeed, managers have to effectively provide feedback and coaching. Barriers to doing this include a desire to avoid appearing overly critical and to avoid conflict. If one is uncomfortable with the process, finding the “right” time and place to do this can be difficult. Some managers are reluctant to fully engage in the process because they view it as time-consuming. Before sitting down with the employee, the manager should be sure that he/she has a complete picture of the employee’s job responsibilities and performance before giving feedback.

Overall development strategies

Companies such as General Electric differentiate between the career opportunities and financial rewards offered to employees based on their performance. Exceptional (A) performers are rewarded with fast-track advancement opportunities and substantially higher salaries than average performers. Average (B) performers should be given the training and support they need to become A performers. Below-average (C) performers must be given opportunities to improve their performance. Should this not occur, they must be separated from the organization. Typically, C performers are often in the same job for many years. Some managers prefer to give C performers a second opportunity in another job assignment that may be more suited to their skills.

Driscoll depicted this differentiation of opportunities in Figure 1. The X-axis of Figure 1 represents the progression of new hires progressing from novice with much to learn to mastering the requirements of their current assignments and exhibiting outstanding performance.


The Y-axis represents something often harder to assess than performance — the potential for outstanding performance both in one’s current assignment and at the next level. As Driscoll explains in Figure 1, the career planning activities differ for each stage of the individual’s progression in their job assignment until, at the right of Figure 1, the employee is ready for promotion or other career enhancing experiences. Potential represents a combination of the individual’s learning ability and adaptability to new assignments. If one’s potential is low, even an individual performing very well in their current assignment may not be suited to move to the next level if that level is an extremely challenging one. Indeed, some individuals in this situation, with other priorities such as balancing their work and personal lives, may decline advancement to the next level. In this situation, managers much develop a strategy for the individual to use his/her skills more effectively at their current job level. One obvious way to do so depicted in Figure 1 is to train others. 

Overall, this approach can make your work unit or your company more attractive to highly talented people. However, it can also have a disadvantage in possibly making B performers feel undervalued. Certainly, the C performers will fill some pain associated with reassignment or job loss.

The manager's role

Managers must accept their roles in developing talent along the lines depicted in Figure 1. This means coaching and mentoring employees as needed. To do so effectively, managers must learn what motivates each person. They must be good communicators to have productive career planning and talent development discussions with their employees. By doing all this and having passion for the process, managers will create engaged employees.

Driscoll calls rewards “tools for retention.” Rewards help keep employees engaged and satisfied reducing employee turnover increasing company costs and delaying projects. She notes that rewards are more than the monetary ones of receiving raises and year-end bonuses. Another tangible reward is promotion.

Intangible rewards are often easier to provide. Their effectiveness largely depends on the manager’s knowledge of what motivates each employee.

As a recruiter, Driscoll says, “I have found that there are two main reasons why employees either stay with their company or conversely why employees choose to leave.

  1. Whether the employee has positive feelings about their manager or negative feelings about their manager.
  2. Whether the employee feels there is growth potential within the company or a lack thereof.”

She notes, “Neither of these reasons for an employee leaving is addressed with a monetary or tangible reward.” However, intangible rewards, judiciously used can increase employee satisfaction to the point where they do not consider leaving. One is informal monthly discussions focusing on what the employee is doing very well and praising them for it. Just knowing they are appreciated goes a long way to increasing employee satisfaction and improving motivation.

Periodic awards recognizing outstanding contributions need not be expensive. These plaques are often highly visible in the recipient’s office motivating both themselves and their co-workers who resolve to win one too.

The act of working with each employee to create personalized development plans goes a long way to instilling loyalty. They feel that have a place to go within an organization. To increase engagement, ask each employee during their annual performance review what they hope to achieve over the course of the next year or two. Then work together to create a plan accommodating at least some of their goals. The employee feels you, as manager, support their professional growth. Their ideas may indicate new ways they can contribute to the organization.


Effective talent management applies to non-profit organizations, such as educational institutions and government laboratories, as well. Like industry, they are engaged in a war for talent. As industry, science and applied technology become increasingly globalized, this war of talent is becoming a worldwide struggle.

*Note: Figure 1 is used with permission by Megan Driscoll, taken from her presentation at the ACS national meeting in Chicago.