How to hold onto your sharpshooters
When it comes to retaining top logistics talent, money is important. But it's not the only thing.
By James Aaron Cooke -- Logistics Management, 9/1/1999
Many companies these days are finding it hard to hold onto good distribution managers--their logistics sharpshooters, so to speak. A tight labor market combined with keen corporate interest in supply chain professionals has placed warehousing and logistics managers in strong demand. As a result, recruiters are having a field day plucking talent from the best distribution operations.But companies have some ways to fight back. "What employers need to think about is how to minimize their employees' wish to move elsewhere," says Cindy Thelan, president of the Human Factor, a Chicago-based consulting firm that specializes in benefits and employee relations. "Not only can companies offer competitive pay, but they also can provide training, mentoring, and a career track that is designed to retain their best logistics people."
Monetary Incentives
The nation's vibrant economy has pushed up wages across the board. The Federal Reserve's economic survey this summer found that tight labor markets were showing no sign of abating. Logistics' own salary survey--reported in our April issue--likewise noted that the economic boom had resulted in higher compensation for logistics professionals. In fact, the 1999 survey data showed the second-largest salary jump--6.75 percent-- recorded in the 15 years that the magazine has been compiling salary statistics.
As the first step toward keeping valuable employees, human resource experts say, employers have to make sure that the wages and benefits they offer are competitive. "Companies need to do a yearly benchmarking study of their competition to find out what the total compensation levels are," advises Gayle Gorfinkle, an owner of the executive search firm Gorfinkle & Dane in Braintree, Mass. "If your company is not paying competitive rates, then you risk having unhappy people."
To discourage their superstars from leaving, Gorfinkle says, companies should consider a deferred compensation plan that pays out bonuses or wages in installments. She reports that a number of major third-party logistics companies have begun paying half of their executives' salary bonuses in the year they're earned and the other half the following year. Companies that remunerate executives with stock options also can require that a manager stay a fixed number of years before earning that reward.
Executive recruiter Patrick McGrath of the Atlanta-based Riddle & McGrath agrees that a compensation package should include delayed remuneration as an incentive to stay on the job. "In addition to the direct compensation, you have to have some sort of compensation that's deferred," he argues. "You have to have stock options or bonuses that "vest" over time. It provides a retention incentive."
Upward Mobility
But money isn't the only factor that keeps a warehousing or logistics manager in his or her current job. Most human resources experts believe that companies must offer their managers a career track with opportunities to grow and develop as professionals to win their loyalty. "It's not only the money you pay--it's how you treat them," says Eileen Ford, a co-owner of the executive search firm Ford and Ford in Needham, Mass. "You have to be able to offer [your employees] a career path. It's about training and educating your people."
Executive recruiter Rhoda J. Isaacs at the firm R.I. James in New York City agrees that succession planning coupled with professional development training motivates logistics managers to stay with a company. "The better companies have succession planning and tell [employees] where they can expect to be in two years or in five years. They give them an honest evaluation of their performance and future career path. It's hard to recruit out of these companies."
Because the supply chain encompasses functions from warehousing to customer service, from overseas trade to transportation, a career track often involves a rotation of assignments. Managers gain a deeper understanding of the whole supply chain by working in various jobs. "With succession planning, they should be offering employees cross-functional opportunities in the supply chain," says Isaacs.
A few leading-edge companies are taking steps in that direction. Nabisco Inc. of Parsippany, N.J., for instance, has had a career development program for its logistics professionals in place for the past few years. Rick Blasgen, Nabisco's vice president-supply chain, reports that the program was instituted because "we have to keep [employees] challenged in terms of achieving their aspirations for growth."
As part of the career development process, Blasgen says, employees meet with their supervisors to talk about their goals annually. (The career development reviews are separate from performance appraisals.) "We talk about the network of positions an employee would need to hold to achieve his or her goal," Blasgen explains. "We may say 'Go to work in inventory or transportation,' for example. Then we offer them the ability to gain the experience needed."
Eastman Chemical Corp. of Kingsport, Tenn., likewise has a reputation in the industry for both its training program and low turnover rate among logistics employees. Barry Dale, Eastman Chemical's director of global logistics, attributes the low turnover rate to several factors. "We've been very selective in hiring and we've tried to bring in people who fit our culture," he says. "And we've tried to ensure that our managers and supervisors [are committed] to giving them challenging assignments and making sure we have competitive compensation. We're trying to make people feel they've got a career and a management concerned about their career."
Catch 22
No amount of management concern, of course, can guarantee lifetime employment at a company, says Steve LeMay, a professor in marketing and logistics at Mississippi State University who does research in the area of career growth and development. But the training and development programs can help take the sting out of downsizing. "If you work here for five years and then we downsize," says LeMay, "somebody else will want you because you worked here and we helped you develop as a manager and logistician."
Yet for companies, career track programs that focus on employability are a dicey proposition. Top job candidates seek out work at companies that promote personal career growth, yet it's those same companies that headhunters target for prospects. "There's a Catch 22," says LeMay. "If we make you employable, somebody else will want you."
Still, the top companies are willing to accept those risks in order to attempt to retain the best logisticians. As Herb Johnson, senior vice president of logistics at CVS Inc. in Woonsocket, R.I., observes, "I'm doing my best to charm all the good guys who work for me. Sooner or later, someone else might come along. I'm not so sure you can stop it in today's market."
How to Keep Top Warehouse Talent
Logistics executives aren't the only employees who develop wanderlust where jobs are concerned. Warehouse workers also are frequently tempted to search for greener pastures. As a result, companies trying to retain hourly workers for their warehouses face the same challenges as those who are trying to hold onto managers. "With today's economic conditions," says Steve LeMay, professor of marketing and logistics at Mississippi State University, "if somebody gets irritated, he or she can walk across the street and get a job."
Although hourly workers, like their managerial counterparts, want fair treatment and competitive pay, many companies still try to command their loyalty with retention programs. A recent study of 445 companies conducted by the Warehousing Research Center at Miami University in Oxford, Ohio, for the Warehousing Education & Research Council looked at the types of programs today's warehouses are using to retain and motivate hourly workers.
Not surprisingly, the survey, titled Effective Motivation and Retention Programs in the Warehouse, found the use of monetary awards to be a very common practice. About 67 percent of the survey respondents used monetary awards to help retain employees and 58 percent of those who used that approach described this approach as effective.
Although survey respondents rated monetary incentives as the most effective of all retention techniques studied, it wasn't the most widely used. Parties and catered lunches on company time ranked number one, with 87 percent of the respondents reporting that they had used this approach. Yet only 26 percent of those respondents said it worked. Despite some reservations about its value, the study authors noted, companies relied on this practice because it was easy and relatively inexpensive to implement.
Flexible scheduling was another retention technique that earned high marks. Some 45 percent of the survey respondents said they relied on that practice to retain part-time workers. Of that 45 percent, 29 percent said they considered this technique the most effective way to retain employees.
By contrast, the study found that companies shied away from offering expensive incentives even though they were considered highly effective. On-site daycare, for example, was considered to be as effective as monetary rewards for employee retention by two out of the three respondents using that practice.
Certain practices have fallen out of favor, the study discovered. Most companies have discontinued the sponsorship of athletic teams, for example. Companies reported that they dropped such teams because of lack of employee participation. Other practices that were dismissed as ineffectual included presenting employee-of-the-month awards, holding company picnics, and arranging group outings. Many of the respondents noted that picnics and outings were fairly costly and did not deliver the expected results. As for employee-of-the-month awards, the companies that rejected them said such programs benefited too few workers.
In its conclusion, the study noted that successful companies employed a variety of techniques to target the different needs of workers. "Companies having the most success have a well-thought-out program with a portfolio of incentive programs," says Thomas W. Speh, director of the Warehousing Research Center.
Editor's Note: To obtain a copy of the full study, contact WERC at 1100 Jorie Blvd., Suite 170, Oak Brook, Ill. 60523-2243, or visit the group's Web site (www.werc.org). The price of the full report is $20 for WERC members and $40 for nonmembers.
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