Retaining Leader Talent

The single most significant loss of expertise and know-how in any firm is the flight of experienced managers, especially those groomed over years for leadership roles in the

organization. Generally, people leave companies to achieve a higher aspiration, from the pursuit of professional goals (e.g. more challenging opportunities, to switch industries, increase remuneration) to the fulfillment of personal ambitions (e.g. realize a life-long dream, change lifestyles, get closer to family and friends). However, it is not uncommon for employees to leave because of a stressful, uninspiring, or unrewarding work environment.

The challenge is to identify and mitigate the negative sources of employee flight and retain leader talent in the organization as long as possible. General Electric and Toyota are no exception.

Retention Initiatives at General Electric

Although General Electric does not disclose figures on management-level turnover, it is possible to use the retention rate of managers in multi-year training programs as a proxy.

For example, the retention rate among ECLP-trained managers in Japan is about 75 percent two years after graduating from the program. This figure drops to about 30 percent after three years (Peilung Yang, personal communication, 2009, March 15). The most cited reasons for their departure, apart from getting a better job outside of General Electric, included feeling unattached or unfamiliar with the company, a lack of satisfactory positions after completing the program, and a difficult or unfulfilling experience during the six-month rotations. This last reason was typified by insufficient time to deliver satisfactory results, feeling as an outsider during assignments, and trivial project responsibility or involvement (Ibid.).

To counter management flight and retain leader talent, the training programs at General Electric have been significantly revamped. From May to July of 2009, almost 40 percent of Cornerstone Leadership course content was changed to tackle employee retention issues (Ricky Taguchi, personal communication, 2009, July 17). For example, the NMDC for managers with direct reports now includes a module on the corporate perspective of General Electric – from what industries the company does business and how big each business is to

where they operate and how they are changing. “If you don’t know General Electric well, how can you be proud of the company? How can you lead your team?” asked Crotonville Leadership Japan Manager Ricky Taguchi. These changes allow managers to see the big picture with respect to the global conglomerate they work for, and how the locality of their

“tree” (or business they belong to) fits in the vast expanse of the “forest” (the firm).

Another major change in NMDC was the shift in instruction from everyone-as-leader to everyone-as-managers-who-lead. According to Taguchi, exceeding expectations requires managers to be leaders, but not on leaders being managers:

We expect all employees to be leaders. If you have a certain level of authority and achieve your expected level of G&Os [goals and objectives] performance, no one will praise or recognize you as a leader… But fulfilling stretch goals of 20 percent, 40 percent, or 60 percent requires influencing others to achieve beyond expectation. This is what leadership can do.

Taguchi’s point is that managers should not just choose the right things to do; they must also be able to execute them. NMDC trainees now learn that their two responsibilities are to 1) develop successors and 2) influence peers to achieve growth objectives one, three, and five years down the line. The purpose of the training shift from everyone-as-leader to everyone-as-managers-who-lead is to increase management engagement in long-term projects and motivate them to stay longer to witness the fruits of their labor.

Management Retention at Toyota

As Toyota expanded in the United States, turnover in its middle-management ranks peaked at almost 8 percent during 2005 and 2006, significantly higher than the company’s voluntary turnover average of about 2 percent (Mediacorp Canada Inc., 2009; Chappell, 2007). This represented a significant loss of investment in training, with many ex-employees

citing excessive overtime, poor communication, and sub-optimal project coordination in the organization as reasons for their departure. Although the voluntary turnover rates are lower than the current industry average of 10 percent, each resignation represents a loss to talent and capability in an organization where capability is nurtured over many years through hands-on on-the-job training (U.S. Department of Labor, 2009).

To mitigate the flight of talent, Toyota began decentralizing project management away from the U.S. manufacturing subsidiary at Erlanger, Kentucky, to two new regional centers set to open in California and Texas in 2010, cutting down travel time for the managers. However, these moves have taken a back seat as the company wrestled with excess production capacity and shrinking sales due to the global financial recession sparked by the U.S. credit crisis of 2007.

Jim Lentz, President of Toyota Motor Sales U.S.A., Inc., acknowledged that maintaining workforce morale during such difficult times was a challenge. Instead of sending home employees at plants idled by a lack of production, Toyota keeps them on-site undergoing skills training to improve problem-solving at the assembly lines through work-sharing schemes that compensate for nine out of every 10 hours worked (Rowley, 2009).

According to Lentz, having employees spend time improving capability was the best option in the long run: “It would have been crazy to lose people [then] rehire and retrain [them] and hope that we have a smooth ramp-up” (Linebaugh, 2008: B1).

Keeping employees on-site and engaged has two benefits: 1) it keeps morale up by keeping idle hands and minds busy through the down-time kaizen of known production-related issues that 2) lead to productivity gains once production starts again. For example, idled line workers at Toyota’s Indiana plant in the U.S. that stopped producing pickup trucks in late 2008 designed a Teflon ring to prevent paint damage that affected two to three vehicles per shift every time the drill to install an electric door switch slipped (Ibid.). These

types of initiatives also relieve the stresses of idled production by reinforcing the problem-solving and teamwork mindset among employees.