High Status Firms: Hiring Advantage but Retention Challenge

Scholars Matthew Bidwell, Ethan Mollick, Roxana Barbulescu, and Shinjae Won have written a new paper titled, “I Used to Work at Goldman Sachs! How Firms Benefit From Organizational Status in the Market for Human Capital.” The scholars discover, unsurprisingly, that high status firms have a powerful hiring advantage. Knowledge@Wharton summarizes the key finding: 

If a firm is high status, it possesses a hiring advantage (“preferential labor market access” in the paper’s language), but the advantage is not what one might think. It isn’t better pay or more interesting or challenging work: It’s the belief that having worked for such an employer can help you get a better job later on.  “You essentially can pay people in reputation,” says Mollick. “They will take less salary early on because the reputation will result in a higher salary later.” 

How substantial was the impact of status in the employment choices made by MBA graduates in the study? According to the authors, the impact was especially critical in investment banking (shocker!), "where respondents’ odds of accepting a job offer nearly doubled with a one-unit increase in their perception of the firm’s reputation."

Interestingly, though, the hiring advantage that high-status firms possess turns into a retention disadvantage later on in people's careers.   These workers may value status over pay when they are looking for a job right out of school, but eventually, they want firms to show them the money!   The scholars found that, "Workers’ pay rises faster with seniority in high-status firms than lower-status firms."    What's going on?  Now these workers have the high-status firm on their resume.  They view themselves as highly attractive candidates on the job market.  Indeed, they probably do have many outside opportunities that are quite lucrative. Thus, they demand high wages if the firm wishes to retain them.  Of course, many of these high-status firms that recruit at top business schools understand that retention will be difficult.  They don't even mind as people leave in many cases.  They cultivate their alumni network, much as a university would.  Why?  After all, these former employees who leave a banking or consulting firm become potential clients for the firm when they move to a different company.  

Employee Loyalty at Marriott

Fortune has an in-depth look at Marriott's culture this week in its "best places to work" issue.  The magazine notes that Marriott's leadership, culture, and talent management practices have enabled it to achieve low employee turnover.  According to the article, "The average tenure for a hotel general manager at Marriott is 25 years; industrywide it’s much lower. Some 10,600 people have been there more than 20 years."  

What's the secret?  Well, it's not one thing, as you can imagine.  It's an entire system of activities that creates the type of environment in which people want to stay.  I thought one practice was particularly worth noting.  It's described here:

The second is an on-the-ground network of business councils—76 local and regional teams of general managers worldwide who meet regularly to compare notes and serve as a conduit to Bethesda, where they report to Debbie Marriott Harrison, global officer for culture and business councils (and Bill Marriott’s daughter). The councils “are one of the best tools I have,” she says.

I found this network quite interesting, because it creates the opportunity for information sharing and best practice transfer across the organization.  Moreover, it enables important information to flow to the corporate office.  It gives people voice and enables senior management to keep the finger on the pulse of the organization.  Of course, the key to making these types of councils successful is what senior management does with what they hear from the field.  I assume that Marriott demonstrates how they are truly listening to this input, and they act on the information and suggestions provided to top management.  People want a voice, but they also want to be sure that they are actually being heard. 

Unconventional Ways to Retain Talented Workers

Chris Ostoich has written an interesting article for Fast Company regarding how to retain talented employees using some rather unconventional approaches.  Ostoich is the founder of a software company named BlackbookHR.   I especially liked this point excerpted below:

Keep An Inventory Of Employees’ Skills And Interests

You may know what your employee Andy does in his job—he’s a front-end web developer and designer—but do you know he’s also a self-taught guitarist, a video editor, a painter, and has a variety of other talents? All employees have skills and interests they don’t use in their day-to-day work. If you can tap into those outside talents, you can benefit your company and better engage your employees. Make a place on your company’s intranet, in a Google doc, or anywhere people can share or search for skills. Look for opportunities to tap into this knowledge network whenever possible.

Onboarding Employees the Whirlpool Way: "Real Whirled"

Companies are experimenting with many new ways to onboard young employees.   Whirlpool has one of the more novel systems.   They have run a program called "Real Whirled" for 15 years.  A group of new young employees live together for 10 weeks in a two-story condo in Michigan.  According to this article in Fast Company, "For those 10 weeks you're spending most of your waking hours using their products in the kitchen and laundry room and comparing them with competitors, hosting dinners for executives, going to product testing labs—essentially becoming one with the appliances you will eventually sell on the sales floor."  Nearly 400 people have gone through this program at Whirlpool.   Not everyone thrives in this environment.  However, Fast Company reports that, "Since 2009, Whirlpool has retained 80% of everyone who has participated. There is also an extensive alumni network, filled with people in all parts of the company..."  

The Stay Interview: Retaining Top Talent

The Wall Street Journal has a great how-to guide regarding employee retention.  I especially liked the tactic of a "stay interview."  Here's a description:

– Conduct “stay” interviews. In addition to performing exit interviews to learn why employees are leaving, consider asking longer-tenured employees why they stay. Ask questions such as: Why did you come to work here? Why have you stayed? What would make you leave? And what are your nonnegotiable issues? What about your managers? What would you change or improve? Then use that information to strengthen your employee-retention st

How PWC Engages Millennials

Bob Moritz, the U.S. Chairman of PWC, has written an article for Harvard Business Review regarding his firm's efforts to attract, engage, and retain millennials.  Moritz and his firm collaborated with researchers from USC and LBS to understand key generational differences.  From that work, PWC began to develop initiatives to foster higher levels of engagement and retention among millennials.  They have tracked the effectiveness of various efforts.  Moritz cites four major areas of emphasis:

1. Give them voice. Millennials want to have input regarding the future direction of the organization.  Therefore, PWC gave them voice in several powerful ways.  They asked millennials to offer ideas regarding the most effective methods for talent development in the firm.  In addition, they asked people for suggestions regarding the next $100 million opportunity for PWC.  More than 70% of the employees offered suggestions.  
2. Provide flexible career paths.   Millennials do not want to stay in the same role for a lengthy period of time.  They want to shift positions and roles, try new things, and embrace different opportunities.  Moreover, they want greater flexibility in their careers.  PWC has created several programs that enable talented employees to take time off or to work part-time for the firm while pursuing other opportunities (such as graduate school). 
3. Recognize them often and in multiple ways.  Millennials want to be recognized, and that does not mean only monetary awards.  PWC implemented more frequent recognition, and they began to offer a host of non-monetary rewards.   For instance, PWC created a sabbatical program as a reward for millennials who perform well and stay at the firm for a certain period of time.
4. Give them a chance to give back.  Millennials want to make a broader impact, and they want to work for a firm that has that same aspiration.  PWC found that employees who participate in a corporate responsibility initiative tend to stay at the firm for a longer period of time.  For example, participants in one program to enhance students' financial literacy tended to exhibit much less turnover than those who did not participate (only 8% of participants had left PWC a year later, while 16% of non-participants had left the firm).