'Extreme' retention tactics

ITworld.com –

With the IT turnover rate averaging 25 percent (see my previous column, "Employee turnover: The costs are staggering"), retention strategies have become a top priority for consultants, hiring managers, and HR departments. The standard offerings are now familiar: flextime and liberal family-leave policies; telecommuting options; career development and training; exit interviews; and maintaining competitive salaries, bonuses, and other financial incentives.

Since companies' benefits packages are often similar, some companies are looking for a new competitive advantage, taking employee retention a step or two further with efforts that are unique, unusual, or on the bleeding edge of personnel practices.

Admittedly, many new retention tricks are designed to attract new employees as well as keep existing ones. The most interesting perks are usually minor; in fact, they're sometimes called de minimis (minimal) fringe benefits. But they're useful because they can build employee loyalty inexpensively and do not have to be reported as taxable compensation under Internal Revenue Service rules.

Some examples:

  • LapLink.com (formerly Traveling Software) encourages skateboarding at work. One visitor reported his surprise at seeing employees rolling down a long hallway in the Bothell, Wash., headquarters. Also, the company brags in its recruitment literature that it's OK if you're the kind of worker who sometimes climbs the walls -- there's a climbing wall in the workout room.
  • Microsoft Corp. (Redmond, Wash.) and numerous others provide free beverages; LapLink.com touts its two movie-size popcorn machines and "a latte machine and chocolate sauce at every coffee pot!"
  • eBay (San Jose, Calif.) has wacky-slippers-to-work days and bagel Wednesdays.
  • Amazon.com (Seattle), Yahoo (Santa Clara, Calif.), and others have video-game breaks.
  • Extricity (Redwood Shores, Calif.) shows Friday afternoon movies.
  • CrossCommerce reimburses employees for maintaining bicycles and scooters they use to commute to the company's San Francisco headquarters.
  • Some companies have in-house dry-cleaning services and masseuses, and give away lottery tickets.

Several consultants and IT vendors say the hottest new perk seems to be concierge services. Also available to the general public, these services act like all-purpose errand boys -- they arrange parties, shop for personal items, and make restaurant reservations; one even offers to buy, sign, and mail Christmas cards. Corporations can use concierges to perform tasks that keep employees out of the office, such as waiting for the cable TV installer to arrive, said Bill Bench, president and founder of Benchmark HR Solutions (Salem, N.H.), an HR consulting firm.

Stay with us, but get their IPOs

Bench said he's seen a marked increase in such soft perks, but cautions: "As more and more companies do it, it becomes less effective." Bench himself faced a retention challenge a year ago when some employees defected to the networking, telecom, and enterprise software vendors that are his company's bread-and-butter clients. "It was the lure of potentially great personal wealth that would attract them to the manufacturing side," he said.

In response, Bench and cofounder Mike Sawin started the Equity Share Program, which awards ownership shares in 10 to 20 client companies. Employees earn shares based on criteria like seniority, position, and whether they were instrumental in signing the client. Bench, who espouses a share-the-wealth philosophy, said every employee gets at least an entry-level stake in the equity pool. Bench is legally prohibited from naming the clients in the pool, but said network-infrastructure companies were deemed the safest and potentially most lucrative investments. When the companies have a liquidity event (IPO, buyout, or merger) the shares will be converted to cash. That hasn't yet happened, but Bench said several companies look promising.

The program gives employees a shot at the wealth that can lure them away, and also reduces the risk of investing years in a company that doesn't pan out. "They seem very thrilled about it," Bench said. "They no longer take that [recruitment] call from a client company."

Bench said some legal firms and IT vendors also use the technique, which should appeal to other firms in similar situations, such as consultants and system integrators. Andersen Consulting (New York City), for example, has a program that awards eUnits -- shares of companies owned by Andersen's venture-capital division.

Mercury computer's Porsche challenge

Some companies are eschewing stock rewards for cold cash or hot wheels. Mercury Computer Systems (Chelmsford, Mass.), a maker of high-performance embedded systems, is giving away cars to retain and attract top performers. In April, the company gave two- year leases on Porsche Boxsters to 20 senior managers and "key technical contributors" after they met a goal of doubling shareholder value in a year. Other employees can get cars for two-week periods if they achieve certain goals, such as referring new hires.

The Ultimate Performance Porsche Challenge has generated good publicity and probably helps with employee retention, though the program is too new to say for sure, said employment manager Lisa Weingarten. "Senior staff certainly likes driving the Porsches. Every day that they're driving it, they're feeling good about Mercury," said Weingarten.

Alcatel's grass-isn't-always-greener reminder

Optical networking vendor Alcatel USA (Plano, Texas) took a more negative approach to retention last summer when it ran an article in its employee magazine, Visions, that related horror stories of employees who left for dot-coms, only to find that lucrative stock options weren't worth long hours and reduced satisfaction. "The psychological pressure doesn't let up," Michael Zeeff, a 15-year veteran who eventually returned to Alcatel, was quoted as saying. "In a start-up company there are fewer people getting the product out the door, so you can never allow yourself to relax. Even when you are away from work you still feel the unrelenting pressure."

At about the same time, a company newsletter reported on legal actions by Alcatel against former employees, noting its increasing use of the "inevitable disclosure" doctrine to stop them from going to direct competitors. Both articles were ridiculed on Light Reading (www.lightreading.com), a news site for the optical industry.

Alcatel spokesman Brian Murphy defended the newsletter article as a fair report of Alcatel's legitimate efforts to protect trade secrets. The dot-com horror stories, he said, provided useful information that was well-received by employees. "I would say it's another way to let employees know what the rest of the world is like," Murphy said. "A lot of people are wondering. I was wondering."

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