Download - Case in Point - Retaining Talent
Rowley & Associates
Rowley & Associates is a management consulting firm that specializes in strategy formulation
and implementation, process improvement, performance management, and other services.
The organization serves Fortune 500 companies seeking to sharpen their competitive edge
through enhancing management quality. Worried about rising expenses during the current
economic downturn, the CEO has decided that Rowley & Associates is staffed too high. To
control costs, she has asked the firm's managing partners to look for opportunities to take
advantage of natural attrition as a way to reduce headcount.
Marta Ferreira, Chief Executive Officer
Marta has been Rowley & Associates' CEO for seven years. With a strong background in
finance, she has earned a reputation as someone who can generate creative ideas for
managing costs and boosting profitability. She also uses her deep knowledge of the
management consulting industry to keep tabs on what rival companies are doing and to
ensure that Rowley maintains its leadership position in the marketplace during tough
economic times.
Arthur Bentley, Managing Partner
Arthur, the case protagonist, became a managing partner at Rowley two years ago. He
oversees several small, close teams of consultants, including the Strategy Group. Before he
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came to Rowley, Arthur had founded a startup consulting firm with several associates.
Unfortunately, his company dissolved when one of the partners decided to join a large,
established consulting organization. As a relatively new managing partner at Rowley, Arthur
relies heavily on Marta's guidance in matters such as cost management and hiring.
Warren Giacomin, Senior Associate, Strategy Group
Warren came to Rowley six years ago as a junior associate in the Strategy Group. After three
years, he was promoted to associate level in the same group, in recognition of his savvy
client management skills, his ability to work well with others, and his solid knowledge of the
strategy consulting field. Warren enjoys close teamwork and finds enormous satisfaction in
grappling with the challenges of strategy consulting. As this case begins, he is promoted
again—to senior associate.
Thursday afternoon
To: Managing Partners, Rowley & Associates
From: Marta Ferreira, CEO
Subject: Cost Management
Following up from our meeting yesterday, I want to confirm the importance of managing
costs during our current economic downturn. As we discussed, we're staffed much higher
than our competitors, and I urge you all to use attrition as an opportunity to reduce
headcount. For example, as many of you may have heard, Eleanor Massoud, the senior
associate who was leading the Strategy Group, is taking a job at ConsultPro. This opens
opportunities to draw upon additional talent from that group without taking on new hires. —
MF
Monday morning
To: Strategy Group
From: Arthur Bentley, Managing Partner
Subject: Eleanor Massoud's Farewell Lunch
Please let me know if you'll be able to attend the farewell lunch for Eleanor Massoud
tomorrow at noon. Eleanor has done a superb job leading our Strategy Group, and we're all
sorry to see her go. If you're coming to the lunch, please let my assistant know whether you
want the chicken or the fish. Thank you.
Arthur Bentley
Monday afternoon
To: Arthur Bentley, Managing Partner
From: Nan Brockleman, Associate, Strategy Group
Subject: Re: Eleanor Massoud's Farewell Lunch
Arthur, definitely count on me to attend the lunch for Eleanor. Our group of eight won't be
the same without her. She challenged and supported us, and we're going to miss her greatly.
ConsultPro is lucky to get her.
Nan
Wednesday
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ARTHUR. . . So, Warren, that's why I think you'd be ideal for the job. With your tenure here at
Rowley, knowledge of the field, impressive presentation skills, and strong rapport with the
team, I think you'd make an excellent senior associate for the Strategy Group.
WARRENThat's great! I'm flattered. But somewhat nervous about taking on all these new
responsibilities. Eleanor did an amazing job, and I'm not sure I can fill her shoes. Frankly, I
thought you would hire someone from the outside to replace her.
ARTHURMarta wants to give people here a chance to grow, and she also thinks we're staffed too high.
Believe me, Warren, we wouldn't offer you the job if we didn't think you were qualified. My
advice is to simply keep the group working together the same way they always have. To help
you ease into your new role, I've drafted suggestions for assigning subprojects to various
team members—to spread out some of Eleanor's work.
WARRENAll right. I'll take a look at this. Thanks for your confidence in me.
ARTHUR
Warren, I know you're going to do a fine job.
One month later
ARTHURWarren, Arthur here. I've been checking my mail while I'm on vacation and I noticed your e-
mail on the subprojects. And I wanted to see how things are going.
WARRENThe new job is definitely an adjustment. People have been complaining about the subproject
assignments. And I'm exhausted from working late four nights this past week. How come
nobody mentioned burnout as a hazard of being a senior associate?!
ARTHURHey, promotions and raises come with new demands! I remember burning lots of midnight oil
when I first started. But seriously, I'm sorry you've been so busy. It'll get better. So, tell me,
what's up with the projects?
WARRENWell, we assigned Nan financial analysis, but she says she's more interested in the contract
negotiations work. And Toby said he'd rather focus on finding new business than producing
client presentations.
ARTHUR
With our smaller team, it's important to leverage each member's skills. Nan has an amazing
mind for financial detail and is the best person for the project. . . . Of course, do as you see
fit, but I think the current assignments best leverage individual strengths.
WARREN
Hmm . . . I see your rationale. You know, dealing with the team is taking more time than I
expected. I've been thinking. What if we hired a junior associate to do the easier parts of my
job? That way, I could focus on managing the team—
ARTHUR
Unfortunately, we can't take on new hires just now. But let's be sure to revisit that idea as
soon as the economic situation improves. I know you're busy, and I'd definitely like to get
you the help you need as soon as I can.
WARREN
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I was afraid that would be your answer. Well, I appreciate your checking in.
The following week
To: Arthur Bentley, Managing Partner, Rowley & Associates
From: Joel Ferguson, Vice President, Raymar Enterprises
Subject: Raymar Contract
Arthur, I want to let you know my concerns about going with Rowley for our strategy
implementation initiative. Yesterday, Warren gave a presentation, pitching Rowley's plan for
handling the project. Usually Warren delivers a very compelling, thoroughly prepared
presentation—he's one of the reasons we keep our business with Rowley. But yesterday he
was off, distracted. As a result, we're not sure we'll go with Rowley for this project. We can't
risk a subpar performance. I'll get back to you on this. I hope Warren's okay.
Joel Ferguson
Voicemail from Arthur to Warren
ARTHURWarren, Arthur here. I just got an e-mail from Joel Ferguson about your presentation at
Raymar yesterday. He had some concerns and wasn't sure whether to give the project to
Rowley. He mentioned your presentation in particular. I know you've been under pressure
lately, so I'm guessing that you were just tired. Raymar's been a good client and can bring in
a lot more business. Give Joel a quick call and make sure he knows you're on top of things.
You might want to do a follow-up presentation.
Voicemail from Warren to Arthur
WARRENGot your voicemail, Arthur. It's Warren. Look, I know I wasn't in top form yesterday at
Raymar. I had much more time to prepare earlier presentations. Instead, I spent most of the
previous evening resolving job assignments for my team. I'll call Joel first thing tomorrow
morning.
A few weeks later
WARRENHey, Arthur. It's Warren. Listen, I won't be able to make this afternoon's company meeting—
something's come up and I need to head out now. Would you mind briefing me later on
what's discussed? Thanks—I appreciate it.
The same day
ARTHURWarren, Arthur here. Just got your message. Too bad you can't make the meeting. Must be
something serious if you have to skip out. Yes, I'll fill you in later. . . . I have to say, I'm
concerned. This makes two meetings in a row you've missed. What's up? Is anything wrong?
What do you see happening at Rowley & Associates? If you were Arthur, what would you do
next? Consider these questions:
l In your view, how is Arthur interpreting Warren's new behavior?
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l How would you interpret Warren's behavior?
l If you were Arthur, would you change anything about the way you're managing
Warren? If so, what?
l What would you do next?
Several days later
ARTHURYou know, I've been thinking about the meetings you've missed—and how busy you've been.
I'm wondering if perhaps we missed the mark with the salary increase that came with your
promotion. We can't offer a lot more these days, but what would you say to another three
percent?
WARREN
I appreciate the gesture. . . . But could we talk about it later? I've got a group meeting I'm
already late for.
ARTHUROkay. Swing by when you have time, and we'll go over the details.
The next day
WARREN
Arthur. It's Warren. I need to speak with you about a decision I've made. It's about
ConsultPro. They've offered me an opportunity that I just can't turn down. It's been a very
tough decision, but I do think it's the best choice for my career.
That same day
To: Arthur Bentley, Managing Partner
From: Nan Brockleman, Associate, Strategy Group
Subject: Giving notice
Arthur, please see my letter of resignation, attached. I didn't want to dump this on you so
abruptly, but an opportunity to take on a stimulating new role at ConsultPro came up very
suddenly, and I felt I had to jump on it. Hope you can understand. Nan.
The following morning
To: Arthur Bentley, Managing Partner
From: Marta Ferreira, CEO
Subject: What's going on in the Strategy Group?
Arthur, What's with the mass exodus from the Strategy Group? You've lost the top three
people in the original team—to our biggest competitor. It was good that you promoted
Warren to replace Eleanor, but why did Warren leave after just a few months? What's your
plan for replacing him and Nan? I want to see a detailed breakdown of the costs involved
here. And I want to know how you intend to keep the rest of the Strategy Group from
heading over to ConsultPro. —MF
The next day
To: Marta Ferreira, CEO
From: Arthur Bentley, Managing Partner
Subject: Replacement cost breakdown
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Marta, here are my calculations of the potential costs for replacing Warren and Nan:
Later that day
To: Arthur Bentley, Managing Partner
From: Marta Ferreira, CEO
Subject: Focus on retention
Arthur, I've reviewed your summary of replacement costs. You didn't include ramp-up costs—
training to get new hires up to speed. Not to mention indirect opportunity costs. I'm not
happy with the impact of these resignations on our budget. Going forward, we have to
balance attrition opportunities with retention needs. I suggest you take a hard look at the
people in all your groups, and decide which ones we can't afford to lose. Then figure out how
you're going to keep them. This brain drain has got to stop, or the rest of us will soon be
looking for jobs. —MF
Warren Nan Total
Recruiting (including commission to
recruiting firm)
$50,000 $40,000 $90,000
Hiring bonus $20,000 $15,000 $35,000
Salary increase $5,000 (5% of
$100K)
$3,000 (5% of
$60K)
$7,000
Relocation costs $60,000 $60,000 $120,00
TOTAL $135,000 $118,000 $252,000
Arthur encountered some difficult challenges when using attrition to reduce headcount while
retaining high-performing employees in the Strategy Group. His experiences offer a number
of important lessons for any leader faced with similar challenges.
Tailor job content and job conditions to improve employee retention. When Arthur
promoted Warren to senior associate of the Strategy Group, he missed opportunities to tailor
the job content and conditions in ways that would strengthen Warren's commitment to his
new role. For example, Arthur never asked Warren what his professional interests and goals
were, or what kinds of work he found most fulfilling. Thus Arthur couldn't define Warren's
new responsibilities in ways that enabled Warren to satisfy his interests.
Arthur could have changed the conditions of Warren's new role in ways that encouraged
Warren to stay. When Warren suggested hiring someone to take on the easier parts of his job
so that he could focus on management, Arthur assumed that hiring someone wasn't an
option—owing to Marta's request to reduce headcount. Creative thinking on Arthur's part
could have revealed a solution. Perhaps Marta would have approved hiring a part-time person
to ease the burden on Warren. Or perhaps another of Arthur's groups could have spared a
few hours of a junior person's time each week to assist Warren.
Finally, by suggesting subproject assignments for Warren's team and then advising Warren
not to change the assignments, Arthur deprived Warren of a sense of ownership of the new
job—which is essential for commitment to one's work. Arthur also dissuaded Warren from
assigning work in ways that increased job satisfaction within the team. Instead, Arthur made
the common mistake of assuming that just because an employee is good at a particular kind
of work, he or she finds that work interesting and satisfying. Assigning projects based on
interest and skill, not skill alone, boosts a leader's chances of cultivating more on-the-job
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satisfaction and commitment among employees.
Know the signals that an employee is thinking about leaving. The first mistake was
made long before Warren began showing signs of leaving. Arthur and Marta should have
responded more promptly and thoughtfully to the departure of Eleanor, a strong and
respected performer. If they failed to notice impending signs of defection in Eleanor, they
should have analyzed the reasons for her departure after she left. Then they could have
applied their learning to their management of the rest of the Strategy Group—and perhaps
have kept Warren and Nan. Arthur and Marta should have known that others in the group
might follow Eleanor—and worked to retain the group's top performers.
With Warren, Arthur failed to see or correctly address signs of impending defection. For
example, when Warren complained of burnout—a common sign—Arthur should have
discussed the issue more with Warren. He should have expressed how much he valued
Warren, explored possible causes of the problem, and discussed ways of resolving it. Instead,
Arthur merely recalled that he himself had worked long hours when he first started out in the
business—then he jumped into discussing the subproject allocations.
Arthur mishandled another sign of defection: Warren's performance during the Raymar
presentation. In addition to prompting Warren to take steps to reassure the client, Arthur
should have explored the reasons behind the performance decline with Warren.
When Arthur noticed Warren had missed meetings (indicating possible withdrawal, a sign of
defection), he offered Warren more money. Studies show that job satisfaction stems from
more than financial compensation. Additional drivers include pride in an organization, a
positive relationship with a supervisor, a sense of belonging, and meaningful, satisfying work.
Arthur didn't consider using motivators other than money to increase Warren's commitment.
Regularly "re-recruit" your top talent. Talented employees feel more committed to their
company if they know that the organization values them. To inspire commitment, Arthur
should have identified the people he wanted to retain—and then "re-recruited" them. His re-
recruitment strategies could have included signaling his appreciation of team members'
talents and scheduling professional development meetings (often called "stay interviews") to
identify way to make their jobs even more satisfying.
In this case, Marta set the stage for what happened in the Strategy Group by viewing people
primarily as costs rather than as prized assets. During a downturn, she focused on reducing
headcount. Though reducing headcount may have been important, she should also have
thought about how to keep talented employees engaged and on board.
Use loyalty to colleagues and teams to retain valued employees. When Warren and
then Nan left Rowley to follow Eleanor to ConsultPro, Arthur discovered firsthand that
employees often feel more committed to colleagues or a team than to a company. Arthur
should have taken steps to strengthen collegial commitment within the Strategy Group after
Eleanor left. For example, he could have set up group outings and events to cultivate social
connection within the team. He might have advised Warren to form subteams within the
Strategy Group to build a sense of collaboration.
Understand the high costs of replacing talented employees. Managers often
underestimate the cost of replacing employees. Arthur omitted training in his estimated
costs. Some replacement costs are obvious, such as ads or recruiting firms. Other costs are
less obvious, more difficult to quantify, yet still significant: loss of customers who follow an
employee to a new company; overload on teams who must perform extra work; and work
put on hold until a replacement is hired and trained. Some experts estimate that the cost of
replacing an employee can be twice the person's annual salary.
When Warren and Nan left, Marta should have asked, "Why did they leave? How could we
have kept them? How will we stabilize the group?" Marta alluded to these questions, but put
more emphasis on replacement costs. Replacements costs are insignificant compared to the
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value that good people take with them when they leave.
© 2004 Harvard Business School Publishing. All rights reserved.
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