The Appeasement Trap

What's more, employers have only themselves to blame, at least as far as Wharton's Cappelli is concerned. He says that all that downsizing in the 1980s and 1990s marked the beginnings of the sea change. Corporations violated the notion of a safety net and demolished the concept of employment for life. Enter a sadder-but-wiser, market-driven workforce, who heeded the message that they needed to look out for themselves.

And it's probably not going to get better anytime soon, even if the economy should take a sudden southern turn, because the changes in workers' attitudes are likely to be permanent. Demographers project an even tighter hiring pool for the next few decades. "What can we expect to see in the future?" asks Kennedy. "The simple answer is more and more of what is already visible now, until much of the job market closely resembles the one in Silicon Valley today."

But the future isn't entirely bleak. Employee loyalty isn't dead, says Clancy, it's just been refocused. "Today in the software business you see development teams who sneer at any idea of company loyalty but whose members will get up from a sickbed to improve the product or meet their schedule," he says. Which means that to be successful, companies must focus on giving employees something to be devoted to. "Companies have to take a long-term view about investing in and creating an environment that attracts and keeps employees," says Kennedy. Some of that can be achieved by proffering perks like free lunches and weekly massages, "but the heart of it comes from the attitude employers have towards employees. That means listening to them, paying attention to their needs, treating them as long-term assets."

Peterson, for one, bristles at the notion that senior management should spend so much time making sure employees are happy. "I know it comes with the territory in trying to be a long-term caring company," he says, "but it's taking its toll on the nurturers. It's taking up all our time. Senior-level consultants and principals aren't spending their time doing what they should be doing." But that begs an all-too-important question: What exactly should senior management be doing? What we're looking at is a redefinition of what it means to be a CEO.

That's how Brett Price sees it. Price, CEO of Cheetah Technologies, a systems-integration business in Bradenton, Fla., says he's happy to do whatever it takes to make his company successful. And right now, that means focusing on long-term employee satisfaction. "Do I sometimes wish I could be doing other things? I don't look at it like that," says Price. "This is what I do. It's my job to put an organization in place that makes these people want to stay. The only thing I wish would change is the speed. You have to respond faster today. If something is wrong with the organization, and you don't fix it in a matter of months, they'll leave."

"There's such a demand that [my employees] often just go into business for themselves."

In response to the increasingly tight labor supply, a lot of companies are significantly redesigning the way they do business. Some are fine-tuning the way they compensate and motivate people. Others are revamping how they educate and communicate with staff. Some are starting from scratch and reinventing their entire corporate cultures.

Sure, but where should you start? How do you transform your company into the employer of choice? What follows is a sampling of transformative responses that growing companies have developed to address employee satisfaction. Bear in mind that none of these strategies stands alone. Rather each rests within a larger framework of building a long-term productive workplace. When it comes to designing a desirable place for people to work, you're not looking for short-term solutions. You're building a culture of retention.

Sharing the wealth
Sure, money isn't everything. And you certainly don't want to throw it around willy-nilly. But it's not as if money's irrelevant. For most companies, paying the industry average is a minimum, along with some combination of incentive pay, profit sharing, a retirement plan, and even stock options where applicable.

Some companies go even further. In the age of the dot-com, even traditional businesses are feeling the need to give employees a piece of the action. About four years ago Bob Schneider, the 57-year-old CEO of Patio Enclosures, a $73-million-plus company based in Macedonia, Ohio, that manufactures and installs sunrooms, started thinking about succession planning. He decided to share ownership with his employees with an employee stock ownership plan. But measures like that go only so far. "There's such a demand for people to do remodeling that they often just go into business for themselves," he says.

Even companies that are in a position to ply people with stock options have recently had to reformulate their compensation strategies, especially when the allure of an impending IPO is replaced by the reality of the post-IPO stock fluctuations. Since Gordon Brooks of Breakaway Solutions, a Boston-based consultancy, took his company public, in October 1999, its stock went from a stock-split high of 85 1/2 to a low of 16 7/8 before it started to recover. "The stock price is so low now compared to what it was, we tell people to look at all the upside," says Brooks. To reassure recruits, Brooks founded Breakaway Capital LLC, a venture fund through which Breakaway invests in its client companies. Half of the return goes to select employees, but only if they stay long enough to see the investment mature. "Clients like the fact that we have some skin in the game, but the real driver was to reap the benefits and share them with employees," says Brooks.

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