The Appeasement Trap

It's not just people in the new-economy jobs that require career-development opportunities. Bob Schneider found he needed more than an ESOP to find the craftsmen he needed for Patio Enclosures. "Construction is booming, but no one wants to go into that type of work anymore," he says. "They can go work in computers and not fight the weather." He estimates the staffing shortage cost his company more than $5 million in revenues in 1998, and the less than fully qualified staff he did have was a significant drag on profitability. "Last year we had record sales, but profits only ranked third because our installation staff was not as qualified and our installation wasn't as efficient," says Schneider.

So he and his staff set up apprenticeship programs for their sunroom installers and manufacturing staff, with pay scales matched to increasingly valuable skills. Employees are given a four-page booklet that lists the graduating criteria and receive a stamp when they've satisfied the requirements for each level. The effect on turnover has been palpable, according to executive vice-president Jerry Fox. "If an employee knows he's two or three jobs away from the next pay level," he says, "why would he want to jump to another place?"

Treating employees like customers
Victims of the appeasement trap often manifest their desperation by becoming company-culture Nazis. Those CEOs figure if they can't swing the big money or the cushy perks, they'd better make their companies fun, Fun, FUN places to be. Adherents appoint "culture czars," establish "fun committees," throw beer blasts and booze cruises, and put on a perpetually happy face to show the world that, dammit, they have a zany, kooky, madcap kind of workplace.

"People with technical-support skills are in great demand, especially at the start-ups that have money to throw around."

But those forced efforts miss the point. A lot of companies are realizing that finding and keeping good people isn't about stroking the group mentality. It's about discovering the needs and desires of each individual employee and doing your best to fulfill them without giving away the whole company. That requires constant two-way communication from the day new employees walk through the door.

Brett Price decided that if he was going to track and respond to his employees' ever-changing needs, he wanted to put the process into the hands of a professional. But rather than choosing someone with a human-resources background, Price opted for a selling expert. He enlisted Gordon Greenfield, his vice-president of marketing, to take charge of recruiting and retention. "Today you have to understand that these people don't need you," says Price. "That modifies your behavior."

One of the first things Greenfield instituted was a formal annual employee survey, asking the staff to weigh in on various areas pertaining to their work satisfaction. The top finding from the first survey: Cheetah was an unwitting proponent of the Peter Principle, promoting successful staffers to management positions before their time. "When you have employee unrest, you can usually point to a manager who's struggling," says Price. In response, Price and Greenfield launched a new-manager training curriculum, which includes courses at local universities on such subjects as project management and handling conflict. "It's expensive, but when you lay it against recruiting costs, it starts to look really cheap," says Price.

Taking a similarly long-term approach is Eric Rabinowitz of IHS Helpdesk Service, a New York City- based company that provides outsourced help-desk services. In January 1998, when he appeared in Inc. (" How're You Gonna Keep 'Em Down on the Firm?"), Rabinowitz was battling a 300% turnover rate and was just completing a major overhaul of the business, improving employees' career-planning and training opportunities as well as appointing a communications liaison between management and the rest of his staff.

Rabinowitz reports that although turnover did hit a low of 18%, it has now popped back up, to around 45%. "It's pretty disturbing to me," he says. "With all that we've been doing, there's a lot of people out there doing it, too. And people with technical-support skills are in great demand, especially at the start-ups that have money to throw around." So now he is expanding on the employee-liaison concept and making sure there is a companywide push for employee satisfaction. "Each account manager is now responsible not just for their three or four accounts but also for the 30 to 40 employees that go with them," he says.

Where does Rabinowitz draw the line? How far is he willing to go to hang on to people? "I'll do whatever it takes, as long as I'm still making money," he says. "Not listening to people almost put us out of business. We don't have to learn that lesson again. But whatever we do, it has to be within our cost constraints. We can't start giving more away than we're making. I have to think of all the people this company supports, not just employees but their families, too. It doesn't do anyone any good if we go out of business."

Christopher Caggiano is a senior staff writer at Inc.

Please e-mail your comments to editors@inc.com.