To Retain And Hire High Quality Employees
Presentation made at the 2004 Wood Technology Conference, Portland, Oregon

Abstract
The forest products industry is undergoing a significant transition:  new products, new markets, new technology, and results-oriented employees.  Business firms need to address key factors in retaining quality employees and hiring new employees.  This presentation will focus on improved employee retention and hiring practices.  Topics covered will include some thoughts highlighted by Jack Welch, former Chairman of G.E., selected employee policies implemented by several growth-oriented forest products firms, and ideas suggested by the speaker geared to improve employee performance in the hourly, supervisory, and senior management levels of an organization.

Introduction
Total quality management and product quality are topics which have been discussed at numerous conferences in the past.  But what is a high quality employee?

A high quality employee exceeds a certain set of performance standards for a given set of job responsibilities, be it a machine operator, a first-line supervisor, a personnel manager or a general manager of a specific business unit.  Performance standards can be qualitative or quantitative.  They can be short-term for a given shift or long-term – one year or more.

Each employee should understand what the set of performance standards are for their function in the business unit.

It is my intent to relate to you some of the thoughts focused in this area from 3 specific viewpoints; from Jack Welch’s point of view, the viewpoints of results-oriented managers who are clients of SNA, and my point of view after spending over 28 years in this industry as a professional recruiter.

The Viewpoint Of Jack Welch
Jack was Chairman and CEO of General Electric for over 20 years.  He built GE’s market cap by more than $450 billion and established himself as one of the most admired business leaders in the world.  How did he do it?  One key ingredient was continuing to develop quality employees.

……… ON RETAINING QUALITY EMPLOYEES

Jack recognized at the outset a need to differentiate people across each business unit.  He used the “4 E’s” to differentiate people:

• Energy

• Energize

• Edge

• Execute

These can be expanded to include:

• Classifying people with high energy levels

• Classifying people with the ability to energize others around common goals

• Classifying people with edge to make yes or no decisions

• Classifying people who consistently execute and deliver on their promises

Using this criteria Jack and his senior management team classified people as A, B, or C players.  

THE VITALITY CURVE

• A’s are cherished, B’s need to be taught, C’s are the ones that need to leave the firm.

• Passion separates A’s from B’s.

• Losing an A is a sin.

• A’s get higher raises than B’s.

• Easy to implement the first year, process gets tougher each year but process needs to continue.

• Evaluate all people in a matrix format.

MATRIX FORMAT

• Treat people with dignity and give them a voice.  This message translates throughout G.E.

• Create a learning culture, find a better way every day.

• Need appraisals all the time, always wanted everyone to know where they stood.

• Focus on on-going education, training for the B’s and A’s.

Some added observations on forced ranking to weed out weak performers from Dick Groat, H.R. Consultant.

“A company that bets it’s future on it’s people”, former GE CEO Jack Welch wrote in his final stockholders’ letter in April, “must remove the lower 10%, and keep removing it every year – always raising the bar of performance and increasing the quality of leadership.”

GE isn’t alone.  Ranking employees is an everyday practice at highly admired tech companies such as CISCO Systems, Hewlett-Packard, Microsoft and Sun Microsystems.  Sun’s system parallels GE’s:  20% are ranked “superior”, 70% are “Sun Standard” and 10% are “under performing”.  HP uses a 1 to 5 scale with 15% receiving the highest grade, and 5% the lowest.  Microsoft uses a 2.5 to 5 scale.  PepsiCo ranks workers with a quartile approach; EDS uses quintiles.

What all these systems have in common is the requirement that managers, in addition to evaluating how well people have performed against objectives, compare people against each other.  Managers must place each person into one of a limited number of categories, with a fixed percentage assigned to each bin.

Critics argue that forced ranking is discriminatory, subjective, divisive, arbitrary, and unfair.  That’s just not true.  Ford and Microsoft were hit with class-action suits charging that their ranking systems were discriminatory and used illegally to favor some employees over others, but these suits haven’t held up in court.  Certainly the process is discriminatory:  It discriminates in favor of the talented and energetic, and against the lazy and dull.  But that form of discrimination is not yet illegal.

“Ranking is an outgrowth of a fundamental American principle”, says Hewlett-Packard CFO Bob Wayman… “the whole idea of our economic system is competition.  Companies that do well win; employees who do better than others move up faster and get paid more”.

The Viewpoints From Results-Oriented Managers In Our Industry
During the past several months I contacted a number of our clients who I think have made a significant contribution in the growth of business units which they have managed or supported during the past ten years.  Their firms are leaders in forest products niche markets.  Their comments coincide with the views of Jack Welch as it relates to retaining and hiring quality employees.

……… ON RETAINING QUALITY EMPLOYEES

 “…the majority of the time people leave are for reasons other than money… the opportunity for professional development and career enhancement are important factors… people are likely to stay where they feel valued and respected”.  SD

 “…it is really only through quality people and how we work together (teamwork) that can differentiate one company’s performance from another over time.  After all we can all buy the same technology, serve basically the same markets over time and access the same wood baskets….I believe that having the right person with the right skills, mindset, and determination is really the only effective way to have a truly effective organization”.  DB

 “To retain and have available to hire high quality employees is to create a working atmosphere encouraging the better performing people to want to be there.  What employees seek is participation in the decision making, the ability to be semi-autonomous in their efforts, and to be held responsible for what they do”… “employee-inspired goals will be tougher that any manager dare try to install, but employees must be inspired to create their own goals”.  DM

 “… the better employees want to work with others like them and will help recruit and find people they think are smart, ambitious and aggressive… by creating a pro-employee atmosphere, which includes high standards, ethical conduct and a commitment to safety, you can create a positive cycle… the basis for a positive work environment is credibility on the part of management.  Managers must have a trust, faith and believe that employees can do well and be open and honest… if you believe in your employees (hourly and salaried) and make that belief credible day after day, then they will believe in you.  You will not only retain good employees and be able to hire good employees but you will have them excited and motivated while at work.  And that will be fun for everyone!”  DM

 “… managers must define job responsibilities and requirements for all employees… need goals and challenges… managers must provide broad experiences so employees can feel a sense of ownership in the business unit.”  JR

 ………….ON HIRING QUALITY EMPLOYEES

 “… it is interesting to think about employee selection from the point of view that if every person you hire were to work for the firm for 20 years which is common, by the time you add up the wages and benefits paid over that time it is in excess of one million dollars.  To get approval to spend that kind of money on a capital project requires a tremendous amount of planning and analysis.  Yet often we get in a hurry to hire someone as fast as possible rather than take the time to hire the best person possible… we have had some success using a hiring panel to ask each applicant a series of questions we hope will pull out information to help make the selection”.  SD

 “…I would like to see more cross-over from other industries.  We have some great opportunities in this industry for the right type of supervisors and managers…. Some of them may be teachers, or store managers today.  We have not sold our industry very well the last 10 to 15 years”.  HS.

The Viewpoints Of A Professional Recruiter

………….ON RETAINING QUALITY EMPLOYEES

A quality-focused culture in a business unit will attract quality employees.  A business unit must continually focus on improving the level of customer services and product quality.  Customers are the ultimate supervisors for everyone in the business unit.

A 4-year college education is not an essential element to advance in our industry.  College creates an important learning atmosphere for people to continue to learn and apply new thinking throughout their lives.  This also can be developed by high school and junior college graduates.  On-going education and the respective application of new ideas throughout one’s career is essential (seminars, conferences, etc.) 

Business units need to support the A’s and B’s by providing continuous challenges for people to respond in a team-based environment.  Cross-training for hourly employees throughout a production, sales, or staff process is essential for employees in order to feel ownership with the employer.  This same approach can be focused in the supervisory and mid-management ranks.

………….ON HIRING QUALITY EMPLOYEES

Allow “A” and “B” players to become part of the recruiting and hiring processes.  Allow “A” players to become mentors (teachers) to the new hires.  “A” players have a larger success rate in these assignments than “B” players.  These challenges will provide added stimulus to “A” players’ potential for growth.

Senior management must continue to speak at public forums and become active in trade association activities.  The focus on discussing the highlights of a quality firm will attract quality employees from the competition and from firms outside the forest products industry.