Viscious Cycle - Retention Strategies Part II 24

[swearingen]

For the first round on this topic see thread731-168675.

There's another twist to the crazy job market here. It goes something like this:

1. Company lands good sized project - why? They were low bidder. They forecasted costs based on job market, current salaries and end-of-year raises and bonuses.
2. Job market goes nuts. Companies are stealing workers from each other due to the limited talent pool available.
3. Wages skyrocket.
4. Company lands other projects based on new salaries of the folks it has to bring in plus raises and bonuses.
5. Folks brought in for new projects go to lunch with the folks working on the older project and the subject of salary comes up.
6. Folks on older project choke on their food when they find out how much new employees are making.
7. Those folks march into the boss' office and demand money.
8. Boss can't budge - the older project costing was based on old salary info before the wage spike. He offers what he can, but he still has to stay profitable.
9. Those folks leave for the next company for a gargantuan sum, only to have the cycle repeated at that firm.

It's just nuts and, quite frankly, it's scary. As I said in the former post, project continuity is shot and morale stays low. Any thoughts?

 

[ctopher]

One reason why we have not put a man on the moon in a long time ... and why the USA is becoming a service country while others are becoming mfg/eng countries. Sales/marketing have taken over and become more $$ hungry, hurting the rest of us!
¢¢

Chris
SolidWorks 06 5.1/PDMWorks 06
AutoCAD 06
ctopher's home (updated 01-18-07)

 

[cjd97]

Your concerns are well known among the profession. However, either no one cares, or no one knows what to do. I recently left a job for about a 20% increase in pay. The scary part is that it wasn't tough to get that job and it took very little negotiating to get that kind of bump. For whatever reason, it was like pulling teeth to get anything from my former employer. I didn't even give my former employer a chance to give me more. The way I see it, if they can afford to pay me more when I say I quit, they should have been paying that to begin with.

I think this situation is somewhat good. It forces companies to evaluate their wages and retention methods. The only problem is that sometime you can't teach an old dog new tricks.

 

[zdas04]

I had a situation once where compressor technicians were in very short supply and everyone was bidding the price up and folks were going down the street for $0.25/hour. I built a "profit sharing" program for them that took the turnover from replacing the entire staff 3 times a year to losing 1-3 (out of 20) techs a year.

The program was based on:
1. Annual bonuses that result from tangible, measurable performance on the part of the individual. In this case it was wellhead production, each tech had 8-12 wellhead compressors and his bonus was based on the monthly production from those wells compared to the production forecast.
2. Bonuses visible every month, payable once a year. At the end of every month I talked to each tech about his bonus for the previous month, and specific strategies to do better the following month. At the end of the year I would take them to a fancy lunch and hand out checks. Everyone knew what everyone else's performance was and it worked out that this was a carrot for the under performers to do better. One note, anyone who quit prior to the payout got nothing.
3. Aligned compressor-tech bonuses to goals that had a direct, bottom-line impact on my goals.

This combination of steps paid out up to $3,600/year per tech and it never (in 6 years) became an entitlement that they felt the company owed them.

Interesting to note that in the 6 years I did this, we lost 12 techs (almost all of them quit right after the luncheon). In the 3 years since I retired (and they dropped the program) they are back to replacing the entire staff 3-4 times per year (about 70 new hire learning-curves in 3 years). At the same time, the production rarely ever meets the forecast.

This incentive program was: (1) tied to things that the individual could directly impact; (2) Was visible and auditable by the employee; (3) was aligned with company goals; (4) was assured to be paid out regardless of other facts; and (5) was significant. This program worked for hourly field techs in a seller's market. I believe that any program with all five of these characteristics would improve the attitude of any employee.

David

 

[ctopher]

I blame a lot of it on the greediness of the unions. They were great at one time, not any more. They are killing our companies. Sorry, I know I get flack for this, but is what I believe.

Chris
SolidWorks 06 5.1/PDMWorks 06
AutoCAD 06
ctopher's home (updated 01-18-07)

 

[SWComposites]

ctopher - what do unions have to do with engineering salaries? With some exceptions, unions are not killing companies, greedy, incompetent management kills companies. And don't try to claim that engineering salaries are excesive compared to sales/marketing/management.

Steve

 

[IRstuff]

As an example of what killed the company I worked for once, I offer Mr. A. He became our GM and it was clear that he knew which side of the bread was buttered and that his timeline was about 6 months to get promoted or fired. So, he cancelled all new product development. He forced last time buys on our cash cow products to spike our revenue. He continued to ship parts even when it was clear that there were problems with the design. Nonetheless, by month 5, he got the division into the black, and was immediately promoted. Mr. J, the next GM, came in and immediately needed new underwear. We had no new products to sell and no cash flow. I left PDQ after that. No unions in sight.

TTFN

 

[655321]

My father was a railroad conductor, a member of a strong union, a union that fought and continues to fight, 15 years after his retirement, for his best interests. He has good health care, a great pension, and many good memories of a career that he enjoyed and that kept his family well-fed and happy. The company he once worked for continuous its long history of profitability.

He stayed with this company for a little over forty years, performed his job admirable. The reason he never left to seek greener pastures? He didn't need too! The union protected his interests, collectively bargained for a fair wage, fair benefits. No reason to leave.

Most companies don't care about you. But thats OK, I don't want companies to care about me, it isn't their job. Now, when unions represent you, then there is someone who has your back, who has your interest in mind. Not everybody is superstar project manager material, some people are just hard workers that want a fair wage and a little security in life. Unions aren't the problem; They're the solution.

And don't give me that crap about unions being corrupt, for every corrupt union I'll show 10 corrupt companies.

My post wasn't supposed to be about unions, What I really have to say is that a smart company, especially in the engineering business, should recognize the value of people, and pays as much as it can afford to keep people happy. Not the minimum it takes to prevent them from leaving.

 

[GregLamberson]

It's supply & demand and most industries are in a great demand swing. The only thing that could possibly ease it some are contractual terms & conditions. In that there is escalation for personnel on each contract based on an industry benchmark. Apart from that, not much else is going to work.

In my industry, company's are offering completion bonuses of up to 10% to finish out a contract. Now you know what is starting, you guessed it, signing bonuses to offset the completion bonus you were getting.

One of the rules I follow is this - with other consultants I have no problems discussing terms & conditions of contracts, but in my line, we do not discuss day rates or compensation. I don't know of any of my fellow consultants that discuss day rates, it's taboo to ask anyone and if anyone asks me I tell them it's none of their business. I'll discuss per diems, travel class, transportation allowance, etc, but not day rates. Nobody's business.

My advice to anyone who grumbles about their package, it came from an old superintendent a long time ago - if you don't like it, you hired out wrong. You make your own deal, make the best one you can and when you sign on you honor it. When the contract is up, negotiate a better one.

I agree 100% with ctopher, the unions were very much needed early on in the industrial revolution and made great and needed improvements. But they have evolved into exactly what is choking our country - entitlements. If you want to know what's wrong with our education system - teachers unions.

Greg Lamberson
Consultant - Upstream Energy
Website:

http://www.oil-gas-consulting.com

 

[kchayfie]

I think I've finally figured out the "retention strategy" that's going on here. We need to recruit a heck of a lot more staff to complete all the work that we're gonna be getting in the next couple of years. Our competitors are also heavily into the recruitment phase of the cycle at the moment as well. So it seems that our management are trying to p*ss off all the existing staff so that they leave and take up all the posts being advertised by our competitors and that way the only jobs available to job seekers are at this company and recruitment suddenly gets easy!

At least thats the only reason I can think of to explain why they choose the option that is guaranteed to annoy someone when the alternative won't cost any extra.

 

[ScottyUK]

kchayfie,

You credit them with far too much forsight to dream up a plan like that!

Should you ever pass through the North East you will hear a whirring sound. It is the sound of the Stephensons, Charles Parsons and William Armstrong are turning in their graves (like a turbine in the case of Parsons!), mortified at the state of the UK's manufacturing industry.

I disagree with those who blame the unions, at least from a UK perspective. The problem has spread downward from the top, where the focus has shifted from the long term good of the company to the short term bonuses of the Board and the shareholder dividend. As with everything there is a balance to be struck, but at this moment the scales tipped too heavily toward the accountants holding sway. I suspect there would be an entirely different set of equally serious problems if engineers were in virtually sole control of a company.


----------------------------------

Sometimes I only open my mouth to swap feet...

 

[PSE]

zdas04,

A star for showing a incentive plan that makes sense. It has been a long time since I have seen one. The last one I had was pretty simple, If there was a profit, some of it was shared with you. Since then, succeeding executives have implemented enough "improvements" so that it is essentially non-existent.

Regards,

 

[zdas04]

PSE,
That is what I keep seeing too--every time management "sweetens" an incentive program they add some more strings. After a while it is so complex that no one has any idea what their personal share might be, they lose sight of how their activities impact their bonus, and it stops being a day-to-day incentive. The program that worked was totally transparent and a guy could see a direct and immediate result of his actions.

I had a guy come to me in November once with the story that he had been offered a promotion and since he wasn't leaving the company could he collect his 11 month bonus--my answer was a truly hard ass I'm not paying the bonus for [his compressor serice company], I'm paying it for my production. Everyone knew about this and it had a positive impact on more people than were mad. The rules were clear and unchanging. It works.

David

 

[kchayfie]

One of our slightly more sensible morale-boosting efforts is a finders fee for staff who bring in new employees. If you introduce a friend to the company and your friend sticks around for 3 months, the company will pay you £1000 (which is less than the recruitment agency demands to introduce the same guy). In order to get the cash, you also have to stick around for the 3 months so it helps reduce some of the turnover.

 

[CarolinaPE]

You could change the words "job market" with "housing market" in the initial post and realize why the workers choke on food (or housing info flyers) and go out to find a new job. The average middle class house in a decent neighborhood in my city has doubled in the last 4-5 years easy.

 

[ewh]

I have to agree with ctopher and GregLamberson about unions in the US. They have played an important role in early industry, but have grown fat. All I have to base my opinion on is my personal experience, as well as that of family members.
I spent some time contracting at a huge fiber optic plant that was unionized, You don't want to be stuck behind a union employee when you have to get to a meeting. They always seemed to be running on 1/2 speed. Heaven forbid you ever pick up a screw driver or a light bulb! You're putting your job on the line if you do ANYTHING not in your work description.
Companies that have plans such as zdas04 had are looking out for their employees and their own interests at the same time. This makes sense. If it is not in the companies interest, it ultimately is not in the employees interest either.

 

[swearingen]

Some great discussion and also some interesting info on unions. If I'm not mistaken, my profession can't unionize anyway by law, so that's not an issue.

kchayfie, the company I used to work for now pays a $2,000 bonus if you bring someone in that makes less than $50k and stays 3 months. It's $4,000 for an employee that makes over $50k. A friend of mine that works there made $14,000 last year just in recruiting bonuses!

GregLamberson, I agree with you completely when it comes to sharing rates. My father taught me that it is a taboo subject, but it seems I'm the only one around here that thinks so. The rampant talk in the hallways at work is unsettling to me.

I guess I'll just ride this wave and make sure to prepare for the inevitable down-swing...

 

[atlas06]

If you think you have it tough, try to hire engineers with top secret security clearances in the post 9/11 era.
Here, they advertise even in metro stations for people with TS security clerance and can't get them.

People have figured out the small places asking 50 hours per week just to keep your job, or those that hire you to finish this rush job and let you go, teh micro-managers, etc.. at most good companies now, people don't even consider looking for another job.

I judge the state of the economy by the number of head hunter calls I get per month. I am somewhat underpaid, but I've had it with mom and pop shops (firms under 400 people), I will not go to them for anything.

See, those that did not treat workers right, they played into their competition's hands, they can't get those workers out of there. Sow the wind and you'll harvest the storm.

 

[civilperson]

No sympathy for engineering management taking work at last year's cost structure and now having to pay competitive salaries. The prospectus of the big firms brag about the billions in backlog of contracted work. The market does not recognize that this work is NOT PROFITABLE. If enough shortcuts are taken to end the job costs in the black, then quality drops and completeness disappears with future charge backs and liabilities forthcoming in the form of lawsuits and cancellation of future work.
The professionalism had disappeared previously, with no budget for mentoring young engineers or provisions for keeping the "gray hairs" as quality review experts. This all came about from price competition on fees and lowest cost hourly rates contracts. Blame can be equally shared by the corporate management of the engineering firms and the customers who were not told that good engineering does not cost money, it saves money.
Loyalty is a two way street. After numerous layoffs at the end of successful project completions, I am now a mercenary engineer working for the highest dollar amount available. It is nice to get 40% more than the average due to being able to take the next higher offer.

 

[Comcokid]

Until about 25 years ago, there was an unspoken "Social Contract" that good employees could generally expect long-term employment at a company. In Japan, this was practiced to the extreme of "lifetime employment", and was probably why the phrase "made in Japan" went from being synomimous with "junk" in the post war 50's to "world market domination" in the 80's. After all, if an employer watches out for his employees, the employees are fully able to watch out for the interest of the employer.

However this practice was not law, so companies have discarded this along with benefits, pensions, and other forms of positive workplace culture. Companies have become mercenary and employees have had to respond in kind.

This new 'competitive employment marketplace' is not efficient. It contradicts Drucker's insights of the technological worker, Manslov on the creativity and maximized employee efficiency, Nash on maximum benefit to all parties in a mutual contract, and even Demming and quality. But today's business is focused on short-term returns at the expense of long-term business viability. The business philosophy today is not based on theories and insights of Nobel prize winners, but on the philosophies of take-the-money-and-run ego fixtures such as Donald Trump.