It's that time of the year when employees celebrate by attending holiday parties and planning how they will spend their end-of-the-year bonuses. But we also know this--some employees wait until the end of the year, or the first of the new year, to announce their resignations, which is not so merry a thought, especially if those employees are top performers.
When a valued employee quits, some managers respond by offering to raise the employee's pay to match or exceed the outside offer, which often turns out to be a failed strategy. But most managers reluctantly accept the employee's resignation.
Some CEOs refuse to accept resignations without a fight, however. One such CEO is T.J. Rodgers, CEO of Cypress Semiconductor Corporation, San Jose, California. His experience is worth sharing, so I devote this holiday e-letter to quoting from Mr. Rodgers description of how he responds to resignations of top performers, as it appeared in my first book, Keeping the People Who Keep You in Business. I would like to hear your responses to his determined and innovative approach:
"With people, as with most things in business, the best defense is a good offense. A company keeps its most valuable people by treating them fairly, rewarding their performance, and creating opportunities for them to do important work. But there comes a time when every company simply must play defense: A startup is determined to steal one of your top salesmen, or a big company is launching a new product and wants three of your best young engineers. When it's time to play defense, and you have a good case to make, systems can improve your chances of winning.
Two major systems help Cypress Semiconductor Corp. guard against raids from the outside. One is designed to seal off the company from headhunters. The other is designed to win reversals when a valued employee decides to leave Cypress. Without these systems there's no question our company would have lost some of its best people.
In any company, the first line of defense against headhunters is the support staff. That's because the first "barrier to entry" for headhunters trying to steal good people is finding out who they are. The names and titles of our vice presidents are public information; they're listed in our annual reports. The names and titles of all other people are confidential.
Headhunters cleverly manipulate the good intentions of support staff to obtain this valuable information. Their job is to say whatever it takes to obtain the roster of a department or the names of the members of a new-product team. Our job is to make their job as tough as possible.
Our defenses against headhunters begin with something as simple as the telephone book. We treat the Cypress telephone directory as a highly proprietary document. On every page of every company phone book, stamped in bright red, is the following warning:
CONFIDENTIAL. Not to be reproduced. Not to be taken off Cypress premises. This information is proprietary to Cypress. This stamp is in red. If it is in black, return it to your departmental secretary immediately!
Then "headhunter control" takes over. We like to test how good we are at protecting our borders. Twice in the last few years I've asked a "friendly" headhunter to penetrate Cypress. Both times the firm reported back that we were one of the toughest companies it had come up against.
Of course, it's impossible to completely seal off any company from raids by the
competition. Top-quality employees are always receiving job offers. How you react to these offers - how quickly and effectively you make the case for staying with the company - determines how many people you keep or lose.
Five years ago, after a frustrating week in which I was called in at the very last minute to save two key people, I wrote a memo that articulated how our managers should fight to retain valued employees who quit. Intel Corp. inspired mush of our approach; for many its system for retaining key people was a model for doing it right. We modified and added to the Intel principles and developed a system whose batting average has been about .500. This is an excellent turnaround figure that makes our rivals' recruitment jobs exactly twice as hard as they expected - a great reason to recruit elsewhere.
Here's the memo. It speaks for itself. Our biggest headache is getting people to follow the procedures. Every year or so we make another set of copies of the memo, distribute them to our vice presidents and top managers, and remind them how we are supposed to do things.
'Cypress Semiconductor Corp. Internal Correspondence. TITLE: What top Do When a Valued Employee Quits. TO: All Managers. AUTHOR: T.J. Rodgers.
I have not been called upon to save a valued employee for quite some time. Last week, I became involved in two such instances, both successful, but my job was made much more difficult by our not following the fundamental principles of what to do when an employee quits.
I realized that I never have stated formally what our policy is concerning resignations.
Here it is:
1.) React immediately (within five minutes). There is nothing more important to do than to react immediately to an employee who has quit (presuming the employee is one who we are intent upon keeping). The next activity you have scheduled should be canceled; any delay (such as, "I'll talk to you after our staff meeting") is unacceptable. There are two purposes for reacting with a sense of urgency. First, it demonstrates to the employee that he does take precedence over daily activities, and second, it gives you the greatest chance of changing the employee's mind before an irreversible decision has been made.
2.) Keep the resignation secret. To the greatest extent possible, you should prevent the knowledge of a resignation from being publicly disclosed. Keeping the resignation absolutely under wraps is important for both parties. For the employee, it removes a major barrier to changing his mind in staying with the company, that of appearing to vacillate on a major decision. Once the employee's ego gets attached to a decision, right or wrong, he is very unlikely to change course. If other employees are unaware that a resignation has occurred, the employee who has resigned does not face the embarrassment of a public reversal. The company also is given more latitude when a public announcement has not been made. When I managed to convince one employee to remain at Cypress, there were multiple rumors (all untrue) that the company changed his mind by "buying him back." The company does not negotiate the salaries of employees who have resigned.
In addition to the obvious conclusion that management should never disseminate information about a resignation, management should also do everything possible to prevent the employee from doing so. Usually, the best way to convince an employee not to disseminate resignation information is to state the arguments given above: that the employee limits his own flexibility for the future and may unwittingly damage his reputation if he decides to stay.
3). Tell your boss immediately. When an employee resigns, I expect instantaneous communication all the way up through the chain of command to me. I expect that communication to happen within an hour of the time a resignation is received. I will consider management to have done a poor job if any resignation takes more than that time to get to my attention. I can be interrupted in meetings, called out of meetings in outside locations, or called at home (I am listed in the telephone directory). There is no excuse for not informing me (and everyone in the chain of command between the individual and me) immediately when a resignation occurs.
4.) Listen carefully to the employee. Once a resignation has occurred and the proper people have been informed, the manager of the individual and his VP should sit down and talk to the employee, listening very carefully to ascertain the exact reasons for the resignation. Any attempt to rescue the employee will be impaired severely unless management listens to exactly what the employee has to say and accepts it.
The message from the employee should be transmitted up through the chain of command without any changes, even if it is unflattering to the manager involved. (For example, "I quit because I do not like working for you." Perhaps the company can find useful employment for a valued employee working in another group). An exact determination of what the employee's options are at the other company. Is the employee looking at a better job, more money, slower pace, faster pace, or a fundamental change in career? These issues obviously will be key in formulating an argument to change the employee's mind.
5.) Construct your arguments. Once accurate data have been gathered, you and your VP should sit down and put together a plan to convince the employee to stay, if that is possible. In some cases, a realistic assessment of the situation will dictate that you not try to keep the employee. When Russ Winslow quit Cypress to start his own company, the only reaction that made sense was to wish him good luck. Ninety percent of the time, however, a good argument can be made that it is in the employee's best interest to stay at Cypress. The only possible effective argument to retain an employee is one that validly claims that the employee's best interests are served by staying at Cypress.
Typically, an employee will have quit for two simultaneous reasons: a "push" of some sort having to do with longstanding frustrations at Cypress, and a "pull" from another company at which the "grass appears to be greener." A successful retention argument will expose the advantages perceived for the other company as unrealistic, as well as offer a real solution to some of the problems that caused the employee to consider leaving in the first place. Once you and your VP have formulated your first-cut employee-retention arguments, I should become involved to help set the overall strategy. This strategy should be defined and refined the very day the employee resigns.
6.) Use all the horsepower at your disposal to win. With a carefully constructed strategy in place, we can then proceed to win back the employee. The employee first got the message that quitting was a big deal because of your rapid reaction to his resignation. We then reminded the employee that the company truly was interested in him because we listened to what was wrong for as long as it took to hear out the problem.
On the second day, the employee should be given the message that his quitting was a mistake, that the company knows it was a mistake, and that the company will single-mindedly try to rectify that mistake. (Cypress will accept only two answers to our proposal that you stay: "Yes" and "We'll talk about it some more.") On the second or third days, during which our position is being presented, the employee should be given the firm impression that we are not continuing business as usual. Schedules are interrupted. If appropriate, we may meet over meals outside the plant during off-hours.
If the employee's spouse is a major factor in the resignation,, the spouse is involved in the discussions. Any level of management required to get the job done is brought in. If it takes the president to get the job done (and it does in half the cases), then the president has nothing more important to do than to sit down with the employee. One of the greatest mistakes middle managers make when an employee quits is to assume that I am too busy to interrupt my schedule to keep a good person in the company.
7.) Win back the employee by solving his problems. If our arguments are constructed in a timely manner and really do correct the problems that caused the employee to start looking around, we will be successful more than 80 percent of the time in causing the employee to change his mind. Most often, resigning employees like Cypress, its benefits, and the people with whom they work. They usually are threatening to leave because they do not like some of the particulars of their job or their direct supervisor.
Their resolve to leave is strengthened further because they have found a job (typically) at a company that is a poor second to Cypress, but which at a first glance appears to offer some relative benefits. By eliminating the root problem at Cypress and stressing the fundamental differences between us and the other company, the employee usually can be made to agree that staying is best.
8.) Wipe out the competitor. The next step in the process is to shut down the other company. Two objectives are important here: to shut down the competitor so firmly that no further negotiations occur with our employee, and to make the competitor believe that it has wasted its time in trying to hire Cypress employees.
Get the employee to agree to call up the competitor and shut down its offer himself. He should firmly state that counter-offers and continuing negotiation are not desired, that he is going to stay at Cypress, and that his decision is absolutely final. Ask the employee to present the data to the competitor in such a manner as to discourage the company from continuing to hire other Cypress employees. For example: "There was no counter-offer; I just want to stay at Cypress. I think my long-term best interests are served by being here. The same hour that I told my boss at Cypress I was thinking about leaving, I had meetings with my boss, his VP and T.J. Rodgers. When they made comparisons between my career at Cypress and at your company, it was clear to me that I had made a mistake in thinking about leaving Cypress. I really do not want to take any time to come over to your company to talk to you; my mind is made up. It would not be helpful to change your offer monetarily; I am fairly paid and have a good stock option. The issue is not money.'"
* Reprinted with permission from T.J. Rodgers, CEO, Cypress Semiconductor Corporation.
Comment: It should be obvious that the best time for re-engaging, re-recruiting, and renewing the commitment of your employees is NOT when the employee resigns, but long before that. If you manage people, the question to ask yourself these days and at all times of the year is this: "Do I know how engaged and committed my employees are?" If you have trouble answering that question, now is the time to sit down with each person you manage and ask the question, "How are things with you?" I'm sure Mr. Rodgers would agree that it's far better to take action long before they quit.