THE EFFECTS OF THE MANAGER’S BEHAVIOR ON THE RETENTION OF HIGH POTENTIAL EMPLOYEES FROM DI

Abstract

THE EFFECTS OF THE MANAGER’S BEHAVIOR ON THE RETENTION OF HIGH POTENTIAL EMPLOYEES FOR DIFFERENT GENERATIONS

Kimberlee J. Rhule

Doctor of Education; December 2004

Duquesne University

Chair: Dr. James E. Henderson

The purpose of this study was to identify the behavior of the manager that affects the retention of high potential individuals within an organization. Research suggests that the reason why employees leave organizations is their manager. A high potential is defined as an individual who exhibits the capabilities of developing into a future leader of the organization. The study also investigated high potentials’ perception as to how effectively their expectations of those managerial behaviors are being met. Managerial behavior is defined as the manner or conduct displayed toward employees by the manager. High potential individuals who participated in the study were identified as belonging to one of the two generational categories: Baby Boomers (born between 1943 and 1960) and Generation X (born between1961 and 1989) to determine if there were any generational differences within the high potentials and these managerial behaviors. Results of the study indicated that high potentials of the two generational categories are more alike than different. The results also indicate that there are four managerial behaviors that affect the intention of high potential individuals to remain with the organization. They are: utilizing their talents and strengths, providing challenging job assignments, providing opportunities to contribute and make a difference, and allocating appropriate salary increases based on their job performance. When managers develop and utilize these key behaviors with high potential individuals, they increase the overall likelihood for the high potential to remain with the organization.

THE EFFECTS OF THE MANAGER’S BEHAVIOR ON THE RETENTION OF HIGH POTENTIAL EMPLOYEES FROM DIFFERENT GENERATIONS

by

Kimberlee J. Rhule, M.S.

Submitted in partial fulfillment of

the requirements for the degree

Doctor of Education

Instructional Leadership Excellence at Duquesne University

School of Education

Duquesne University

December, 2004

ii

iii

copyright

by

Kimberlee J. Rhule

2004

iv

Abstract

The purpose of this study was to identify the behavior of the manager that affects the retention of high potential individuals within an organization. Research suggests that the reason why employees leave organizations is their manager. A high potential is defined as an individual who exhibits the capabilities of developing into a future leader of the organization. The study also investigated high potentials’ perception as to how effectively their expectations of those managerial behaviors are being met. Managerial behavior is defined as the manner or conduct displayed toward employees by the manager. High potential individuals who participated in the study were identified as belonging to one of the two generational categories: Baby Boomers (born between 1943 and 1960) and Generation X (born between1961 and 1989) to determine if there were any generational differences within the high potentials regarding these managerial behaviors. The survey consisted of 36 managerial behaviors that the high potential participant rated as important to their staying with the organization. The participant also rated how well their manager was doing in each of the 36 managerial behaviors.

Results of the study indicated that high potentials of the two generational categories are more alike than different. The results also indicate that there are four managerial behaviors that affect the intention of high potential individuals to remain with the organization. They are: utilizing their talents and strengths, providing challenging job assignments, providing opportunities to contribute and make a difference, and allocating appropriate salary increases based on their job performance. The managerial behavior that most affected the high potential’s job satisfaction was for the manager to utilize their

v talents and strengths. When managers develop and utilize these key behaviors with high potential individuals, they increase the overall likelihood for the high potential to remain with the organization.

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TABLE OF CONTENTS

Chapter I: The Problem (1)

The Significance of the Problem (7)

Questions for the Investigation (9)

Limitations of the Study (11)

Definition of Terms (11)

Chapter II: Review of the Literature (14)

Introduction (14)

Employee Retention (14)

History of Retention (16)

State of the Workplace (20)

Labor Shortage......................................................... Aging Workplace....................................................... Changing Demographics.............................................. Downsizing and Flatter Organizations.............................. Leadership Gap......................................................... Generational Effects................................................... The New Psychological Contract.................................... Changing Nature of Work............................................. Scarcity of Talent (23)

24 26 29 31 35 40 47 50

The Generations………………………………………………………..

How the Generations Differ……………………………………

Baby Boomers………………………………………………….

Generation Xers………………………………………………..

Generation Y/ Nexter / Millenials……………………………...

Generation Cusps………………………………………………

What the Generations Want (52)

52

53

55

56 58 60

vii TABLE OF CONTENTS (cont.)

The Effects of the Manager’s Behavior on Employees………………...

The Manager and Retention……………………………………

The Manager’s Role in Retention………………………………

Effects on Talented Employees………………………………...

Managers Are Blaming Other Factors For Turnover…………..

What Retention Managers Do to Retain Employees…………... 69 69

73

74

75

76

High Potentials…………………………………………………………

Definition of High Potentials…………………………………..

High Potentials’ Impact on an Organization…………………...

Identifying High Potentials……………………………………..

What High Potentials Want…………………………………….

Retention of High Potentials…………………………………… Summary of Review of the Literature…………………………………. 80 80 83 83 89 96 99

Chapter III: Methodology (102)

Subjects (102)

Instrument (103)

Study Design (109)

Pilot Study (110)

Expert Reviewers and Survey Changes (113)

Statistical Analysis (114)

Additional Analyses (117)

Summary (117)

Chapter IV: Results (119)

Introduction (119)

Demographics of the Population (120)

Measures (122)

Research Question One (126)

Research Question Two (128)

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TABLE OF CONTENTS (cont.)

Research Question Three (137)

Research Question Four (142)

Research Question Five (144)

Additional Findings (148)

High Potential Responses to the Qualitative Questions (149)

Summary (150)

Chapter V: Discussion (154)

Introduction (154)

Limitations (156)

Reliability of Themes (156)

Discussion of Research Question One (157)

Discussion of Research Question Two (158)

Discussion of Research Question Three (161)

Discussion of Research Question Four (162)

Discussion of Research Question Five (163)

Discussion of Additional Findings (164)

Discussion of Qualitative Feedback (165)

Implications for Managers and Organizations (165)

Conclusions (169)

Implications for Further Research (170)

References (174)

Appendix A: Pilot Study Survey (188)

Appendix B: Final Survey (195)

Appendix C: Correlations of the 1-36 My Manager Items With Intention to

Stay That Were Not Significant (202)

Appendix D: Correlation of 1-36 My Manager Items with Motivation to

Perform That Were Not Significant (205)

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TABLE OF CONTENTS (cont.)

Appendix E: Correlation of 1-36 Importance to Staying Items With Intention to

207

Stay That Were Not Significant........................................ Appendix F: Open-ended Survey Question Responses. (210)

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LIST OF TABLES

Table

1. Survey Items Supported by Researchers (104)

2. Study Sample Demographics (121)

3. Reliability of the Five Importance to Staying Themes (123)

4. Reliability of the Five My Manager Themes (125)

5. Correlations of 1-36 My Manager Items with Intention to Stay (127)

6. Mean Ratings of the 1-36 Importance to Stay Items by Generations (129)

7. Mean Ratings of the Six Importance to Staying Items by Generations (135)

8. The Importance to Staying Four Themes Mean Ratings by Generation (136)

9. Ranking of 1-36 Importance to Staying Items with 1-36 My Manager

Items on Mean Ratings (138)

10. Correlation of 1-36 My Manager Items With Job Satisfaction (143)

11. Correlation of 1-36 My Manager Items With Motivation to Perform (146)

12. Correlations of Work Relationship, Job Satisfaction, Motivation to

Perform and Intention to Stay (148)

13. Correlation of 1-36 Importance to Staying Items With Intention to Stay (149)

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ACKNOWLEDGEMENTS

It gives me great pleasure to dedicate this dissertation to the very special people in my life. Thank you…

To my committee chair - Dr. James Henderson, my professor, mentor and committee chair, who had more faith in me than I did myself. Thank you for your constant support, contributions, enthusiasm, and guidance throughout my doctoral program.

To the rest of my committee members – Dr. Jay Liebowitz and Dr. Carol Parke who guided me through this process and were extremely generous with their time, contributions, and expertise. You were both extremely patience with my shortcomings. To my Mother – L. Elizabeth Rhule who has been through it all with me, the good, the bad and everything in between. Mother, I could have given up on my dreams long ago, but you always had an encouraging word or thought to keep me going.

To my Dad – Paul “Skip” Rhule who was my rock, my strength, and who quietly supported me in more ways than anyone could have ever asked and gave to me unconditionally. I hope that you have been able to watch from above and see me accomplish this journey.

To the rest of my family and friends who were all supportive and encouraged me to keep going amidst all the personal and professional trials and tribulations of the past four years.

I love you all and without each of you, I would have never been able to complete this dissertation. Thank you for the special place each of you has in my heart and my life.

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CHAPTER I

INTRODUCTION

The Problem

What makes an organization competitive today? Most retail stores, banks, insurance companies and many other organizations have the same types of products and services. What distinguishes one organization from another? What gives one organization the competitive advantage? It is their people. “In a global marketplace driven by ideas where information freely flows, brainpower remains the source of competitive advantage” (Kaye, Jordan-Evans & Career Systems International, 2002, p. 4).

Pfeffer (1998) says,

Success comes from successfully implementing strategy, not just from having one. This implementation capability derives, in large measure, from the

organization’s people, how they are treated, their skills and competencies, and

their efforts on behalf of the organization. A people-centered strategy facilitates

higher levels of customer service and enables firms to compete on the basis of

knowledge, relationships, and service, not just price. (p. 17).

Rush (2002, p. 15) in an interview with Beverly Kaye, a world-leading expert on career development, mentoring, and talent retention, stated that, “Talent is always going to be the critical competitive discriminator among organizations.” In the past ten years, the studies of how human capital affects an organization’s profitability have increased.

2 Smart (1999) says,

Proactively seeking out and employing the most talented people can have

a multiplier effect on the creation of the competitive advantages. High

performers, the A players, contribute more, innovate more, work smarter, earn

more trust, display more resourcefulness, take more initiative, develop better

business strategies, articulate their vision more passionately, implement change

more effectively, deliver higher quality work, demonstrate greater teamwork, and find ways to get the job done in less time with less cost. (p. 12).

Research conducted by McKinsey and Company (2001) surveyed 6,900 managers in fifty-six large and mid-size companies and found that high performers increase productivity 40% in operational roles, increase profits 49% in general management roles, and increase revenue 67% in sales roles. McKinsey’s research also found only 14% of managers surveyed in 2000 strongly agreed that their companies attract highly talented people, and only 3% strongly agree that their companies develop talent quickly and effectively.

In 1997, McKinsey and Company coined the term “war for talent.” McKinsey’s “War for Talent” 1997 survey was designed to identify what top performing companies did differently than average-performing companies when it comes to talent management. According to the survey, excellent talent management has become a crucial source of competitive advantage. “It is an inflection that says that talent is now a critical driver of corporate performance and that a company’s ability to attract, develop, and retain talent will be a major competitive advantage far into the future” (Michaels, Handfield-Jones &

3 Axelrod, 2001, p. 2). Smart (1999) also says, “the single most important driver of organizational performance and individual managerial success is talent” (p. 1).

Reidy and Bhar (2000) in their research with top organizations found that the significance of high performers increases with job complexity. In low complexity jobs, such as machine operators and clerks, those in the top one percent produced three times more than those in the bottom one percent. In jobs of medium complexity, such as sales clerks and mechanics, a top performer produces 12 times more than those at the bottom. In the most complex jobs such as, insurance salespeople, lawyers, and doctors, top performers had 127 times more value than the average performers. And for those in high technology positions, the top one percent produced 1,272 times more than average performers. This research provides a strong case to all organizations that top performers and high potential individuals can have an incredible impact on the bottom line success and competitive advantage of an organization.

Several years ago, I read the book, First Break All the Rules by M. Buckingham and C. Coffman. This book reported the research that the Gallup Organization conducted over the last twenty-five years on what the most talented employees needed from their workplace. From that research, they discovered that talented employees need great managers. They also found that how long an employee stays with an organization is determined by his or her relationship with his or her immediate supervisor. “…People leave managers, not companies” (Buckingham & Coffman, 2000, p. 33). Other research also supports Gallup’s findings such as, DDI (Development Dimensions International) of Pittsburgh (2001), McKinsey (a national consulting firm, 2001), and Beverly Kaye, (2000) a noted consultant of career development. This research is significant in that it

4 provides organizations with the reason why talented employees leave organization, and the remedy being to ensure that their managers are developers of people.

Gallup’s research suggests that the immediate manager is most important to the retention of the employee. Buckingham and Coffman (2000, p. 34) say that the manager has an effect on the employee. “She defines and pervades your work environment. If she sets clear expectations, knows you, then you can forgive the company for its lack of a profit-sharing program. But if your relationship with your manager is fractured, then no amount of in-chair massaging or company-sponsored dog walking will persuade you to stay and perform.” An organization does not want to spend the time, resources and money to retain all of their employees. A high-performing organization wants to focus on the retention of their most talented employees, often referred to as high potentials.

Turnover is costly, particularly when organizations have spent time and money on identifying, developing, and promoting individuals who are viewed to be the future leaders of the organization. “A significant number of companies – especially large, older organizations - will see 40% to 50% of their executives leave in the next five years - and there are not enough people prepared to replace them” (Byham, 1999, p. 1). “The loss of high performers costs more than money. It tends to impair the organization’s memory, dilutes the ability to perform, and compromises the will to win. In short, it saps the organization of its vitality” (Kepner-Tregnoe, 1999, p. 5).

Companies’ costs of losing employees are expensive, but the costs can be even higher if the employee is a talented contributor in the organization. “What does it cost an organization when a talented employee defects to the competition? Some of the cost factors are obvious, such as productivity loss due to a vacant position. However, there

5 are often unseen costs, like the reduced productivity from the departing employee who

is inevitably distracted during his or her job search and therefore contributes less during this time period (sometimes called ‘short-timer’s disease’). Using conservative calculations, one technical company in California’s Silicon Valley estimates that it costs them an average of $125,000 when just one employee leaves. Other companies calculate that attrition costs them annual productivity losses of 65-75% of one years pay in the position the employee departs” (Ware and Fern, 1997, p. 2). With the scarcity of talent, organizations face the predicament of not having or not being able to retain the right talent for current and future leadership positions.

And what impact do talented high potential employees from each of the generations have on an organization? For the first time in years, there is a combination of four generations in the workplace, which has different attitudes, work ethics, motivators, and values based on the shared set of events and worldview of their age group. The workplace used to have a system of the old being in charge and the young doing what they were told. This is no longer how the workplace has evolved (Stauffer, 2003). Younger workers are taking on more critical managerial roles in an organization, hierarchies are disappearing, and organizations are incorporating team-based structures that enable younger workers to have more of a say in decision-making, the work, etc. And, seniority has less influence in organizations than in the past. “The key implication of the mixed-generation workplace for you, the manager, is clear: The better you understand the unique combination of factors that motivates each generation, the better you can tap those motivators and gain the best combined effort from your entire team” (Stauffer, 2003, p. 3).

6 Supporting Stauffer (2003) is Frederick Herzberg’s theory of employee motivation. “[He] constructed a two-dimensional paradigm of factors affecting people's attitudes about work. He concluded that such factors as company policy, supervision, interpersonal relations, working conditions, and salary are hygiene factors rather than motivators. According to the theory, the absence of hygiene factors can create job dissatisfaction, but their presence does not motivate or create satisfaction. In contrast, he determined from the data that the motivators were elements that enriched a person's job; he found five factors in particular that were strong determiners of job satisfaction: achievement, recognition, the work itself, responsibility, and advancement. These motivators (satisfiers) were associated with long-term positive effects in job performance while the hygiene factors (dissatisfiers) consistently produced only short-term changes in job attitudes and performance, which quickly fell back to its previous level” (Gawel, 1997, p. 1). This theory suggests that those motivators that create satisfaction for an employee are in the control of the manager (achievement, recognition, the work itself, responsibility, and advancement).

There is no one simple solution to retaining top talent. There are many factors that affect an employee’s reasons for staying with an organization, as well as how important those factors are to employees from the different generations.

Some prefer an employment relationship that allows them to try a number of different jobs as a way to gain experience and develop a broad skill set. Others want balance between work and commitments beyond work. Still others are

looking for a fast track that offers challenging work, quick advancement and high rewards. Attitudes and expectations such as these determine, in turn, which

7 factors attract, retain and engage employees, adding a new spectrum of issues to

the talent management challenge. (Towers Perrin, 2001, p. 3).

Because of this, organizations cannot expect one solution or program to retain their high potential leaders. Finding individual factors that affect each generational age group can provide managers with some guidance in having a greater influence in retaining their high potential individuals.

The Significance of the Problem

Because high potentials are the future leadership of the organization, it is essential for an organization to understand how to retain high potential individuals after investing large amounts of time, money, and resources into their development. By identifying the key managerial behaviors that are important to high potential individuals in each generational category that influence their decision to stay with an organization, the organization has a much greater chance of retaining their future leaders. Using these research findings in the field, once an organization identifies the key managerial behaviors, the organization can:

1. Develop new management and human resources policies, and utilize a more participative decision-making style to increase the probability of retaining high potential individuals from the different generational categories.

2. Provide retention programs that address the manager’s behavior to better meet the needs of high potential individuals from the different generations.

3. Identify high potentials early and devise retention strategies (Holt, 2001).

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4. Coach and develop the organization’s managers to recognize these specific factors in each high potential individual that they manage and develop behaviors and strategies which would better retain those individuals.

5. Develop an organizational culture, which encourages and facilitates greater dialog between its managers and employees.

In determining the effect of the manager’s behavior on high potentials within each of the generational categories, Price’s (2002) Failure to Commit research supports the axiom of different strokes for different folks. Assuming that others share the same motivational drivers may put your [employee retention] commitment plan at risk, waste resources or perhaps make the problem worse. Consider the 1999 study, “Factors Affecting the Organizational Commitment of Technical Knowledge Workers: Generation X, Baby Boomers, and Beyond” by the Center for Effective Organizations (CEO), assessed the commitment of technical workers based on career maturity levels. They found younger technical workers tend to thrive in environments where autonomy, innovation and technical development are the norms. Mid-career professionals tend to value work/life balance, advancement and technical development. Older workers tend to value job security and sharing in organizational wealth. Rather than assuming all employees are driven by the same factors, take time to understand employee differences before creating a plan” (p. 100).

Everywhere employees are demanding more of their work. They want to be recognized as individuals. They want a chance to express themselves and to

gain meaningful prestige for that expression. …At the same time, companies are searching for undiscovered reserves of value. Human nature is one of those last,

9 reserves of value. If they are to increase their value, companies know they must

tap these reserves. (Buckingham & Coffman, 1999, p. 242).

The manager is the catalyst in tapping those reserves of their high potentials.

Questions for Investigation

Because high potential individuals are the future leadership of the organization, it is essential for an organization to understand how to retain high potential individuals after investing large amounts of time, money, and resources in their development. By identifying the specific job-related factors that influence the high potentials’ decision to stay, an organization has a much greater chance of retaining their future leaders. Research on the retention of employees is readily available. There also has been some research on what motivates the different generations. However, there is very little research on the specific factors that will retain high potential individuals in an organization.

In this study I will hope to identify those aspects of the manager’s behavior, which are correlated most closely with the retention of high potentials. This survey will identify those aspects, which are very closely related to retention and also identify some attributes that don’t really matter. I also hope to identify those aspects of the manager’s behavior that are uniquely important to particular generations. It is quite likely that there will be more similarities than differences as to what high potentials in the different generations expect from their manager. This study was conducted using the aspects of the manager’s behavior that are known to be factors in the retention of an organization’s general employee population but will focus on the high potential employee segment and

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