by Carol Hymowitz
From The Wall Street Journal Online

Few things trouble executives more than watching outstanding talent walk out the door. In burgeoning industries, such as technology, the most creative minds never lack for job offers. Turnover also is common after changes in the corner office or down the ranks, or when a company is acquired.

Even a small flight of out-of-the-box thinkers or managers who prompt the best work from employees can take considerable time and expense to replace. Some executives try to stop exiting high performers with offers of more pay or promotions. But others react defensively, telling themselves that whoever is leaving wasn't a big loss.

"It's psychologically threatening to those who are staying to acknowledge there's a reason some people are leaving -- so executives often dismiss them as untalented or even deny that an exodus is occurring," says Gurnek Bains, chief executive of YSC, a London-based corporate-psychology consultant.

At one big financial-services company he worked with, executives insisted turnover was low when, in fact, 50% of the hundreds of new employees the company had recruited quit within two years. Many veterans left as well. The reason: The company was undergoing changes that top executives "didn't sell well to employees," says Mr. Bains. Instead of asking employees to help, "they said everything they'd done in the past was rubbish and stirred a lot of insecurity."

Rather than deny a talent bleed, executives should carefully analyze why it is happening. Carl Bass, CEO of software maker Autodesk, has found that employees are most likely to accept offers elsewhere if they don't think they are being challenged to grow. Most frequently, they leave if they don't get along with their boss.

"That's a more powerful factor than what an employee feels about the overall company," he says. "It's like marriage where you may live in a nice house, but if your spouse isn't the right one, what your house looks like doesn't matter much."

Mr. Bass tries to anticipate what employees need and want before competitors come and woo them away. He asked one of his most capable employees, in his early 30s, to run a start-up unit.

"You have to catch talent and make sure they get opportunities before they're already at the door," he says. Autodesk says its annual employee attrition rate is in the single digits and less than half the rate of a typical technology company.

Larry McClure, Liz Claiborne's senior vice president of human resources, tries to create jobs with growth potential for the company's gifted employees instead of waiting for openings to occur on the organizational chart. "You can't be a slave to your structure and tell a very talented director he can't be promoted to the next rung until a vice president leaves," says Mr. McClure.

He tries to craft stretch assignments for his best employees that may not have existed before, but fill a current need. He urges employees to get out of their comfort zone and raise their hands for jobs in unfamiliar areas. He has encouraged some sales managers, to spend time in operations, where they can learn about product flow, delivery and other technical issues. The stint broadens their experience so they're qualified to become general managers.

"At any given point, your highest-potential people will get a phone call from another employer -- and if you haven't kept giving them challenging assignments, it's shame on you when they take what they learned with you elsewhere," he says. He jumped from a job in aerospace to financial services and then specialty chemicals before joining Liz Claiborne and understands why ambitious managers who feel stalled are apt to head for the door.

By analyzing who is leaving, companies also can determine if they have difficulty retaining women, minorities, young people or other groups, and try to address the reasons why. Salaries that lag behind the norm leave talent open to even modest offers.

Numerous companies, such as United Parcel Service, Lehman Bros. and Deloitte Touche, have launched mentoring and management-development programs for diverse employees in recent years to stem attrition.

The best retention scores belong to executives who can empathize with employees' hopes as well as their gripes. Dawson Rutter of Commonwealth Worldwide, a Boston-based limousine service, started out as a cab driver and remembers how disconnected and unvalued he felt "being by myself all day and getting no feedback." As he expanded his business to 350 employees, he offered training, benefits and higher pay, and rewarded veteran drivers with more-lucrative routes. In an industry where turnover is steep, many of his drivers have 20 or more years at his company.

Although employees on exit interviews often cite pay as a main reason they're moving on, they're often more influenced by what colleagues are doing. "If someone's best friend is leaving, he or she is more likely to leave, too," says Jim Harter of the Gallup Organization, "especially if their interchanges become "gripe sessions about an employer."

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