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Retention woes for unconfident corporates

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Corporates lack confidence in ability to retain people critical to their success despite high levels of investment in development programmes.

Organisations ‘lack creativity’ in approach to people development, with Less than half of senior managers in UK and Ireland blue chip organisations are confident of retaining the high value* individuals who are critical to their success and only 55 percent believe they are effective at retaining their future senior leaders. This is despite the fact that most organisations invest in development programmes for key people and many expect that investment to increase. This survey of 200 senior managers** was undertaken by talent and career management consultancy Right Management, part of ManpowerGroup. Mark Hodgson, Practice Leader of Talent Management in Right Management, comments: “The results suggest a lack of creative thinking in the way development programmes are structured, particularly for high value individuals”.

“Development practice is an important part of how organisations retain their key people but success is determined by detail. Achieving the right blend of development activity is critical. Worryingly organisations are placing the majority of their investment solely in traditional development programmes instead of blending this with experiential development opportunities such as stretch assignments, secondments, coaching and mentoring. All of which in our experience are far more effective for developing high potential people who learn best by doing.” said Hodgson.

Ninety two percent of organisations have formal programmes in place to develop their future leaders; 76 percent have programmes in place for people with specialist skills and knowledge. However, only 49 percent of senior managers questioned believed that these critical individuals are being developed in such a way that will help their organisation achieve its business objectives. The survey also shows that 36 percent don’t measure their success in retaining high value individuals; 25 percent don’t measure success with retaining their high potential, future leaders. Where measurement does take place, organisations use retention rates, appraisals and the rate and numbers of promotions. Performance is assumed and not confirmed, says Hodgson.

Hodgson also believes that current practices are of particular worry for businesses trying to create leaders with the kind of skill sets required for global challenges. A global Right Management report***, released this month, identified the six intercultural competencies essential for leading multinational organisations. The top three competencies were an ability to adapt socially, to demonstrate creativity and having an even disposition. “Traditional thinking on how best to develop people will not create leaders with that range of competencies. Companies need to demand that their suppliers and partners are much more creative when helping them develop critical people in a very challenging business environment.”

Another key cause of the lack of confidence in retaining key people is the reduction in the number of job levels across industry. 90 percent of respondents believe there are real disadvantages in a flatter structure because of a reduced number of career opportunities. They believe flat structures make it much harder to retain staff. As Hodgson concludes: “The organisations we spoke to seem aware of the risks of losing talented people but are also determined to continue using the same approaches to develop and retain them even when there is no evidence that their programmes are working.” For example, A junior member of staff/part-time administrative employee earning, say £10,000 p.a. could be given shares worth £2,000 but the value attributed to the rights they give up in exchange is treated as virtually nil. In that case the employee could face an income tax charge on the £2,000 difference between the value of the shares and the value of the rights they gave up in exchange. The employee would then have £400 tax to find, with a possible further impact on tax credits claimed.

A more senior member of staff/middle manager with technical expertise of value to the employer might be earning say £50,000 p.a. They could be given shares worth say £50,000 in exchange for rights worth say £10,000. That would give a taxable difference of £40,000 which, taxed at 40 percent, would give a tax charge of £16,000. “Employees would be required to pay the income tax on receipt of shares. In some cases (primarily listed companies) that might be collected through the payroll as if it were a cash payment made to the employee in the month. In other cases income tax might be collected through the self-assessment system after the end of the tax year,” says Mr. Welland. “Calculating the income tax bill will be headache inducing,” he adds. “There is no hard and fast algorithm for calculating the value of an employee’s employment rights. The value of employment rights will also differ considerably depending on the individual employee and his or her role in the company. HMRC may take a different view on the fair value of the shares received by the employee which could result in sticky and unpleasant negotiations.

“‘Good’ employers will take on the burden of dealing with HMRC to safeguard their employees’ PAYE and NIC positions, perhaps applying for agreement on the value of the shares with HMRC before issuing the shares. But less caring, or less knowledgeable employers could leave employees with the responsibility of dealing with the Revenue alone.”

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