How Not to Alienate Your Employees (Hint: Don't Hire From the Outside)

The talent wars haven’t ended: As the economy continues to recover, technology continues to advance and the world grows ever smaller, talent reigns supreme in organizations. Suddenly, it's a buyer’s market again.

As a result, your best employees have options and opportunities to go elsewhere, and they know it. Organizations want to keep their most talented employees in house, but many are undermining themselves without even knowing it.

A big issue here is that despite this being the "information age," and word travelling faster today than ever before, organizations continue to operate under a veil of secrecy when it comes to talent. Alternately, talent has more and more access to information -- and the markets. So, don’t leave things to chance. Get in front of your top team members and let them know they’re valued. Here are the five biggest mistakes organizations make when it comes to engaging and keeping their most talented employees in-house.

1. Hiring successors to senior level roles from the outside more than 50 percent of the time

There’s no bigger hit to motivation than working for an organization that continually looks to the external markets to fill leadership roles. If you’re not developing your successors and building a bench, it’s time to start thinking more critically about talent management. There are valid reasons for going outside, but if you’re doing it more than 50 percent of the time, you’re sending the wrong message. If you pass on an internal candidate for a promotion, let that person know why. If you want to keep him or her around, prove it. Offer an expanded scope and work with this individual directly to develop a formal career path and plan.

2. Not communicating with employees about their career potential

There’s been an ongoing debate for years about whether organizations should communicate potential ratings to their employees. The debate is over. Tell them. If you don’t, you leave things to chance. Employees who are unsure about where they stand will fill in the blanks and maybe get it all wrong. If things don't look promising, they’ll look elsewhere and look for reasons to validate their intuition. The slightest hint that you’re not on their side anymore will probably mean "game over."

3. Not differentiating compensation based on performance and potential

Some organizations do communicate potential to their star employees. I worked at one where employees who were the top 5 percent of the organization were selected for high-potential programs. They were given special treatment during the program, but come year's end, they received the same 3 percent raise as their peers. If they were lucky, they saw an additional percentage added to their merit increase. That's not good because . . . employees talk.

Don’t be naïve about it. People find out about compensation. Don’t tell me that "it’s confidential and those conversations shouldn't exist." They do. Often. So, if you want to differentiate performance for your high potentials, be sure that you make it worth their while. Compensation may not be the ultimate motivator, but it matters. Make it count.

4. Not valuing talent mobility.

Your top talent is looking to be challenged. They want to try new things, be exposed to different parts of the business and stretch themselves. If your idea of talent mobility is purely hierarchical, you’ve missed the mark. You need to develop leaders with breadth and depth. They need experiences that expose them to new functions. Skills are more transferable than you think. Unless all of the roles in your organization are highly specialized or technical, consider moving people into new experiences and energizing them in different roles.

5. Not ensuring that internal pay scales meet market standards

Top talent has options. These employees scan the market, understand their value and test it once in a while. There’s nothing worse than losing junior talent to an external organization because your pay scale doesn’t flex as needed to keep these people in the organization. Most employees understand that to see a big bump in pay, they need to go elsewhere, as they progress in their careers. But, why? You inevitably back-fill their role, and you likely pay more than the person who left was making. Add in recruiting costs and productivity dips, and you’re costing yourself money. I’ve seen too many organizations let people walk for pennies on the dollar.

So, take heed. In today’s market, you can’t afford to lose top talent. Yet, our organizational structures and practices haven’t done enough to keep pace with these changing dynamics. There are too many organizations that are shooting themselves in the foot and undermining themselves by alienating their own employees. Make sure yours is not one of them: Scan your organization and make things right.