Monday, October 31, 2011

What HR heads can learn from Cruise and Airlines industry

Short answer...Loyalty Programs to reduce Total Cost of Ownership. Continue reading for the long answer.

Let me be very clear..this advice will not help all the HR Professionals. Many HR Professionals (Headhunters/Job Portal companies etc.) will actually hate the plan because if implemented properly most of them have to close down. 

Who will love the plan..I think everyone except those HR Professionals. Customers, Co-workers and Managers - nobody loves to work with a person who is new in that role and who do not have complete information. Nobody wants to train a person from scratch and then loose that talent one day and start the process again. Attrition is costly - and the cost is generally underrated. Depending on the industry and the role that cost varies - but I think most don't appreciate all the cost implications of attrition. We generally consider the substitution cost (extra salary/compensation (which sometimes are as high as 100% or more) which needs to be paid to attract similar talent to fill that position) but don't account for the loss in customer confidence, extra hours lost by co-workers in knowledge transfer process and loss in intellectual insight when a person leaves the organization. From an employee perspective as well it may be beneficial - considering the pain of relocation, adjusting to the new office work-culture and extra work needed to create a good brand image. So it is a win-win.

Problems understood, what's the solution? My view: Organizations need to implement the best practices from the Best-run Loyalty Programs in the industry - airlines and cruise industry. Airlines have one of the most liberal rewards (loyalty) program in the world which actually creates a lot of stickiness. Cruise lines offer something unique - they provide repeat guests VIP treatment by inviting them to special parties, bon-voyage gifts or Champagne, priority embarkation, great rates for the next cruise etc. Result - cruise industry enjoys a very high-level of repeat clientele.

Organizations need to understand there are two pieces for employee loyalty - monetary (tangible) and emotional (intangible). Monetary parameters are important - nobody likes to stick to the same company if he sees that even the best performance for next 10 years cannot match the salary he can gain by a single switch. Companies need to understand the market forces and go for more personalized, more real-time approach towards compensation(why not increase someone's salary 15% when you need to pay at least 30% more for a substitute talent) .

At the same time companies need to understand a very important piece of the puzzle which is seldom appreciated. How you treat people, how you give them more opportunities, how you empower them, how you respect them (here is great book on this), how you make their life more easy is as important as how much you pay them. Learn from cruise industry - create special benefits for the people who have shown loyalty - it may be extra leaves, special bonus rates, invitation-only parties - there are no limits on innovation in this space.

Caveat: Loyalty programs are not for everyone. Companies do not like loss-making customers or
Bad-performing employees and do everything needed to get rid of them - and that is perfectly acceptable (I love Jack Welch theory of eliminating bottom 10% every year). What is not acceptable is treating good talent without special recognition.

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