Employer of choice: the new corporate imperative

Lea Soupata, Senior Vice President of Human Resources for UPS, on human capital management.

The term ‘employer of choice’ has become a popular phrase in human resources circles in recent years. The concept and its benefits – that employees will choose your company over others and choose to dedicate themselves to your success if your company measures up in their eyes – seem obvious.

In How to Become an Employer of Choice, authors Roger E. Herman and Joyce L. Gioia write: “The phrase is a more than a buzzword. It is representative of a whole new design of corporate culture.”

I’m proud to say the significance of being an ‘employer of choice’ is important to the management at UPS. However, I hasten to point out that the current generation of UPS management can take credit only for nurturing the idea. The inspiration to strive to be an employer of choice originated with our founder, Jim Casey, long before human resources professionals added it to the corporate lexicon.

Back in 1944, at a UPS managers’ conference, Jim Casey talked about the need to expand the company. “One of the reasons why we must build a good organization now is that we must plan for the expansion of the business. An expanding business is the only way to provide opportunities for our people. So, if you want to build our people, we must expand,” he said.

In those three sentences, Casey hit on the reasons why becoming an employer of choice was so important to a young company like UPS and why six decades later it is corporate America’s imperative. Companies must grow to survive, but they won’t grow without the leadership of great people.

Our founder has since gained many followers. Many of today’s most respected business leaders include ‘employer of choice’ among their corporate priorities. For example, when asked how he measures his company’s success, IBM Chairman and CEO Sam Palmisano said he monitors four measurements. In addition to market share, consistent financials and being a valuable corporate citizen, Palmisano includes attrition rates and being an employer of choice. “People want to be here and want to make a big difference,” he says.

Palmisano and other CEOs who live in the glare of intense expectations for growth know the pains of attrition. When companies lose experienced employees, they also lose expertise gained at their company’s expense, hard-earned relationships with customers and experience that is difficult to replace in today’s labor market.

If you believe, as so many business people are fond of saying, that “our people are our number one asset,” then you might be so bold as to move EOC to the top of your list of priorities. Because being an employer of choice today is the only way to attract and retain critical human assets – assets that will give you competitive advantage.

One of the sure signs EOC importance is gaining more than lip service from the C-suite is the move toward ‘employment branding’ as a business strategy. Building an employment brand is similar to the branding practices used in marketing. The idea is to develop an image of your company in the minds of job candidates that makes them want to work for you because you treat employees fairly, challenge them and give them opportunities to grow. The concept has become one of the leading strategies in employment circles because employers see it as one of the few long-term solutions to the tight labor market. The big benefit – as with the power of brands on the product and services side of the business – is once your employment brand is well established, candidates, like consumers, will choose you instead of your competition.

Whatever strategies companies decide to employ, there’s no doubt workforce stability creates a competitive edge. “In a tight labor market, locating, attracting, optimizing and retaining the talent they need to serve their customers” is the key to success, according to authors Herman and Gioia. They’ll get no argument from Home Depot CEO Robert Nardelli, who in a recent story in BusinessWeek said: “One of the things we compete most for in the marketplace is our associates.”

The urgency to be an EOC and attract the best and brightest employees is driven by America’s shrinking and dynamic labor force. We’ve all seen the ‘aging baby-boomer’ statistics. As the unemployment rate settles in at some of the lowest levels since 2001, the US Department of Labor estimates that by 2012 there will be a shortage of more than 10 million skilled workers in the US. Not only are boomers leaving the corporate ranks, but many of those entering the workforce lack the skills of the workers they replaced.

On the other side of that picture, while many baby boomers prepare for retirement, others plan to continue working, although many will opt for shorter hours and less stressful jobs. America’s workforce also continues to get more diverse. While building their employment brand, companies must carefully consider the different needs and interests of this changing landscape if they want to be viewed as employers of choice.

Candidates coming into the workforce today are more selective about the jobs they want and the kinds of companies for which they want to work. A recent story in BusinessWeek said, “A new generation of employees is demanding attention to stakeholders and seeking more from their jobs than just 9-to-5 work hours and a steady paycheck.”

Noting that the number of Generation Y workers – those born between 1977 and 1994 – in the working world has grown 9.2 percent since 1999, while the number of Generation X workers remained flat and baby boomers declined 4.3 percent, the article said corporate America’s leading citizens “are finding that burnishing an image as a socially responsible company helps to attract younger workers, at all levels.” As evidence, look no further than the surging membership increase in Netimpact.org, a network of socially conscious MBA graduates.

This concern for social responsibility and stakeholder interests has become known as corporate sustainability. PricewaterhouseCoopers defines sustainability as “aligning an organization’s products and services with stakeholder expectations… thereby adding economic, environmental and social value.” Certainly current and prospective employees are stakeholders influenced by a company’s actions. And the most important – or damaging – actions a company might take are those that persuade a proven performer to leave its ranks or dissuade a top prospect from coming to work in the first place.

At UPS, we believe our business success depends on balancing economic, social and environmental objectives. This commitment to sustainable business practices isn’t just about mitigating risk – it’s about creating value for our stakeholders.

There may not be a plaque awarded for EOC status, but many benefits accrue to any firm that reaches it. Those benefits reach into practically every corner of the organization, from marketing and recruiting to investor and customer relations. After all, it’s an accepted business principle that when employees are in a challenging and rewarding workplace, they perform better, and stay with the company longer. In fact, a study by Bain & Company linked a five percent swing in employee retention rates to a 25 to 100 percent difference in earnings. In other words, when you lose employees – especially the good ones – you lose money.

At UPS, we’re so convinced being an EOC is something to strive for that we spend thousands of hours and millions of dollars every year polishing our employment brand. So how do we paint a picture of UPS as an employer of choice – as a place where people can have a career, not just a job?

One of the strongest cultural tools we have at our disposal is our practice of promotion from within. Today’s average employee changes jobs seven to eight times in a career. At UPS, we say you can change jobs many times while staying with the same company. I’m a good example. I joined the company in 1969 in New York as an office clerk, and over the years I’ve had multiple jobs – including driving our brown package cars – before my current position. Our senior managers average 25 years with the company, and most have spent their entire career with UPS. Most started in the operations environment, many as package handlers and then drivers.

We believe in people having multiple career paths. We offer employees rotational assignments to give them broader expertise and to prepare them for future leadership positions. We’re always on the lookout for the people who will be our future leaders. One very successful program for us in this regard is the Earn and Learn program. The purpose of Earn and Learn is to recruit and train qualified student employees by providing them with education assistance and student loans for college. Since its inception, more than 48,000 employees have participated in Earn and Learn at more than 200 partner schools.

Another strong selling point is our partnership philosophy. We like to say UPS employees think like owners and work like partners. We offer stock incentives to management employees, and every employee has the opportunity to own shares in UPS. In our opinion, giving employees an ownership stake in the business is the best way to engage people and ensure high-level performance to customers.

Companies become employers of choice when they not only attract, but also retain the best and brightest employees. In addition to the cultural benefits – promotion from within and a partnership philosophy – a commitment to training and development also helps retain employees.

Unfortunately, the ability to develop direct reports ranks near the bottom when employees of US companies rate today’s managers’ leadership competencies. While 85 percent of employees say career growth is a key reward, according to a Towers Perrin study, only 49 percent say their organizations provide it.

At UPS, every manager is responsible for people development, and it starts on Day One for UPS employees. We begin with orientation classes and move people along through corporate schools, all the way up to executive education at recognized business schools like Emory, Harvard, Wharton and INSEAD.

We spend more than US$380 million a year on training and development programs and we measure their effectiveness. We assess candidates’ progress, measuring competency and skill sets required for leadership positions. We also pay close attention to the progress we’re making on developing and advancing minorities and women. Each month, the UPS Management Committee reviews the list of candidates in the leadership pipeline.

Benefits also serve as strong recruiting and retention tools. Companies that offer a broad portfolio of services for all levels of workers are in effect creating healthier, happier and more productive employees. And it confirms to employees that they work for a caring employer.

Does our system work? We believe it does. The turnover for UPS management is seven percent, including retirements. We know the investment made in people and their development is substantial, but our company believes it is time and money well spent. We think our people return that investment us in many ways, including making UPS an employer of choice.