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BY JULIE FORSTER
Knight Ridder Newspapers
April 5, 2004

ST. PAUL, Minn. - (KRT) - In his former job, Mike McGuire's workload grew with every round of layoffs. As head of service for a medical and dental benefits administrator, he took on increasing responsibility during the last few years as management layers were peeled back. The stress was getting to him. So, when a headhunter called, he jumped.

His former boss tried to entice him to stay with stock options and other perks. "Yeah, all of that," McGuire said.

But as the saying goes, it was too little, too late.

As the job market begins to loosen, companies could find that the years of retaining their best employees with merely the promise of a job are a thing of the past. Having been socked with three years of cost cutting, salary freezes and layoffs, some survivors are polishing off their resumes and preparing to bolt.

Employees intending to leave their posts as soon as the job market opens up are at the highest level in four years, according to WorkTrends 2004, an annual survey of more than 10,000 U.S. workers. The report, by Minneapolis workplace research firm Gantz Wiley, was released in February.

"There is a weariness of it all from the survivors of the layoffs," said Scott Brooks, executive consultant and research director for Gantz Wiley.

To be sure, the productivity gains posted over the last few years are good for the economy. But those gains have come on the backs of professionals, many of whom are operating in a sort of shell-shocked haze while their companies extract as much as they can.

The economic downturn forced McGuire, 37, to take on longer hours, more work and more stress as the company went through several rounds of layoffs. When he came to the company four years ago, he was responsible for two call centers. By the end he was in charge of call centers across the country and what had once been his boss' job - the entire telecommunications side of the operation. He also ended up running all Web-based customer-service functions.

"Your focus gets pulled in so many directions that you don't produce the quality product the customer is looking for," he said. Like other professionals, he had had enough with multiple jobs and 60-hour workweeks.

The squeeze on workers is evident in the numbers. Overtime hours are inching up and wage increases have been declining. Workers' wages and benefits grew a measly 0.7 percent in the fourth quarter of 2003 - the smallest quarterly increase in a year.

"White collar professionals have had to work longer hours, in part, because all businesses have had to do more with less," said Sung Won Sohn, chief economist for Wells Fargo Bank.

But relief may be in sight.

After making stunning gains over the last three years, productivity actually started to slow in the final quarter of 2003. As productivity slows, that translates to the creation of jobs in the face of rising demand, said Sohn, who recently heard from Silicon Valley executives that for the first time in nearly four years, tech workers are job-hopping.

They're not the only ones.

McGuire landed a job at Minneapolis-based U.S. Bank where he is senior vice president of 24-hour banking and financial sales, overseeing the banks' sales and customer service functions. The new job offers the opportunity to move up the ladder at a much larger, growing and more established firm. And, with most of his experience in the financial services industry, it was exactly what he wanted.

As economic conditions brighten, companies need to figure out ways to keep their choice employees on board, either with challenging opportunities or better pay and flexibility, experts say. Otherwise, like McGuire, they'll be out the door.

Meanwhile, companies also need to address a growing credibility gap with their workers, who are increasingly cynical and suspicious of information they receive from their employers.

According to a Towers Perrin survey of 1,000 working Americans released in January, less than half think they are receiving truthful information about their company's financial status and business strategy.

The results should be a wake-up call to senior executives worried about retaining their most talented employees in 2004, said Karen Leonard, a Towers Perrin principal and leader of the communication consulting office in Minneapolis.

Close to 60 percent felt shareholders were getting more accurate information about the company's financials and strategy and more than half thought that their company is putting too positive a spin on the information given to them.

"Their perception is that there is more straightforward information going to shareholders and customers than employees," Leonard said.

Worried about retention, some companies are taking steps.

"We are concerned about losing our top talent," said Randy Ross, a Best Buy Co. vice president.

Richfield-based Best Buy rolled out in February a more generous benefits package, including a wider mix of options for health, tuition assistance and life insurance. The company also introduced a new employee stock-purchase plan that allows its 70,000 full- and part-time employees to buy company stock at a reduced rate.

On top of that, it recently launched a long-term incentive program for midlevel managers and up that includes a mix of restricted shares and stock options.

A few times a year, Best Buy surveys its employees to measure how engaged they are at work. One question asks: "How likely are you to consider leaving the company?" If there are areas in the company with sub-par results, "We immediately launch an action plan to improve that," Ross said.

Ross knows employees who don't feel challenged will make the leap if and when a headhunter calls.

Recruiters are seeing some signs of a jobs recovery.

Lee Artimovich, managing director of the Minneapolis office of the executive recruiting firm Korn/Ferry, senses that his clients now have a more positive attitude about the economy. Lately, his business has started improving.

"But it's not a rocket ship to the moon," Artimovich said. "This is slow, steady growth."

According to a national executive survey conducted by Korn/Ferry, more than half of the respondents (58 percent) said they expect to change companies by the end of the year, while 96 percent expect to switch by August 2004. Though 85 percent have updated their resumes within the last six months, only 38 percent are yet to see a vacancy that specifically interests them.

"The global recession has significantly tested the mettle of today's work force," said Paul Reilly, chairman and CEO of Korn/Ferry International, in a statement about the study. "Employee productivity metrics are at all-time highs. It's natural that many executives are feeling burnt out in their current roles and a reviving economy brings promise of finding something new."

Lower down the ranks, the fear that has dominated workplaces since the economy started its decline is turning to optimism. The number of Americans worried about losing their jobs fell to 17 percent in January, down from 20 percent in December, according to the Hudson Employment Index, a monthly measure of employee attitudes on work issues.

The numbers are based on survey responses from about 9,000 U.S. workers. Overall, 31 percent predict their companies will be hiring more people while just 16 percent expect layoffs.

At the same time, many workers are eager to change jobs. Only one-third of nonsupervisory workers said their company offered the best opportunity for advancement. Nearly one in three employees are job hunting and nearly two out of three said they would seriously consider another job offer, the research found.

James, 28, is one example. After graduating from college, he started work as a software engineer in Minneapolis for a wireless services company. He still works for the same company but in Austin, Texas. After a series of layoffs, he managed to keep his job and was handed additional duties along the way. With the extra work came a salary freeze. James is his middle name. He didn't want his last name used for fear of retaliation.

When he started with the company he mainly worked on software development. After the person who manages Web services was laid off during the first round of job cuts, James picked up that job, too.

"I just get one thing done and I have two more things to do," he said. "It's almost making me work bad, because I'm just trying to figure out the biggest problems. I keep getting e-mails, `Have you got this done yet, or that done yet?' and I've only got two hands."

What he wants is simple: Less work and better pay. In November, he started sending out resumes.

In January, he began hearing back from interested employers and was scheduled to come back to the Twin Cities for some job interviews. He is from St. Paul and is looking for a job in the area. "I think it's starting to loosen up," he said.

Pay raises and bonuses aren't the only things to keep people on the job. If a company has been frank with its employees and transparent about the company's business prospects throughout the downturn, that's one important factor in retention, said Dennis Ahlburg, associate dean of the Carlson School of Management at the University of Minnesota.

Another is treating employees with respect and recognizing hard work.

"Companies that have manipulated workers' fear of losing their jobs are going to see much more turnover," Ahlburg said. "Workers will say, `This company screwed me in the downturn so I'm going to get out of here and find a company that will treat me right in good times and in bad.' It's the best people who will be out the door if they have a sense of not being fairly treated in the last couple years."

In 2000 and 2001, researchers at the University of Minnesota studied 1,000 new hires at seven leading Minnesota-based companies to try to find out what factors affect employee retention the most. They tracked the employees every four months over the two-year period.

The most critical predictor of whether people would stay was their initial measure of commitment, said Ahlburg, a co-author of the study. The 98 employees who left their companies were less committed to the company in the first place, and they thought it would not be difficult to get another job.

"Companies need to look at their work force and say, `Who are the people who can most easily move' and focus on them," he said. "Then they need to figure out who are those showing the lowest sense of commitment. If those are valuable employees, they need to work on what issues those employees have."

The study also shows the importance of the first month an employee is on the job. Companies can boost that initial level of commitment first by giving the employee clear information about what the job entails, a detailed orientation, people who will help them learn the ropes, and formal mentors.

"You have to get it right from the beginning," Ahlburg said. "If not, it is very hard to get that person committed to the organization."

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