CASE STUDY A

SHOULD YOU FIGHT TO KEEP A STAR

by Boris Groysberg Harvard Business Review May-June 2020

The people involved in this case:

Connor Stevenson; Managing Director Equity Capital Markets

Alysha Stark; Director

Trent Tucker; Investment Banking Associate

Malik Turner; Managing Director; M&A

Liana; HR Manager

Do you have a few minutes to talk?

The slack message from Alysha Stark made Connor Stevenson uneasy. He was the managing director of equity capital markets at Paulsen & Harper, a Chicago based boutique investment bank, and Alysha was one of the directors on his team. She'd been leading the upcoming deal with MicroBase, and things had been going so well. But Connors knew that urgent meetings requests were often bad news.

Sure, he typed. I am free now. When Alysha stepped into his office, she closed the door and sat down across from him "I might as well come right out with it," she said. "I'm resigning." Connors heart sank. He didn't know how the firm can handle MicroBase without Alysha; She was the only person at P&H who knew the intricacies of the semi-conductor industry. "Where are you going?" he asked. He tried to keep his voice calm, though he felt something between panic and anger.

"I am taking a job at Randall,' she replied. Connor visibly winced. Randall was one of P&H's competitors. "They're offering me 20% more base pay, plus a higher bonus range," she explained. Just two months earlier, Connor had asked Alysha about the rumours she was thinking of leaving. She had reassured him: "We all get calls, of course, but nothing I would consider." Connor had believed her. After all her recent bonus had been generous, and she was on track for a promotion to managing director.

"Who else knows?" he asked. "Right now, just my family. And Trent, of course." Trent Tucker was an up-and-coming associate who worked closely with Alysha, and they made a powerhouse team. Connor instantly realized that Trent might follow her-such moves were common in the industry. But it was good that Alysha had been discreet so far. If others knew that one of the best bankers was about to leave for Randall, it could hurt morale, not to mention the MicroBase deal. At least now he-and HR-would have more leeway to negotiate. At a previous firm, he'd made the mistake of extending counteroffer to a VP being wooed by a rival, and then he'd spent the next six months fielding the requests from the rest of his team. Connors knew that many firms had no-counter offer policy; their attitude was "if you want to quit, quit." But P&H took it case by case. Leaders would discuss deals with people they really wanted to retain, while letting less valuable employees go. Alysha almost certainly fell into the first category.

"I know the timing isn't ideal,' she said now. "It's not." He re plied. They were set to start a new round of funding for the semiconductor company in the next quarter. "But I am not only worried about MicroBase; I am concerned about you and your future. We are on the top boutique firms in the country. Why do you want to leave? Is it really about the money?" "That's only part of it. I's just ready for a change-or I will be, after the mandatory few months off. I'm getting stale here, and I'm really intrigued by the culture at Randall." Connor tried to read between the lines. Did Alysha feel uncomfortable at P&H? Was she implying that as a black woman, she would be treated better at Randall? "Alysha," he said, "you know how much you're valued here. We all see you as the future leader of this firm. Can you give us a shot at keeping you?" Alysha started to shake her head, but Connor kept going: "Just give me the rest of the day to see what we can come up with. I don't want to take this decision lightly. And I can't tell you how sad I'd be to lose you as a colleague." With that, Alysha's expression softened. She promised to wait the day out in the conference room and consider a counteroffer.

NOT THAT MANY ALYSHAS

As soon as Alysha left his office, Connor texted Malik Turner and arranged to meet him downstairs caf. Malik, a fellow managing director who focused on M&A, was his closest friend at the firm. While filling him in, Connor felt his resentment rising. "Maybe I should't fight to keep her. I mean, maybe it's like good riddance," he said. "Good riddance to Alysha? We're still talking about your favorite team member, right?" Malik asked, confused.

"Yes, I know. But two months ago, she said she wasn't looking to make switch. Then she clearly interviewed behind my back." "OK, so you feel betrayed. But did you really expect her to tell you that Randall was trying to poach her? No one does that."

"And think about it,' Malik continued. "she's an incredibly talented black female investment banker focused on tech. Of course, she is going to get offers." Connors had to admit that he knew how much in demand talent like Alysha was. But he'd let his conversation with her to easily assuage his concern. "Have you talked to Joshua yet?" Joshua Schafer was the president and cofounder of the firm. "We had a quick text conversation. He said he trusts me to figure out what's best and that he'll have my back." "Good. Now what about Trent? Does he know enough about MicroBase to jump in?" "He's smart, and he knows a lot. But he's more junior than Alysha is, and the client is not going to see him the way they see her. I'll have to step in myself, and I'm already spread thin. Plus, I am sure he's got an offer from Randall as well." "Ok, here's your game plan. Talk to Trent and find out what he's thinking. Then have HR get on the phone with some recruiters to see who else might be out there." Connor rolled his eyes. Of course, he needed to consider external candidates, but given P&H hiring protocols, there was no way he'd have someone in the role soon enough to get moving on MicroBase. "If I were you, Con, I'd put together a counteroffer. There aren't that many Alyshas in this business. Losing her-and perhaps Trent-would be bad for you and the whole firm."

WE NEED CONTINUITY Connor asked Trent to meet him in his office. "I hear Alysha's already told you about her offer." "She has. It seems like a great opportunity." "For her?" Connor probed.

"Of course," Trent replied, "and for me too." "You're thinking of going with her?" "Well, Randall's made me an offer, and it's more money. But I haven't accepted yet." Connor knew that pay was often the primary motivator for bankers, but other things also mattered: Firm culture, reputation, opportunities, a good team leader. He believed that Trent had to take care about P&H cachet, management support, and the possibility of an early promotion. Ordinarily, such rapid advancement for an associate would have been out of the question. But if Alysha were really walking today, elevating Trent was probably Connor's most time- and cost-efficient option. "I can't promise anything yet, Trent, but I'm wondering if a promotion could entice you to stay." "That would definitely make me think twice," Trent said, looking pleased. "I'll be straight with you. If Alysha leaves-and I'm hoping, she'll consider-I'd prefer to bring in an established banker with the same level experience that she has. But I might not be able to do that for a variety of reasons." Trent nodded. "So, this could be a great opportunity for you. I would like to do whatever it takes to keep you. We need continuity on MicroBase. You helped construct all the models, and you are well acquainted with the players there. "I am certainly interested," Trent replied. "Of course, I'd need the specifics." Connor stood up and shook his hand. "OK. Let me get back to you." Inside, he felt queasy. Now he was looking at preparing two counteroffers.

CONSIDER THE RISKS

Early that afternoon, Connors sat down with Liana, an HR manager. "I am kicking myself for ignoring the signs," he said. "This shouldn't be a crisis. I should have had a pipeline, been more proactive about succession planning, retention-all of it." Liana did not response immediately, and he suspected she agreed with him but didn't want to rub salt in his wounds. "Let's go over your options." She said jotting down "Counter," "Promote," and "External" on a notepad. "I guess 'Go back in time' isn't one of my choices, is it?" "Afraid not." Liana said. "Now I talked to two of your recruiters earlier, and they don't sound too hopeful about finding someone with Alysha's expertise in the semiconductors. There are people out there, as you know, but most of them have made moves recently, and none of them have her profile." "She's one of those few women in this field-I realize that." "And one of fewer women of colour, which may be why she's considering Randall. They are known for their inclusion initiatives, and they have got great diversity on their executive committee. "And we don't," Connor acknowledge. "No, not yet. But we are working on it, and we should be sure to communicate that to Alysha." "Are those recruiters looking only at the big firms?" Connors asked. "We should check the smaller, regional firms too. That's where Alysha came from." "I will follow up with them," Liana said, "but I think there's a pretty limited pool to choose from right now, given how hot the semiconductor industry is. Besides, even if we found someone, the hiring, relocation, an onboarding process usually takes two or three months-and longer if we have noncompetes to deal with. Who's going to cover microBase in the meantime?" "Trent would," Connor said. "He's Alysha's number two." "Then I'd lean towards promoting him," Liana said. "We talk a lot about internal advancement here, and this is a chance to put our money where our mouth is."

"I'm worried that Trent's not ready. I'd have to get heavily involved. Can't we just match Randall's offer to Alysha?" Liana sighed. "Money may not be what matters to her." "It's the first thing she mentioned this morning," Connor said.

"We can certainly try that approach, but we need to consider that risk carefully. If we bump up Alysha's base salary by 20% and give her a higher bonus range, it's likely that word will get out, and then everyone else will start to feel underpaid. And I don't have to tell you how corrosive that can be to culture."

Connor sighed heavily. What am I going to do? He thought. I need to have a plan by the end of the day.

Question

What is employee retention and the various workplace factors that influence the retention of employee?

What are the advantages of employee retention to the organisation?

What actions that the Managing Director (Connor) should take in the circumstances of the case study and justify your recommended actions?

How can HR managers in organisations can support employee retention in general?