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Keeping Millennials

What High-Potential Young Managers Want

Today’s talented young professionals have a different approach to their careers — and a very different attitude toward organizational loyalty — than earlier generations. Here’s what you need to know to retain and develop this generation of young managers.

The generation that started to enter the workforce a decade ago (often called Generation Y) will account for the majority of workers over the next 40 years.1 These employees have been said to differ remarkably from previous generations in work-related expectations: They attach greater importance to extrinsic values such as money or image, and also to leisure.2 They consider “additional compensation” and “additional bonuses and financial incentives” the two most effective retention strategies for employers.3 Intrinsic values such as attachment to a community appear to be less important to them. They are reported to show less concern for others,4 lower need for social approval, and higher self-esteem and even narcissism than earlier generations of employees.5

Are these early-career employees putting their values into practice in the workplace? While previous studies give a thorough picture of the values they hold, they say little about the work-related behaviors that result from these values. In an effort to cover this gap, we analyzed the work behaviors and experiences of young professionals. We first surveyed 892 young professionals, about 25% of whom represent the top 10% of their academic cohort in Germany, while the rest represent a random distribution of German professionals. Second, we surveyed 312 early-career individuals working in more than 60 countries, all alumni of a top European business school. Finally, we conducted in-depth interviews with 18 young professionals in a variety of industries such as consulting, IT, energy, publishing, and telecommunications, to see whether their experiences confirm the survey results. (See “About the Research.”)

Our surveys and interviews capture a highly skilled segment of the labor force. In one of the samples, all respondents are graduates of MBA (Master of Business Administration) programs. In the other sample, 96% have at least a master’s degree, and 88% of this group came to their first full-time job after having about three internships. Seventy-four percent of our respondents have had international exposure — either studies or an internship abroad — and one-third have had both work and educational experience abroad. On average, they had five years of work experience since completing their degrees.

We organize our conclusions around three themes: the rewards of job change, the job search behaviors of this footloose group of professionals, and the management-development practices that may keep them with employers.

The Rewards of Job Hopping

The young professionals in our German data set reported that they spent an average of 27 months with an employer before moving on. But can they cash in on these moves? We found that, over a period that averaged five years, the frequency of employer changes increased pay for these workers. While those who stayed with the same employer received average annual pay increases of 11%, those with two employers received 13% average annual pay increases, and those with three or more employers saw average annual pay increases of 15%. Consider two individuals, each of whom had an annual starting salary of $80,000 and then five years of work experience; if each received the average pay increases, in the fifth year the one who did not change employers would be earning $121,446, and the one who made more than two changes would be earning $139,921.

After the number of promotions that our respondents had received during their careers, the number of employers they had worked for was the most important determinant of their average annual pay increase. It was more important than their gender, age, or any aspect of their human capital, such as their highest degree earned, the specialization of their degree, or their pre-employment work experience — including the number, duration, and types of internships.

How can employers create pay systems that cater to footloose young employees? The external, market-based approach of Netflix Inc., the provider of on-demand Internet streaming media that is based in Los Gatos, California, is well-known. During its annual performance reviews, Netflix readjusts its high-performing employees’ pay to going labor market rates, as if the company were in the hiring process and competing for new hires. This approach convinces employees that they are paid well with respect to the market rate and signals the company’s determination to fight for top talent.6 The Paris-based credit-insurance company Euler Hermes offers a similar guarantee to young professionals: It has a dynamic compensation policy with short-term incentive plans that, during the first few years of employment, adjust employees’ salaries according to their skills and performance after their annual review each year.

Our research suggests that job hopping not only provides a higher pay increase but also no longer seems to undermine respondents’ promotability. The average individual in our German data set of young professionals had been promoted every three years. The difference in the frequency of promotions between job hoppers and those with a single employer (2.9 vs. 3.1 years) was not statistically significant. However, it did seem possible that those who stayed with the same organization might have received more significant promotions, such as a move from a staff to a line function. To check this assumption, we looked at the number of subordinates that the respondents were responsible for at the time of the survey. While 73% of our sample had no subordinates, the rest most commonly managed between one and five employees. Neither the likelihood of having subordinates nor the number of subordinates was related to the number of across-employer moves. Although job hoppers reported a slightly higher number of promotions, their jumps across employers netted them similar types of managerial responsibilities.

However, we did find examples in our interviews of professionals who received more significant promotions when they changed jobs within the same organization. For example, a project manager in Germany became a senior account manager in the United States, in charge of two business lines and a team of 15 software developers and testers. While working as a project manager in Germany, he had trained people and set up processes in the company’s U.S. business division. These prior stints enabled him to demonstrate his fit with the organization and gave him a lot of credibility before his promotion. In addition, unlike outsiders, he was accustomed to the company’s very specific culture, and his organizational social networks helped him get things done, allowing him to overcome some of the obstacles in his new position.

In general, however, our results on the relationship between employer changes and promotions represent a radical departure from both previous empirical research and conventional wisdom about job hopping and career success. A decade ago, it was generally believed that promotions accompanied with a disproportionately large increase in responsibility were more likely to be given to insiders than outsiders. Employers already have had the chance to learn about the past performance as well as the potential of internal candidates, and employers take less risk than with an outsider, on whom they have little reliable information other than what is obtainable from references and selection tools.7 Empirical accounts examining the career success of executives found that those who moved inside organizations were more likely to receive promotions, both to higher-level positions (such as from functional management to general management) and to same-level positions in a bigger unit.8 Our research suggests that this advantage seems to have eroded: The results here show no marked differences between the promotion patterns of job hoppers and those who stayed with the same employer during the early stage of their career.

Job Hunting While Employed

Among individuals who were still in their first job, 92% of respondents reported that they were always on the lookout for opportunities with other employers. They revised their résumés, monitored job openings at other employers, talked to friends about job opportunities, or obtained information on prospective employers at least once in the year of our survey. Sixty-three percent applied for jobs, attended job interviews, or contacted search firms at least once in the survey year.

What drives this relentless search for other jobs? First, young professionals have marked and ambitious career goals that are often not linked to any particular organization. As one of our interviewees said, “My main goals are to be satisfied with my job and to make sure I earn the highest possible level of compensation. If I find a better place in terms of these aspects, then there is no harm in changing jobs.”

Second, this group of professionals does not see frequent jumps across employers in a negative light. Said one interviewee, “No matter how many times you change employers, as long as these moves are valuable for your long-term goals, you will be successful and satisfied in your career. Hopping from one place to another might be harmful for one’s career, but only when the person does not really have a legitimate reason to change employers.”

Another interviewee boldly admitted viewing job hopping as a way to “improve your personal brand.” He considered a move across employers a signal “to external parties that you have your own brand equity.” As in the case of promotability, these perspectives represent a sea change from the commonly held view that frequent jumps leave an unfavorable impression on hiring organizations. That traditional view suggested that highly mobile employees might be perceived by potential employers as lacking stability, unable to get along with coworkers, overly opportunistic and trying to sell themselves to the highest bidder, or placing personal advancement ahead of employers’ interests.9

Third, this relentless job search is not necessarily driven by dissatisfaction with the job and an intention to leave the organization, as traditional models of job search and turnover may argue.10 One high-potential person revealed that he went to interviews and constantly had contacts with recruiters and headhunters because he did “not want to be taken advantage of.” He considered interviews a learning opportunity and the chance to obtain information about the labor market. A marketing manager at a telecommunications company had similar motivations: “Interviews are very helpful to evaluate yourself and understand how valuable you are in the market. I even tell my subordinates to apply for jobs elsewhere to gauge their market value and gain job-market experience in case they need it in the future.” Such comments also appeared to be a defensive response to corporations’ notorious move away from the guarantee of job security and lifetime employment.

Fourth, job search is enabled by technological advances that have made the labor market more transparent, providing information on employers and job seekers with a depth and accessibility that were previously unimaginable. Employees may freely communicate what their employer and working conditions are like on sites such as Glassdoor.com or Vault.com. Facebook and LinkedIn not only provide rich information on candidates’ career histories but also facilitate the initial contact between employers and job seekers. Dissatisfied young professionals wanting to move may soon be presented with plenty of opportunities, like this organizational development manager at a holding company: “When I started to send my CV out and let people in my network know that I was looking for a job, I received 16 offers within three months, mostly via LinkedIn.”

Job search is said to reduce one’s focus on and productivity in the job. But if employees appear engaged in their job, are they less likely to search for alternative opportunities? To answer this question, we looked at the relationship between job search and four work-related behaviors, each focused on the current employer and meant to benefit the individual while at this employer. The first behavior, feedback seeking, was asking for feedback and critique on one’s performance during and after assignments. Relationship building amounted to spending as much time with one’s boss as one could, forming a relationship with the boss and seeking to be acquainted with higher-level managers. Networking involved actions aimed at building relationships with individuals in the organization other than one’s boss. Job challenge represented proactive efforts to obtain developmental, challenging tasks at work and to assume leadership in areas where there appeared to be no leadership.

In our German data set, we found that those who are more likely to engage in these proactive work behaviors are also more likely to be active when it comes to mapping opportunities with other employers. It is possible that some of the proactive behaviors represent employees’ discontent with, rather than engagement in, their job: Employees may be more likely to seek feedback and look for challenging tasks if they perceive that they do not receive enough performance-related feedback or that the complexity of their tasks does not match their skill level. This is illustrated by the experience of one of our interviewees: “During my first job, I tried to take responsibility for many challenging tasks, for the sake of my personal and professional development. Because the company didn’t really understand my career goals, I was assigned many tasks that would not be helpful for my development.” But job search also increases as organizational networking and relationship building increase, making it more plausible that those who are more proactive on the inside are also more likely to map outside opportunities. In summary, although young employees may seem engaged and committed in their job, they nevertheless keep track of opportunities outside the organization. Their seeming “investedness” in their employer is no guarantee of their loyalty.

The Effect of Development Practices

Human resources practices such as training to help develop employees’ careers and to help them get on in the organization, personal development plans, and clear feedback on employees’ performance reduced job search behaviors. These practices were most effective in dissuading employees from looking for other opportunities.

The positive relationship between development practices and employee behaviors is not a coincidence: Many studies have found similar relationships between organizational interventions and employee attitudes and behaviors. Development opportunities induce positive employee attitudes and behaviors toward the organization.11

But not all development opportunities are created equal. To identify the development practices that may be most effective in keeping young professionals at organizations, when we conducted our global survey of graduates of a leading European business school, we gave our respondents a list of practices, which we organized into 14 groups. The focus of our list was developmental assignments — the development of employee skills and abilities through challenging job assignments or job-related experiences — because most managerial skills are acquired on the job. We focused on the following on-the-job development practices:.12 (1) practices that require incumbents to start something new or make strategic changes (developing new directions); (2) practices that make incumbents deal with external factors such as unions, government agencies, or community problems (external pressure); (3) jobs with pressure from senior management, with high visibility and responsibility for key decisions (high stakes); (4) jobs that require managers to influence parties over whom the manager has no direct authority (influencing without authority); (5) jobs with an inherited problem that was created by a predecessor; (6) jobs that require leading a diverse group; (7) jobs that require managers to handle new, different, broader responsibilities; (8) jobs with a large scale and scope, with a wide breadth of significant responsibilities; and (9) jobs involving work across cultures.

Developmental assignments are often complemented by other pillars of management development that do not constitute an integral part of jobs.13 Such a synergistic approach is more effective in developing leaders. For this reason, we also included the following development practices: (10) formal (classroom-type) training; (11) mentoring, where a more experienced or knowledgeable person in the organization helps the individual’s personal development; (12) coaching (help from a professional to develop the skills needed in the job); (13) support from senior management to facilitate the individual’s career progress and give direction and support; and (14) support from the direct superior in the form of general direction, performance-related feedback, and career development.

Ranking the 14 items by the extent to which respondents found them important for their career development, high-stakes jobs have by far the most importance. (See “Which Development Practices Matter Most?”) Support from senior management indicates that the job is of key importance to the organization, and so does developing new directions. Formal, “classroom-type” training is the third most important item for respondents.

Which Development Practices Matter Most?

View Exhibit

To identify the talent development practices that are most important to today’s young professionals, we presented survey respondents with a list of practices, which we organized into 14 groups. The survey respondents gave all of the five highest-ranked items an average score between 4.06 and 4.27 on a one-to-five-point scale, with one representing “not at all important” and five representing “extremely important.” In other words, respondents rated all five of the highest-ranked items between “quite important” and “extremely important.”

In regression models, we linked all development practices to respondents’ organizational commitment — an important antecedent to voluntary turnover that also relates to employees’ dedication to work. Among the various development approaches, only high-stakes jobs and support from senior management were significantly related to respondents’ organizational commitment. Very importantly, we found that high-stakes jobs showed a positive and linear relationship with organizational commitment: The more such jobs were provided to early-career, highly skilled professionals, the higher their commitment to the organization was. There seemed to be no diminishing returns to this type of developmental practice, probably because our target population had high career aspirations.

These findings are supported by interview evidence as well. We asked interviewees to tell us about a time when they felt that organizational development practices greatly increased their commitment to the organization. Jobs with high stakes jobs and support from senior management were a recurring theme of these answers. For instance, an Indian male who was a brand and strategy consultant said: “In my last job, I was dealing directly with the board of my client companies and with my top managers. All these senior people know that you’ve only got some few years of work experience but they still value your opinion, so this increases your job satisfaction and your long-term commitment towards an organization.”

The importance that this generation of young professionals attaches to high-stakes jobs and support from senior management is likely higher than in the case of earlier generations, whose careers mostly evolved in hierarchical organizations with predictable patterns of career advancement. Changes in the business environment, however, also signified an end to intra-organizational career paths and job security, and required employees to be more entrepreneurial, responsible for their own advancement and employability. In organizations where predictable career advancement is mostly a thing of the past, young employees want to secure career success by striving to work in ways that have a huge upside potential, either by working in an important or visible job or by enjoying the support of senior management.

At the same time, our respondents thought that job transitions across functions, divisions, or regions inside the same organization (new, different responsibilities) were much less important for their career development. Interestingly, most management development programs in multinational, multidivisional companies are built around that kind of job rotation. The respondents also do not put much priority on managing diversity, be it racial, gender, or cultural diversity, even if many employers may visibly promote diversity efforts. Neither do they consider working on an inherited problem important for their career advancement. However, except for working on an inherited problem, all the items received very high scores, above 3.5 (halfway between “moderately important” and “quite important”). This shows that young professionals are highly concerned about every type of development practice.

The importance scores show no major differences across respondents who occupy different levels of the organizational hierarchy (nonmanagerial, managerial, or even C-level positions), meaning that these practices are equally important to young professionals no matter where they are in the corporate hierarchy, not only when they are nearing the executive ranks.

What can employers do? Given the importance that respondents put on high-stakes assignments, companies with flexible promotion paths where individuals are promoted when they are ready for a new job may be more successful at retaining this generation. Companies with rigid timelines will lose valuable talent, as was the case with one of our interviewees: “As a result of those projects, my prestige in the company went up. I expected a promotion and a salary increase. It took them more than six months to finally give me an offer, which was too late, because I had found another job.”

In smaller organizations where managerial- and executive-level positions are limited, frequent promotions may not be possible. These organizations need to give job challenge and voice to early-career employees and connect them with senior management in other ways. The Turkish joint venture of a global automobile company has been very successful in doing this: It developed “Cultural Change Clubs” — employee clubs that aim to use their research and activities to make changes in the corporate culture. The company encourages participation in the clubs, which employees choose according to their personal interests. Directors, middle-level managers, C-suite executives, and all junior employees work together in the clubs. The clubs are essential in helping young professionals to show and develop their leadership potential, get access to C-suite executives, and learn from working with senior colleagues from different areas. The organization of club events and the collaboration among different layers in the company also create an informal mentoring network for employees.

Another large, global professional-services network of accounting and consulting professionals organizes an event for graduates on the day they join the firm. Senior executives are invited to attend this event, which not only provides new hires a more powerful and authentic introduction to the culture of the company but also signals that they are valued. In addition, the company gives voice to early-career employees by inviting its trainees to the annual partner conferences, where they mix with the organization’s most senior people and discuss their experiences at the highest level. This practice makes early-career employees feel that they are making a difference in how the company is run.14

Where the Gaps Are

Gaps in Development Practices

View Exhibit

We also analyzed the gaps between the practices that respondents consider important for their career advancement and the actual practices that they perceive their employer to provide (both measured on a one-to-five-point scale). The difference between the level of importance of the practices to respondents and the “actual supply” of such practices was consistently positive. That is, organizations always provide a lower level of the development practices than corresponds to their importance to respondents.

We also analyzed the gaps between the practices that respondents consider important for their career advancement and the actual practices that they perceive their employer to provide (both measured on a one-to-five-point scale). The difference between the level of importance of the practices to respondents and the “actual supply” of such practices in their jobs was consistently positive; in other words, the extent to which organizations offer the practices to respondents is lower than their level of importance to respondents. We find the largest gaps between what respondents deem important and what their jobs offer them with respect to mentoring and coaching, formal training, support from the direct manager, and support from top management. (See “Gaps in Development Practices.”)

These are the practices that demand the largest financial and labor resources. The results are underscored by interview evidence. As one interviewee, a male IT manager, said:

I had a commercial function in my last job at a very dynamic company, so time to market was very important. Managers preferred to push people towards different responsibilities so that they learn by trial and error on the way. It would have taken too long to send people away for training and then figure out how to apply what they had learnt.

The gaps are much smaller with respect to various on-the-job development practices — jobs that inolve new, different responsibilities; influencing without authority; an inherited problem; or managing work group diversity. This is perhaps because contemporary jobs provide ample on-the-job development for incumbents, as the waves of organizational restructuring in the last several years have made jobs more complex and more diverse. In addition, corporations increasingly operate in an uncertain, highly volatile business environment where change is a constant.

Employers should pay attention to and try to close gaps between their development practices and employee needs. Lagging behind employee expectations signals that the employer does not understand or care about employees’ needs and does not support their personal growth.

Today’s young professionals have a new, technology-enabled outlook on job tenure and job searching. How do you retain this group of employees? Our study suggests that developmental practices are essential. Employers should not be afraid that such practices will cost them employees; on the contrary, employee development decreases job search behaviors and boosts organizational commitment. Employees crave development, especially assignments that offer clear responsibility and accountability for a project, and visibility to and support from senior managers. Organizations that are ready to give young professionals these forms of development will be the most likely to attract and keep them.

References (14)

1. T.J. Erickson, “Plugged In: The Generation Y Guide to Thriving at Work” (Boston: Harvard Business School Press, 2008).

2. J.M. Twenge, S.M. Campbell, B.J. Hoffman, and C.E. Lance, “Generational Differences in Work Values: Leisure and Extrinsic Values Increasing, Social and Intrinsic Values Decreasing,” Journal of Management 36, no. 5 (September 2010): 1117-1142.

3. Deloitte, “Has the Great Recession Changed the Talent Game? Six Guideposts to Managing Talent Out of a Turbulent Economy,” report, April 2010.

4. J.M. Twenge, W.K. Campbell, and E.C. Freeman, “Generational Differences in Young Adults’ Life Goals, Concern for Others, and Civic Orientation, 1966-2009,” Journal of Personality & Social Psychology 102, no. 5 (May 2012): 1045-1062.

5. J.M. Twenge and S.M. Campbell, “Generational Differences in Psychological Traits and Their Impact on the Workplace,” Journal of Managerial Psychology 23, no. 8 (2008): 862-877.

6. D.F. Larcker, A. McCall, and B. Tayan, “Equity on Demand: The Netflix Approach to Compensation,” Stanford Graduate School of Business case no. CG19 (2010).

7. J.M. Citrin and R.A. Smith, “The 5 Patterns of Extraordinary Careers: The Guide for Achieving Success and Satisfaction” (New York: Crown Business, 2003).

8. K.S. Lyness and C.A. Schrader, “Moving Ahead or Just Moving? An Examination of Gender Differences in Senior Corporate Management Appointments,” Group & Organization Management 31, no. 6 (December 2006): 651-676.

9. H.-Y. Mao, “Voluntary Employer Changes and Salary Attainment of Managers,” International Journal of Human Resource Management 15, no. 1 (February 2004): 180-195.

10. W.H. Mobley, “Intermediate Linkages in the Relationship Between Job Satisfaction and Employee Turnover,” Journal of Applied Psychology 62, no. 2 (April 1977): 237-240.

11. R. Eisenberger, R. Huntington, S. Hutchison, and D. Sowa, “Perceived Organizational Support,” Journal of Applied Psychology 71, no. 3 (August 1986): 500-507.

12. C.D. McCauley, M.N. Ruderman, P.J. Ohlott, and J.E. Morrow, “Assessing the Developmental Components of Managerial Jobs,” Journal of Applied Psychology 79, no. 4 (August 1994): 544-560. Authorized approval granted for the Job Challenge Profile by the Center for Creative Leadership for research purposes (copyright© Pfeiffer/a Wiley Imprint).

13. D. Weiss and V. Molinaro, “Integrated Leadership Development,” Industrial and Commercial Training 38, no. 1 (2006): 3-11.

14. G. Plimmer, “We Need to Persuade Our Graduate Recruits to Stay,” Financial Times, Nov. 6, 2013.

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