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Oct 31, 2014

When you think about the employer-employee dynamic, the old career path is dead, and the balance of power has really shifted toward the people who have critical skills.

Open up a major business publication any day of the week, and you’ll find employers talking about how hard it is to find employees with specific skills.

In a Harvard Business Review article and new book, LinkedIn founder Reid Hoffman advocates a new employer-employee compact that addresses this problem. Hoffman and his co-authors suggest hiring employees for “tours of duty” lasting two to four years.

The strategy misses some important nuances.

There is a big difference between how you approach your entire workforce and how you approach your highest-value employees. At my company, for example, we have 115,000 global employees. Entering into a two-year contract with all of them would be hopelessly complex.

Still, a tour-of-duty strategy can be useful — especially when it’s used for engaging existing talent rather than recruiting new employees.

Combatting the transactional employment crisis

The necessity of a tour-of-duty compact sheds light on a troubling trend. Hoffman points out that employers no longer commit to employees, and employees don’t stay at any job for long. This trend doesn’t just affect the high-tech sector in Silicon Valley, either.

According to the Bureau of Labor Statistics, turnover rates across the nation were within 1.1 percent of one another between March and July of this year.

This change in attitude is primarily driven by a nationwide skills gap.

While unemployment remains relatively high, employers are struggling to fill jobs with qualified candidates. This has shifted the power from employers to highly skilled employees who, like A-list actors in Hollywood, are in a stronger position to dictate the terms of their employment.

One problem: transactional costs

In response, employers are becoming more flexible and creative in how they think about relationships with employees. They understand that most people want to leave after a few years, so they have to entice employees to stay longer.

The main problem with a tour-of-duty approach is transaction costs. Constantly cycling through new people in your organization involves a significant cost to both parties.

New hires take about three months to become fully productive. The most productive employees tend to be those who understand their company’s strategy — a knowledge base that increases with time at a company. On the other side, employees must re-establish their reputation, credibility, and networks every time they get a new job.

When Tour of Duty works

The tour-of-duty approach works best when you want to obtain or retain top talent in an area where skills are in high demand.

In these cases, a tour-of-duty contract offers flexibility for both parties. It also reflects the reality that most people with high-demand skills already approach their careers this way. A tour of duty minimizes questions associated with short tenures at an organization — behavior that’s already normal for many workers.

A tour of duty can also increase productivity when employees know that their continued career success is contingent upon producing measurable results as quickly as possible.

4 ways to make a tour of duty approach work

Here are four tips to help you get the most out of this type of agreement:

  1. Identify your eligible positions. A tour of duty will work well for any position where a person has high-demand skills. Aim to identify no more than 15 percent of people in your organization who are a good match for this approach, focusing on the most critical, difficult-to-fill jobs.
  2. Provide compelling work. Employees want to improve their skills and do things they’re passionate about. Retaining top talent means assigning work that’s stimulating, compelling, and challenging.
  3. Have strong leadership. Leaders must show interest in their employees’ career development. Good leaders are probably already engaging in conversations with their most valuable employees and saying, “Working with us will make you more marketable.”
  4. Extend the tours. The primary way to capitalize on a tour-of-duty agreement is to keep employees moving up within your company. Your best people should be gaining diverse experiences, not stagnating.

A win-win proposition

These practices can make a tour-of-duty agreement advantageous for your company. Your most talented employees become even more valuable as they constantly improve and grow in their understanding of how the company functions. In return, they get to build their networks and skill sets.

As employers realize that they help employees keep their skills fresh while maintaining organizational stability, it’s becoming increasingly clear that there’s no one-size-fits-all solution for an entire company.

It’s a segmentation problem, and we’ve got to pick and choose our moments.

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