Attracting and recruiting top talent takes a lot of work and time to accomplish - keeping them on board is a different story. Employee retention remains one of the biggest and growing challenges for organisations, one that has the potential to hold back an entire organisation and its workforce from achieving a successful transformation. It would appear that many organisations believe that better compensation is the key solution to getting people to stay, it's not. The key is establishing employee loyalty by enabling them to engage and express themselves through meaningful work, guided by purpose-driven leadership.
According to Monster‘s 2021 Future of Work report, the hiring outlook in 2021 is positive, with organisations looking to replace vacated roles and hire new positions. In the US, organisations, especially in the tech industry, are planning to create new roles this year and increase their blue-collar and grey-collar workforce, as per the report. According to a LinkedIn article, hiring is expected to increase with 4 out of 10 employers looking to invest 10% more headcount in 2021 in the Asia Pacific region.
Development of the Recruitment function is critical for companies to acquire and build the workforce of the future. However, this only covers one side of the challenge. On the other side is retention. Employee retention relies on different factors, including employee engagement or experience, compensation and benefits, work-life balance, professional development, office morale, employee onboarding, and office collaboration. Employee retention has shifted from a broad-base challenge to a targeted issue for many employers. Organisations are growing weary of not keeping the talent they need and that simply replacing them is not enough. High staff turnover also has a material financial impact on organisations, thus rendering them unable to keep up with competitors equipped with well-established retention strategies.
If you ask your employees what would encourage them to stay with you, you’ll likely get answers centred on higher compensation and better benefits. This answer can often be attributed to employees who can’t see any other mechanism by which they can be acknowledged and valued.
The reality is your competitors are also using money to lure away your top talents and best candidates, and a lot of the time, they are successful. The material negative impact of using compensation as a retention tool has, is that it drives salary inflation unevenly across a business and industry sector. The other, much more significant material impact exacerbated by salary increments for retention is that it keeps disengaged talent on your payroll. According to a 2020 Gallup article written by Jake Herway, disengaged employees can cost an organisation more than $60,000 USD yearly. “In a company of 10,000 employees with an average salary of $50,000 USD, the cost of their disengagement is $60.3 million USD annually” Herway says. While money plays an essential role in employee attraction and retention, it does little to achieve the larger objective of having an engaged workforce.
The Covid-19 pandemic has momentarily increased employees’ reluctance to leave their jobs for a new role. Despite the offer of higher compensation, they are greatly concerned with company stability and job insecurity. This concern will remain beyond the pandemic. With that, it is possible that in the present and the future of work, some employees will settle with jobs that don’t provide them with the value and opportunities they seek. In retaining employees, better compensation must be combined with a stronger sense of purpose that delivers greater employee engagement and development.
Purpose-driven leadership is about rewarding employees with opportunities for growth rather than only offering a pay increase. In doing so, the currencies you can use include leadership programs, upskilling, wellness activities, work-life balance initiatives, career mobility, all of which contribute to greater employee engagement. Employees must be encouraged to develop their skillsets to take ownership of how the workforce and the workplace may evolve. After all, what is the point of hiring top talent if they aren’t engaged to bring their best self and work? Increasing retention of employees who are not engaged and productive decreases your Return on Human Capital (ROHC).
The number of Gen Z and Millennial employees will continue to grow exponentially. There is also a renewed focus on better accommodating mature age workers, age 50 and above. These age groups of workers are looking for strong leadership to represent them for their capabilities, knowledge, and skills, not their age. In Australia, 42% of older workers lost their jobs or had their working hours reduced due to the pandemic, according to a research report by Humanforce in November 2020. Several organisations and their executives are now engaging in discussion on embracing better the mature age workforce that would allow them to attract and retain these employees. It’s not just organisations, but also government bodies that are supporting this agenda in Australia.
Employee retention is one key area in human capital management and understanding employee retention on a deeper level means measuring it. Employee retention is an important metric that would allow organisations, mainly the HR department, to measure ROI from human capital investments. Employee retention measurement can be broken down into sub-metrics, including voluntary turnover, involuntary turnover, employee satisfaction rate, new employee satisfaction rate and employee attrition.
It isn’t easy to measure employee retention and its sub-metrics, especially if your organisation is not equipped with the right skills and tools. Increasingly, organisations are relying on actionable feedback from their employees to come up with retention strategies. Employers, managers and executives keep asking for feedback from their employees, but many of them don’t act on it. In the Engagement and Retention survey report by Achievers with 2,000 respondents, one of the key findings is that employers tend to drop the ball when it comes to their response and resolutions on employee feedback. More than half of the respondents provided feedback on how to improve company culture and employee experience. However, when it comes to establishing action points and acting on this feedback, nearly half of the respondents deemed their managers or employers to be lacking.
To better understand employee retention for your organisations, talk to your employees. Don’t just ask questions; engage in the discussion. Not only that, articulate the organisational and financial impacts of high turnover rate to your entire team. The exact cost of employee turnover varies; nonetheless, it is cause for concern. Losing high-performing employees means a drop in productivity, low engagement, more training and onboarding cost, and cultural impact.
The best way is to develop the “right solutions” for the “right reasons” for employees to stay, engage and thrive. When I say “right,” I mean right for the employees and the organisation, not just for the latter. These retention solutions or strategies are not going to be the same as one another, but the main point is that they should be compatible with your employees and the value they bring on board. Vincent Flowers and Charles Hughes discussed the same sentiment in an article published by Harvard Business Review more than 40 years ago. It is essential to get it right for the present and future of work.
It is a continuous process of learning the different factors that motivate our employees to stay and thrive for us at Will. Ultimately the purpose is to deliver additional value through their contributions to all stakeholders and grow as professionals.
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