Talent retention must be a top priority to sustain growth post-pandemic, where an unprecedented number of employees are looking for change. While it seems like that means companies should just hike salaries and reduce profit to attract and retain top talent, job seekers have a much broader set of priorities defining what kinds of work can entice them in a company and keeps them there.
Money alone isn’t a solution. For instance, a decade ago, major multinationals in China were looking at average merit increases of 20%. During that time, those companies also saw a turnover rate of 20-25%, so higher salaries should not be assumed to be the key to talent retention.
What company managers should do is invest in benefits an total rewards that deliver significant value to employees but cost relatively less to offer, said Tim Glowa, principal for Human Capital Services at Grant Thornton, compared to salaries and bonuses, which have an equal cost-versus-perception ratio, every other perceived value reward is either a fraction of or an excess of that actual value. For example, a global beverage company which provided top executives a monthly car allowance determined through surveys that the perceived value of this perk was significantly greater than its actual value. At the same company, per-employee healthcare with a perceived value of between $10,000 and $12,000 actually cost $15,000 annually – an example of employees undervaluing a benefit.
What these examples illustrate isn’t that cars are better than healthcare but that understanding better what your employees value can help you design rewards and benefits that best maximize perceived value. Doing so would allow an organization to differentiate its value proposition in a way that is meaningful for employees.
“If you can do that, you have the potential to differentiate your employee value proposition in the eyes of employees in a very meaningful way,” said Jennifer Morelli, a principal in Grant Thornton’s Business Change Enablement practice.
In our 2nd quarter CFO Survey we learned that employers have the data about what employees want and value right now, even though some don’t want to believe it.
- 33% of CFO respondents say they want employees back in the office, yet 75% of employees want flexibility
- 34% of employees actively looking to make a change this year
- 66% are actively looking for a new job
In Grant Thornton’s soon-to-be-published “The State of Work in America” survey, we find these trends are even more pronounced for employees making more than $100,000 annually. Which means that there is some tension between what CFOs and other company executives want and what their employees want from work. It’s a balancing act, and the right solution to balance the desires of employees and their bosses is dependent on many factors – most importantly, what kind of company and what kind of work is being done. Decision-makers in a company should understand employees desires for workplace flexibility but not be afraid to set boundaries and expectations when a particular type of work requires, say, an in-office presence.
In this environment, “good will” alone isn’t enough for companies that want to retain their talented employees.
That’s not to say that salary and bonuses aren’t also important. But in a sense, ensuring decent pay is “table stakes” -- they aren’t really sure what will distinguish companies from each other. Companies need to take other steps if talent retention is important to its future. In our experience, the three biggest factors that influence whether employees stay at a company are 1. Feeling a connection to a company’s values, 2. The relationship with their immediate manager and 3. The possibilities for career development.
Connection to company -- More than ever, understanding what values a company stands for can attract desirable employees. These may not always be the same values -- what Baby Boomers value, what Generation X values, what Millennials value, all may be different. But ensuring that the company invests in local charities, refrains from identifications that are too politically fraught, are ways employees can feel a sense of community working at their business.
But company connections can be made in other ways, such as ability to participate in decision-making. Inviting employees to share in decisions that affect their workplaces, such as deciding on cafeteria rules or building temperature, can serve a dual purpose of making an employee feel their input is valued and identifying employees who show leadership potential.
Immediate manager – The promotion of good workers to bad managers can be a problem for companies since managing workers can require a skill set from the employees being managed.
“It’s not in everyone’s DNA to manage people,” said Angela Nalwa, a managing director of HR Transformations at Grant Thornton. Often, it is difficult for a company to identify its bad managers since the criteria for this judgment so subjective, and often accusations are made by bad employees using management failures as an excuse for low performance. And the issue is critical – our “The State of Work in America” survey indicates 34% of employees point to their immediate manager as the most stressful part of their day. When bad managers drive good employees to leave companies, you lose both talent and money. The cost of hiring and training a new employee can run from 90% to 200% the cost of the former employee’s salary.
One way to identify underperforming managers is to make employees evaluations hinge on multiple reviewers and allow good employees to have more than one person judge their effectiveness. Another is to identify skills that make good managers that are different from overall performance, such as the ability to work with teams, or participation in brainstorming activities, or any similar people-oriented skill. Also, when companies identify and promote employees to be mangers, don’t assume they know how to actually manage. Forbes reported in 2018 that 58% of managers received no management training at all. In a Grant Thornton survey of 551 human resources leaders, only 19% said the development of their front-line managers was a company goal in the coming year.
Career development – Employees will want to stay in a company where they see a well-defined path of promotion and professional development. Good managers should make sure their employees know and appreciate what else is available at the company, and help them see their future in it. Companies would be helped by finding ways to better rank their talent. After figuring out which employees to retain, try to determine which ones are “flight risks” and why. Data analytics can be of use in this endeavor.
Or take the previously mentioned high-turnover rate within multinationals operating in China. Glowa said a select number of companies in China responded by investing in career development opportunities. Doing so allowed these companies to differentiate the employee “value proposition” in a meaningful way for their new hires. This was accomplished through such initiatives as job rotating programs for new hires or offering short-term assignments at corporate headquarters.
“In a tight labor market,” Glowa said, “Investing in developing people can not only potentially reduce attrition, it can have the added impact of increasing productivity within the organization.”
Retaining employees is only one goal, though – you first have to find good employees. A review of your recruiting process should be a must-do if a company has seen a lot of turnovers of recent hires. A company’s business leaders should ask these questions about its hiring process:
- Are there too many interviews/tests on an application (for instance, Google reduced its interview process from 20 interviews to five)?
- Do the job descriptions accurately describe the work?
- Are the recruitment efforts producing the right candidates?
- Can the hiring process be made more efficient so as to reduce the time of decision-making?
As with employee retention strategies, hiring committed employees involves gaining a better understanding of what potential hires value, making that possible within the limitations of the company’s needs, and then effectively communicating that to potential hires to avoid misunderstandings when they actually start work.
There is no one right answer for molding a company’s human relations strategies to best advance the goal of talent acquisition and retention. Often, a professional adviser with experience in this field can be an enormous help in forming and tailoring retention strategies so they are appropriate to the needs of a business.
Jennifer is a leader of Grant Thornton's Business Change Enablement practice. She advises clients across a broad range of industries on how to handle the ‘people side of change’ through organizational, process and technology transformation.
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