Items for directors and management to discuss
If you thought recruiting and retaining the best people for your company was challenging pre-COVID, recent news reports indicate that this battle will intensify significantly going forward.
According to a global study by Microsoft, over 40% of the workforce is considering leaving their employer this year, and the Society for Human Resources Management found that 52% of North American workers were planning to look for a new position in 2021. As a point of reference, the pre-COVID U.S. average voluntary turnover rate was about 15%, according to Mercer Consulting.
Forbes reported 61% of women are planning a major career change post-pandemic. This comes at a time when businesses have been hyperfocused on advancing women and diversity; significant attrition could undo some of the progress made.
In addition to client disruption and possible negative social media implications of significant turnover, there is a large cost to the corporate bottom line. Our research finds the average cost to replace a new employee to be 33% of the cost of their salary; given a U.S. median salary of $47,000, the cost to hire and train a new employee is $15,500.
A contributing factor is a great erosion in trust between company and employee during the crisis. While companies aren’t responsible for COVID-19, they are responsible for their response and behavior with employees. One-third of all companies cut employee salaries because of COVID-19; this was a contributor to the erosion of trust.
We are seeing pent-up frustrations with employees as 69% believe that COVID-19 is the most stressful period in their professional lives. At the same time, employees are indicating a strong desire for greater flexibility. According to McKinsey, over 50% of employees would prefer to work from home three or more days per week, and 30% of employees say they will likely switch jobs if required to return to fully on-site work.
Historically, there has been a strong linkage between engagement and employee turnover, absenteeism, shrinkage and profitability. During a typical corporate merger, we see employee engagement would typically drop 10 to 15 points, and then take a year or two to recover to pre-merger levels. We are anticipating this same type of dynamic with COVID-19 impact on the workforce and employee engagement.
Next steps for directors: Areas to discuss with management
- The first step is ensuring the company is focused on development of a robust employee communication program, carried out in an honest and forthcoming manner, with as much contact as possible. Also, according to the McKinsey report, 47% feel a lack of clear vision about the post-pandemic world is a cause for concern. In addition, 49% are feeling at least somewhat burned out. The old saying — Communicate, communicate, communicate — has never been truer.
- There are some quick wins for organizations. If you haven’t conducted a pay equity study or analysis, now is the time to do so. It can be a true quick win. Communication of the program can be a great start to rebuilding trust with employees. There’s an enormous opportunity to develop an understanding of employee needs and preferences that can help the business to realign benefits investments to changing needs, which can even result in savings.
- If someone’s coming into the organization, why are they joining? What are the attributes that make your company different? Similarly, why are employees exiting? Effective onboarding and offboarding can help you know what you need to work on to retain talent. Behavioral scientist and Nobel laureate Daniel Kahneman documented the peak–end theory, which posits that people judge an experience at its most intense point and at its end, rather than the sum total experience. According to the theory, employees pay more attention to how companies manage departures and that influences their future willingness to return to the company, refer others, influence former colleagues and share their experience on social media.
- At this time, also consider measuring the culture of the company. Culture has radically shifted in the last 14 months, so much so that any employee listening that you undertook prior to COVID-19 is completely useless. The shift in needs, preferences and opinions has been at a seismic level.
- Organizations need to pick one or two workplace attributes they want to own. Being at the 50th percentile with your peers in baseline HR perks and benefits will not cut it. Identify your unique market differentiators — something your competitors can’t match. HR professionals need to think like marketers and create a unique value proposition, with employees and recruits as your customers. You want to address an unmet need in these audiences in a way that your competitors can’t replicate.
If you can’t create this workplace value proposition, you’re going to be short of people and will need to spend more to attract and keep them. Understanding employer stressors can enable creation of solutions, which can be empirically tested to inform, design and deliver a better total reward package that addresses the needs of employees. We find this also often saves money for the company.
- Identify top performers and flight risks. Then, proactively or reactively identify and address individual needs and preferences they shared in their preference optimization responses.
- Last, tap into your alumni and build networks to stay in touch with and support them. Harvard Business Review wrote that a 2019 report by PeoplePath and Cornell University showed that about one-third of corporate alumni maintain connections with previous employers as clients, partners or vendors, and that 15% of new hires come from alumni rehires and referrals.
The pandemic has proven to be one of the most challenging times in recent history for many organizations and their employees. As we move forward and evolve to this changing situation, there are opportunities for organizations to achieve operational efficiencies, drive revenue growth, and strengthen brand and customer experience by leveraging data to drive and improve the human capital function.
Audit insights and technical guidance
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