Employee Retention: the Hows and Whys
Introduction
In the US, the number of unfilled jobs in the country reached a record high in March of 2021 [1]. Also that month, the reservation wage – the term economists use to describe the minimum compensation workers require – was up by 19% from November 2019, with a jump of nearly $10,000 a year according to a survey by the Federal Reserve Bank of New York [2].
Meanwhile, research by the CIPD, published in October 2023, found that around four million people in the UK had at some point changed their careers due to a lack of flexibility at work. The strange thing? Almost two million of them had done so in the previous year [3].
Unfilled jobs, higher salaries, career shifts based on work flexibility, all of these were the result of what was termed the Great Resignation.
Where are we now?
Throughout the pandemic, employers found themselves incapable of retaining staff. And though the process has slowed – in the US, figures from July of last year show that the rate at which workers were quitting their jobs was only modestly above pre-pandemic levels [4] – workers are still quitting at a rate three times that of reductions [5]. That’s according to the man who coined the term “the Great Resignation”, Anthony Klotz, an associate professor of organisational behaviour at the University College London’s School of Management.
The pandemic is over and can no longer be used as an excuse for such profound levels of employee turnover. If businesses want to keep their staff, they need to make steps to do so. That means valuing employee well-being, engaging with processes of flexible working, and giving managers the assistance they need to be able to keep staff on side.
To do that, businesses need to drop the delusion.
Delusional employers
Nearly two-thirds of bosses believe that workers will return to the office five days a week within the next three years. On top of that, a majority of company leaders think that pay and promotions could soon come to be based on workplace attendance [6].
Those are the findings of the KPMG CEO Outlook survey of 2023. More than 1,300 chief executives of the world’s largest businesses were surveyed to reach those numbers. Of them, 64% felt a full return to in-office working would take place by 2026 and 87% felt that financial rewards and promotional opportunities could be linked to office attendance in the future.
This betrays a level of delusion that’s hard to comprehend.
Almost every survey conducted since the pandemic began has found that workers have no desire to return to their desks full-time. Some even said they would quit their job if the possibility of home working was taken away. Our sister company, Lincoln Recruitment’s 2024 Salary & Employment Insights Survey echoes this sentiment with 53% of employees stating if their current employer changed their hybrid work policy they would be more inclined to seek a new role. The vast majority of workers expect at least some level of hybrid working. The idea that they will regress to the old ways – much less do so with a financial gun to their head by way of pay-based office attendance – is for the birds.
Jon Holt, chief executive of KPMG in the UK, acknowledged as much in response to the survey’s findings, saying that any such initiatives could “create tensions between leaders and employers” [7].
“Issuing an ‘all hands on deck’ edict is a simple response to a complex issue – it won’t work for all businesses”, Holt continued. “Some sort of hybrid working is likely to remain a useful way to attract and retain the good people the CEOs know their business needs.”
It’s not even clear why business leaders are so keen to return to what came before. From a purely financial standpoint, research from Timewise suggests that the upfront costs that come from moving to flexible working are quickly recouped from reductions in sick leave and staff turnover [8].
Hybrid working will not be simply willed away. Although, the findings of a recent paper by Arindrajit Dube, a University of Massachusetts professor who has studied the pandemic economy, might provide a cynical perspective as to why chief executives such as those surveyed wish that it could be.
Dube and his two co-authors found that during the pandemic the earnings gap between workers at the top of the income scale and those at the bottom, after widening for four decades, began to narrow. In fact, in just two years, the economy undid about a quarter of the increase in inequality since 1980 [9]. The researchers put much of that progress down to workers’ increased ability – and willingness – to change jobs. One could see why those at the top want things to go back to how they were.
For his part, Dube is not expecting a regression, saying, “There are good reasons to think that at least a chunk of the changes that we’ve seen in the low-wage labour market will prove lasting.”
Retaining workers: Well-being
In a study of Glassdoor employee reviews from April to September 2021, Donald Sull, a senior lecturer at the M.I.T. Sloan School of Management, found that corporate environment ranked as the top factor in employee retention [10]. A toxic work culture was found to be “ten times more predictive of having a higher-than-industry-average attrition rate than compensation.”
Of course, defining toxic culture is difficult. It is more a feeling than anything tangible. Though, of course, endless negative feedback, screaming bosses and unachievable expectations all contribute.
Conversely, the simplest way of developing a strong working culture is to value employees, and ensure that they feel it. Positive feedback, flexibility, compassion, communication, mental health awareness – all things that should be the bare minimum employers offer their staff and yet are so often neglected.
Research published in 2023 based on a survey of over 1,500 businesses across Ireland found that 80% of employers are not investing in workplace mental health at all [11]. The report, Healthy Workplace Ireland: A Survey of Mental Health and Well-being Promotion in Irish Firms, also found that mental health-related absenteeism was on the rise – hardly a shock given the lack of investment firms are placing in the area.
This goes back to Mr Sull’s study. He found that companies often failed to live up to the values they preached in public statements. Those companies whose actions matched their words “are the exception, not the rule,” he said [12]. A number of companies preach the value of mental health and taking care of their employees, but troublingly few follow through on that pledge.
Retaining workers: Growth opportunities
Other factors that help employee retention according to Sull’s research are offering remote working options, consistent scheduling, and, crucially, personal growth and development opportunities.
The analysis showed that providing lateral job moves was twelve times as important as promotions when it came to encouraging retention [13].
Helen Tupper, co-founder and CEO of Amazing If and co-author of The Sunday Times number-one bestseller The Squiggly Career, found the same. “Limited awareness of roles and a perceived lack of support from managers means that for many, it has become easier to leave and grow than squiggle — that is, change roles and develop in different directions — and stay” [14].
It falls to managers, then, to offer employees growth opportunities so that they are more inclined to stay. But as Tupper points out, partially due to the scale of resignations, “Increasingly squeezed managers are spending time they don’t have searching for new recruits in an expensive and competitive market.” Finding the time to offer existing employees new opportunities is not easy, but it is worthwhile.
What managers can do
Tupper argues that managers need help with three things. First, in helping shift the focus of career conversation from promotion to progression, including allowing employees to develop in different directions. Two, in creating a culture and structure that supports career experiments. Three, in shifting the focus from retaining employees in their specific team, to retaining employees in their entire organisation.
To achieve the first, she suggests having honest career conversations with employees. These should not be rushed or mere tick-box exercises. Tupper states that the goal should be two-fold: “to give employees the permission to be curious about where their career could take them and the practical support to make progress.”
To achieve the second, she suggests that managers work together to create career experiments across an organisation. This allows employees to try out new experiences and opportunities and discover more about where their skills can be put to use.
Too often retention is focused on keeping employees in whatever box they wound up in when they first got the job because the employee has shown him or herself to be skillful in that area. In seeking to retain employees who are successful in their individual role, managers often ask them for more of the same so that they maintain that success. As Tupper writes, “The unfortunate outcome is that the people managers most want to retain feel constrained and become more likely to leave, risking the performance metrics [the manager was] so keen to protect in the first place.”
To achieve the third, Tupper suggests reframing the question “how do I keep this person on my team?” to “how do I keep this person in my organisation?”
“A manager’s role in supporting someone’s career must expand to support people to explore opportunities beyond the boundaries of their existing team,” she writes. “Metrics matter in driving behaviour changes, and managers need to be recognized and rewarded for enabling internal mobility.”
Retaining an employee does not mean making them stagnant. Employers should want their employees to grow and develop new strings to their bow. It is beneficial to the whole team and, if done right, more likely to make them want to stay. Loyalty is earned through letting someone spread their wings, not through stockholm syndrome.
Employee retention
The Great Resignation brought a fresh focus to employee retention, as workers showed a newfound autonomy and willingness to walk away from roles that didn’t meet their needs. Many employers want to put Pandora back in the box, but it’s clear that the pandemic changed work practices for good – there is no going back.
To keep staff now, employers must demonstrate that they value them and their well-being. A lot of businesses have worked out that it is beneficial to say they care about their staff’s mental health. Hopefully soon, a few more will realise that actually caring about it will be more beneficial still.
So too must employers offer growth opportunities to employees. Workers often consider such opportunities more valuable than promotions or higher salaries. People want to develop their skills, managers should foster an environment that allows them to do so, understanding that retention should be viewed through a company-wide lens, not just an individual team one.
The pandemic is over, the Great Resignation too. The fallout, however, for employers and workers alike, is still playing out.
Sources
[1] https://www.nytimes.com/2021/06/05/upshot/jobs-rising-wages.html
[2] https://www.nytimes.com/2021/06/05/upshot/jobs-rising-wages.html
[4] https://www.nytimes.com/2023/07/06/business/economy/jobs-great-resignation.html
[5] https://www.nytimes.com/2023/02/13/business/employee-retention-quitting-companies.html
[9] https://www.nytimes.com/2023/07/06/business/economy/jobs-great-resignation.html
[10] https://www.nytimes.com/2023/02/13/business/employee-retention-quitting-companies.html
[12] https://www.nytimes.com/2023/02/13/business/employee-retention-quitting-companies.html
[13] https://www.nytimes.com/2023/02/13/business/employee-retention-quitting-companies.html
[14] https://hbr.org/2022/07/its-time-to-reimagine-employee-retention
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