How Companies Can Retain Their Workforce

How Companies Can Retain Their Workforce

People are quitting their jobs in the UK, Europe, the United States, and other developed economies, including China. The phenomenon is being coined “The Great Resignation”. It is also called the “The Big Quit” and “The Great Reshuffle”. It began at the beginning of 2021 as a response to the Covid-19 pandemic and is continuing today.

Some of the drivers of the Great Resignation include:

  • Dissatisfaction with wages which have stalled post-pandemic
  • Inflation and the rising cost of living
  • Disruption resulting from the war in Ukraine
  • Lack of opportunity to advance careers
  • Unpleasant work environments
  • Dissatisfaction with remote working policies
  • A general long-term lack of job satisfaction

While the Great Resignation affects many job sectors, education, hospitality, and health care are the most affected.

The generation gap

Today people demand a more relaxed work/life balance. Working from home has proven popular, with many workers reluctant to return to the office, despite senior management and the government’s pleas. There is also a powerful generation effect, with Millennials and Generation Z spearheading the work exodus. While records numbers of employees are quitting their jobs, a far more significant proportion, up to 40%, are considering doing so.

But it isn’t exclusively the younger workers leaving their jobs. Many older employees, tempted by the possibility of early retirement, cast off the shackles of employment for a life of leisure. Such workers are unlikely to ever return to the workforce.

Keeping workers happy

The mass exodus of workers is significantly impacting businesses, other organisations and the economy as a whole. The result is companies are failing to recruit the talent they need and are similarly failing to retain existing workers. Consequently, they are falling behind in technology and innovation, with enormous implications for future prosperity.

But how do companies overcome this worker retention problem? Is it just a matter of keeping employees happy, and if so, how to achieve that, or are more profound, less transparent forces at play? To put the problem facing business into perspective, according to a McKinsey survey, one-third of respondents anticipate quitting their job within three to six months. In Poland, the number is even higher – fifty per cent of workers want to quit.

Why European workers are quitting their jobs

Focussing on European workers, the following chart summarises the primary reason why European workers are quitting or wish to leave their jobs (data taken from McKinsey).

The main drivers to quit are inadequate compensation and the lack of a clear career path; however, the lack of caring leadership is also a big motivator. Many workers also feel under excessive stress as the demands are unsustainable. The lack of meaningful work, inadequate support for their health and well-being, and lack of flexibility in the workplace are also significant factors. On a lower level, though still important, are factors such as lack of support from fellow workers, travel issues, unsafe workplaces and inadequate resources.

Not all workers are unhappy

So far, we have focussed on the negative, reporting that forty per cent of the European workforce is unhappy with their jobs. But looking at the other side of the coin, sixty per cent are happy and are not considering leaving. While it is likely that similar factors are at play, we can assume that they are reasonably satisfied with their compensation, career advancement opportunities, leadership and so forth. Presumably, they are not wilting under the pressure of excessive demands being placed on them.

It would be a mistake for organisations to focus entirely on the workers thinking of leaving and concentrate their efforts on persuading them to stay. Instead, it would seem that the most critical group to satisfy are those workers who do not feel the desperate need to go. Given that they are reasonably satisfied, maintaining their satisfaction levels would require less effort.

However, splitting workers into two groups – those who plan to go and those who plan to stay – oversimplifies the situation. It would be better to consider the workforce as split into four distinct bands:

  • Workers who are happy with their job but are looking for greener pastures elsewhere
  • Workers who are leaving because they are dissatisfied with their job
  • Worker staying who are satisfied with their job
  • Workers who are staying but are generally disgruntled with their job

Although the last group are unlikely to leave in the short term, they are also unlikely to be engaged in their work and are unlikely to perform to the best of their potential. In some ways, they might be considered a liability. These workers might fall into the trend of doing the very minimum they can get away with to avoid getting fired, with is not a good place for them and a negative force for their employer. This group is often called the “quiet quitters”, and the number of people who fall into this category is surprising, even disturbing. According to Gallup’s 2022 engagement numbers, fifty per cent of the US workforce falls into this category. Just thirty-two per cent of workers are fully engaged, and the remaining eighteen per cent are actively disengaged.

A possible retention strategy

So far, we have examined the numbers of workers quitting or thinking of quitting their job and why they are doing so. We have also looked at quiet quitters. Next, we will consider a possible strategy that employers could adopt to retain their workforce, keeping the workers they have, attracting new young workers, and restoring levels of engagement and productivity.

Pay above-average salaries

As we have seen, dissatisfaction with salaries is the biggest driver of staff attrition, which has probably always been the case. The need to earn more money is considerably exacerbated in a low-growth economy with rising prices and high-interest rates. So paying your workers more than the average salary seems an obvious way to retain your workforce. It is also probably the most effective. It can undoubtedly keep workers tied to the workplace in the short term. And if you include an incremental retention bonus in their annual compensation, they might be persuaded to stay with you longer than they otherwise would. People are more likely to be motivated if their personal success makes a difference to the firm’s success. Tying staff success to business success is another way of encouraging retention. Employees should also profit through increased salaries or other perks when the business does well.

However, be warned that there are potential downsides to paying above the industry average. One possible repercussion is that the enhanced salary might make the employee appear more desirable to the competition – if you consider them worth the extra money, perhaps they are. Indeed, staff can use their enhanced salary to attract alternative employers.

Also, you have to be fair. Paying new employees more than old and trusted employees is a dangerous practice. However much you might try to keep individual salaries a closely guarded secret, eventually, the truth will come out. If older employees discover that new recruits are earning significantly more, you can anticipate stormy waters ahead.

Address your recruitment strategy

Are you recruiting the right people motivated to commit to the business despite not receiving above-industry standard remuneration? Selecting people of this calibre isn’t easy, and perhaps they are a relatively rare breed, though this kind of loyalty can be encouraged through multiple means. Psychometrics is a powerful tool for digging down into what drives people. It can help differentiate between those recruits who are likely to become team players and those who are not. That isn’t to say you should only recruit team players – some outstandingly talented people are natural loners, so don’t let them slip through your fingers.

What you should avoid during the recruitment process is the bias many businesses are prone to, where each recruiter is looking for a personal clone. Such teams never vary in outlook and strength, with each member having similar characteristics and backgrounds.

Onboarding is also an essential step in the recruiting process. It is one opportunity for employers to make a lasting impression on recruits. Organisations that evoke an “us and them” attitude, where alienation between workers and management is the norm, will never succeed in retaining their best talent. Recruits need to feel at home from the off and welcomed into the band of happy, motivated workers, so they quickly find themselves vital team members.

Address your working-from-home model

The ability to work from home is an essential asset for both recruiting and retaining staff. However, inadequate workplace flexibility is one of the more significant drivers of quitting, and the effect is increasing. The staff turnover rate of office-based staff (41.6%) was significantly higher than both hybrid (36.6%) and remote (38.7%) working models in 2022. This imbalance reverses pre-pandemic staff turnover rates when remote workers (33.0%) were higher than office workers (30.1%).

Remote and hybrid working can benefit both employees and employers. It saves money and time on commuting, leaves more time for non-work activities, and broadens the talent pool of potential recruits. In addition, remote working means that companies can attract talent worldwide. As a result, it can powerfully impact your retention rate.

Invest in staff development

Employees who feel they are learning and growing from their employment are less likely to leave. Motivated employees generally hope to enhance their careers, and employers have much to gain by providing employees with opportunities to do so and encouraging them to take up those opportunities. While the downside is that these enhanced skills will make the employee a more attractive prospect to the competition, at least the current employee will benefit from the same skills until that happens.

Chasing a declining talent resource

Recruiters are facing multiple challenges. The Great Resignation is a real phenomenon occurring at both ends of the generational spectrum. However, the loss of talent from Generation Z and the Millennials is arguably more worrying than the loss of older workers to early retirement. Overall the talent resource is declining while the need for staff is increasing, exacerbated by the speed of new technological developments.

As we have seen, there are multiple reasons why people quit their jobs, and there are some practical steps employers can take to lessen this trend. However, whatever measures employers take, people eventually leave, and often the very best people are the first to do so. Unfortunately, dead wood tends to hang around the longest. Hopefully, those who leave will do so with a positive spirit and warm feelings towards their previous employer, thus encouraging others to join.

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