Why your best business investment could be employee retention
In the old days (e.g., prior to the coronavirus pandemic), many organizations dedicated a less-than-optimal percentage of their HR resources to employee retention. Why bother working to retain staff when new employees were lining up for their positions? Even then, top employers understood that it not only makes more financial sense to retain and engage their current employees, doing so also produces better innovation, enhances company culture and helps to deliver an improved client service experience.
Now, with labour shortages causing havoc across industries—and the cost of staff turnover often costing multiples of an annual salary in retraining and onboarding costs (assuming a worker’s departure doesn’t involve an expensive employment law challenge)—employee retention could be an essential and cost-effective part of your organization’s growth strategy.
In the current business environment, most leaders have little choice than to go above and beyond to keep a smile on workers’ faces—a reality across industries. The latest Statistics Canada data shows that while the national unemployment rate continues to hover at slightly more than 7 per cent, sectors such as accommodation and food services are experiencing labour shortfalls of more than 12 per cent. That figure is around 5 per cent in professional services, 8.3 per cent in arts, entertainment and recreation, 6.1 per cent in construction and 4.5 per cent in the finance, insurance and information industries.
At 5 per cent, the current nationwide job vacancy rate is a record, with available positions spiking by 22 per cent in June from May alone. As a recent RBC Economics report notes: “Workers are now in a stronger bargaining position when it comes to negotiating higher pay or better benefits … In the coming months, labour shortages are likely to intensify as the recovery drives firmer labour demand.”
RBC’s analysis points out that delayed retirements are likely to increase as the pandemic slowly wanes, further exacerbating labour shortages. Wage inflation will almost certainly continue, which will disproportionately impact worker-starved industries such as food and hospitality.
Listen, understand, build trust
That the coronavirus pandemic has upended almost every aspect of our lives is clear. But what it’s really driven is a complete re-think of our individual priorities, both personal and professional. Employees that have been forced to work remotely have begun reassessing what matters most to them—and many won’t return to the old way of working.
They’re now demanding better work-life balance, improved working conditions and greater flexibility to work how and when they want. This won’t work for many employers, of course, but labour-starved organizations must adjust or risk weaker growth and direct threats from competitors who do manage to keep their teams engaged.
It starts by sitting down with employees and asking the right questions: How can your organization enhance their working lives? What do those employees need to be successful? Does their current position still make sense in light of potentially-shifting lifestyle goals?
An ADP Canada survey found that while compensation is still important, work-life balance now matters more to employees. It found that 15 per cent of employees left for a new position or industry during the pandemic, a figure that rose to 22 per cent for staffers that have been working entirely remotely. Fully 33 per cent cited personal life changes as the reason for their workplace departure, 28 per cent wanted greater flexibility and 29 per cent sought to minimize stress and workload.
When it came to priorities, 33 per cent said that work-life balance now tops their list, while 20 per cent felt that wages were a more important factor in determining whether to remain with their current employer.
Securing employees’ trust and dedication takes a renewed look at your organization, its culture and its business practices. Employees will have greater trust in their leaders if they believe that your company is willing to invest in their success.
Catering to new employee priorities
As I’ve noted in previous blogs, employers need to take proactive and deliberate action to attract, engage and retain their employees. How they do it will be directly informed by their organization’s operational requirements, competitive and financial realities and growth objectives.
Those tactics could include a range of options including:
Making hybrid work arrangements permanent—If employees want greater workplace flexibility and you can provide it, create policies around everything from performance and attendance to customer service expectations, then implement the right communication and collaboration tools to set them up for success. Once you have systems in place to help supervise performance, it’s possible to maintain productivity wherever they choose to work.
Implementing new bonus structures—Although money may not be a top employee priority at the moment, it’s still part of a robust total compensation package, and wages are rising in many sectors. Performance-based bonus incentives are an effective tool both to drive productivity and provide cash flow flexibility. Because at the end of the day, employees still need to earn competitive wages, and none will turn down extra pay for a job well done.
Focusing on employee wellness—Investing in group benefits such as mental health or virtual health supports, improving employee vacation entitlements and delivering greater workplace flexibility can help reduce stress and enhance employees’ well-being. And yes, it could be less expensive to make these investments proactively than to deal with the typically-underestimated costs of employee absenteeism, disengagement and turnover.
Maintaining constant communication—It takes time and sustained effort to retain employees. But it’s often possible to catch and address the issues that push many team members to the exits, problems that are sometimes easily fixed. But left to fester, they become employment deal-breakers. Daily or weekly team huddles or one-on-one meetings showcase leadership engagement and remind employees that their workplace success and happiness is your top priority.
Staying on the lookout for top talent—If you can position your organization as an employer-of-choice, there’s a good chance that at least one or more of your competitors aren’t making the same workplace culture investments. That opens opportunities to poach top talent to grow and strengthen your current team.
Of course, the approach to retention will differ by organization, but the message is the same: Retaining employees is not only a key to continued growth, it could be the one of the best investments your organization has ever made.
George Grignano, Co-Managing Partner
For assistance in developing growth strategies for your business, contact a member of our team now.