By Neal England
As the labor market tightens, staffing companies and their clients have become more attentive and aggressive in efforts to retain employees.
The Bureau of Labor Statistics (BLS) report from August indicated 7.1 million job openings (a new record) and 6.2 million unemployed. Job openings outpaced the number of unemployed by about 902,000. The nation’s unemployment rate dropped to 3.7 percent in September, a 49-year low.
These statistics reflect war-like conditions soaring for talent, while the available labor pool is shrinking amid record low-unemployment levels. As a result, companies are taking a harder look at how to retain their employees.
Nearly half of HR professionals cite employee retention and turnover as their top workforce challenge. In fact, retention and turnover have been the top issues for the past three years, according to an annual survey of HR professionals conducted by Globoforce in collaboration with the Society for Human Resource Management (SHRM).
Employers will pay $600 billion in turnover costs in 2018, and can expect that number to increase to $680 billion by 2020, according to a comprehensive national study conducted by Work Institute. An estimated 42 million employees, or one in four workers, will leave their jobs this year, said Work Institute, which also estimates that employers could prevent nearly 77 percent, or three-fourths, of that turnover.
“While many studies report that most employees leave their current jobs for better-paying positions, this report shows that career development opportunities, work-life balance and poor management are consistently the real issues that spur employees to leave,” Work Institute said.
Although companies are offering higher salaries to retain employees, Robert Half International notes that if a higher salary is provided via a counter offer to keep an employee from leaving, it can cause negative ripple effects.
Staff members who accept counteroffers typically leave the company in less than two years anyway, according to a Robert Half survey. A counter offer could produce a morale dip among team members who don’t get a salary bump, and can create a rift in trust between the employee who had planned to leave and his or her supervisor. Finally, Robert Half said employers won’t see any boost in performance after a counter offer is accepted.
Instead, the human resource consulting firm suggests using salary guides and regular salary reviews when setting salaries; offering employee recognition; focusing on professional development, mentorship and well-defined career paths; and preparing employees for promotion when spots do open up. Exit interviews can provide insight into why employees are leaving, and employers can then work to address those issues.
As unemployment marches toward 3 percent, it’s imperative that companies focus not only on finding qualified employees, but also on retaining and promoting from within.
That means companies will need to be well-informed in order to set competitive salaries upfront and to review them regularly, to keep pace with industry salary trends. They’ll also need to look beyond the paycheck for retention solutions. Attracting and retaining employees means getting creative, through ideas such as customization of benefits, or through improving manager-employee relationships. Some areas of emphasis related to employee retention that we are hearing about from our clients include improved performance recognition, clear setting of expectations, transparency across broad levels, engagement and career investment.
Capital Alliance Corporation is a Dallas-based investment banking firm with an extensive international reach and a 40+ year history of providing trustworthy advice to private company shareholders who want to sell their businesses. Our team has deep operational and M&A experience across many sectors, including human resource management.