Across the developed world, companies are struggling to hold on to their best talent. In this article, we’ll provide some pointers to make sure your business can swim against the rising tide.
Good people leave businesses: this isn't groundbreaking news. However, in a full employment labour market with skill shortages and accelerating digital working practices, companies are finding that turnover rates are rising rapidly.
A changing workplace culture
High people turnover is often more than a sign of economic and cultural change. If a business is regularly losing high performers — even with today’s complex challenges — there are often deeper-rooted causes that need addressing. According to data from XpertHR, 1 in 5 UK employees resigned in 2017, representing a six-year high.
This could be outmoded management, a substantial gender pay gap or a dated, inflexible working environment. Whichever of these is applicable, people are increasingly not willing to accept outmoded ways of working — particularly in the case of millennials, who are currently the biggest generation in the US labour force. The UK and the rest of Europe are not far behind, while in Australia, millennials will make up the largest generation of the workforce by 2025.
For a business to reduce attrition, it needs to get to the heart of the problem as quickly as possible — not only to minimise the negative economic impact but also to provide work with more purpose and meaning.
The death knell of jobs for life: new motivations
The concept of a “job for life” today looks increasingly odd. Twenty years ago, it was something to aspire towards. Today, it seems implausibly anachronistic. The most talented people can choose where, when and who they work for — putting increasing pressure on companies to prove their worth to current and potential employees. For a business to keep its best staff, it has to do an awful lot more than increase salaries in line with inflation.
Today’s generation is just as concerned with culture fit as they are with remuneration. We are operating in a new age of people management - an off-white, open-plan office designed in the 1980s doesn’t pass muster, hierarchical management is treated with disdain and the standard 9-to-5 workday is increasingly seen as outdated.
So, what exactly should a business be doing to reduce attrition? How much do the highest turnover rates cost a business?
The economic impact of high employee turnover
The impact of attrition varies from business to business. If we assess the results of studies conducted on the cost of attrition, however, it becomes clear that losing staff costs a lot more than one might initially think.
A Society for Human Resource Management (SHRM) study predicts that every time a business replaces a salaried employee, it costs on average 6 to 9 months’ salary. Meanwhile, a Center for American Progress (CAP) investigation studied the cost of attrition in greater depth. For midrange positions ($30-50,000 a year), attrition costs on average 20% of the yearly salary, whilst highly educated executive positions cost up to 213%. When you take into account that the average CEO in London earns £120,073, the cost of losing an executive team member could potentially cost upwards of £250,000.
The real-world cost of losing high-value employees
Attrition has other visible effects on business, too, and it isn’t just financially challenging. To accurately calculate the impact, factors such as reduced productivity, employee onboarding, advertising costs, agency costs and the expense of new equipment also need to be taken into account.
There’s also the cultural impact. When people see the most important members of their team leaving for pastures new, their response can be to consider why they are seeking out new opportunities. This can lead to disengagement and a loss of productivity, whilst many will possibly also consider their own position.
The steps a business needs to take to reduce its attrition rate
For many, attrition is an unavoidable part of doing business, and ignoring the loss of key staff is a risky game. With such acute skills shortages, finding replacements is not only time-consuming — it’s expensive, but there are strategies that can be employed to stop employees resigning.
Define the right roles: aligning the selection process
When advertising for new employees, it’s essential that job adverts accurately reflect the work they’ll actually be doing. It’s very easy to use a template or to use a job specification used two years ago, but these won’t reflect the roles as they are today. By clearly defining what the role is and what sort of person would be a genuine cultural fit, it’s easier for a business to dismiss unqualified candidates, saving time, money and, in the long-term, reducing attrition.
Ensure a positive work-life balance
Almost a third of the UK workforce feel like they have poor work life balance. In fact, 73% say that they want to keep their work and home life separate. Despite this, we’re creating a workplace culture -“on-call” at all times.
For your people to be content and comfortable at work, they need a culture that promotes a positive work-life balance. This can include flexible working and extended lunch breaks, as well as ensuring that workloads aren’t over-stretched. It’s also necessary to consider the needs of remote workers, who can often feel cut off from the central workplace culture.
People need to feel fulfilled and, appreciated, businesses need to make a conscious effort to recognise the success of their teams, no matter how small the impact on the bottom line. Not only does it reinforce a sense of purpose, but it engenders trust and loyalty, which, in turn, reduces the attrition rate.
Likewise, though salary isn’t as important as it once was — especially for younger professionals — remunerating staff for their skill set and contribution as they develop professionally is still beneficial to reducing attrition. Without this, it’s likely that people will search for better offers elsewhere.
Motivating and empowering a workforce to reduce attrition is no simple undertaking. Keeping people for longer means better, more consistent services can be delivered to an organisation’s customers and ultimately will help to build a better business in the long term.
If you want to learn more about how we deliver our ‘high-retention strategy’ and how we retain clients, candidates, employees and investors for longer, click here to contact us today.