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Human Resources

Staying for the right reasons

Published 31 July 2022 in Human Resources • 6 min read

Simply spending more on compensation and reward will not ensure employers retain their staff in an intensely competitive labor market.

Europe has an unemployment problem. However, it’s not down to a shortage of jobs; rather, joblessness is today at an all-time low across the eurozone and in other Western countries. There are simply not enough people looking for work.

In this labor market, the last thing any boss wants to hear is that a worker has decided to quit. When the pool of candidates shrinks, the pressure to keep employees stacks up. Conversely, this is exactly the kind of labor market where retention becomes harder as companies strive to turn the heads of their rivals’ best workers.

Over the past 11 months, at least million Americans have resigned from their jobs each month. In Europe, one recent study found 46% of employees were planning to quit their jobs in the next six to 12 months. The “Great Resignation,” as economists have dubbed this post-pandemic trend, is a global phenomenon.

For employers – chief human resources officers (CHROs) in particular – the need for a focused and imaginative staff retention strategy has never been more pressing. 

Pay more, keep more?

The temptation is to make staff an offer they can’t refuse and shower them with goodies to persuade them to stay put. Consulting firm PwC, for example, told 22,000 staff in the UK that they can have Friday afternoons off over the summer months, assuming they get their work done. Investment bank Goldman Sachs has joined a growing list of employers that offer staff unlimited holidays. Pay rises are on the table, too: last month, German supermarket Lidl announced a 12.5% increase in its minimum wage, as well as higher salaries for more senior staff.

Some employers think an even more radical approach is necessary. In the UK, 70 firms, employing 3,300 people between them, have just launched a six-month trial of a four-day working week – their staff will work one day a week less than before but for the same pay, assuming they commit to getting through the same amount of work. Similar pilot schemes have been launched in Ireland, the US, Canada, Australia, and New Zealand.

All this may help in the short term. However, dreaming up new golden handcuffs is no substitute for an organization-wide commitment to employee engagement and retention.

“Dreaming up new golden handcuffs is no substitute for an organization-wide commitment to employee engagement and retention.”

Conviction, not compensation

The answer is unlikely to be about reward – or, at least, not just about reward. Naturally, employees expect to be paid appropriately but, for a growing number, other aspects of work take precedence. In one of the biggest recent studies into what people actually want from work, market research specialist Gartner found the COVID-19 crisis had changed people’s priorities. Almost two-thirds (65%) said they had reassessed the place that work had in their lives, 56% now wanted to contribute more to society, and 52% had begun questioning the point of their jobs.

Employees are looking to work for organizations with a strong purpose that goes beyond making money. They’re seeking employers who can articulate what they stand for, and whose leaders transparently practice what they preach.

Purpose doesn’t have to mean undiluted altruism. Not every organization is able to save the world, and not everyone wants to work for a charity. But if they want staff to stick around, leaders need to give staff a sense that their jobs matter to society, as well as the business. Purpose may be partially driven by commercial targets (to be the most customer-centric business in a particular vertical, say), but it should have an authentic societal benefit at its core and must be clear and communicable.

In addition, purpose must be felt throughout the organization. If head office is content merely to voice platitudes, it will find they resonate less and less down the organizational hierarchy. At a certain point, they may even become counter-productive, alienating staff who see no connection between what the leadership is saying and what they are being asked to do every day.

This is one reason why Unilever, for example, is currently pushing for each of its 400 brands to have a social or environmental purpose. The consumer goods giant is also working on a project to integrate individual employees into its purpose-driven approach.

Finding ways to make sense of purpose at a local level can be a valuable retention-driving exercise. Employees who see their employers engaging with the community, whether by sponsoring the local soccer team or sourcing from local businesses, will feel a greater connection and unity with the organization, further insulating them from the siren call of rival employees seeking to lure them away.

Shared purpose, decided together

Purpose, then, can help employers to provide their employees with a powerful reason to stay, strengthening the relationship based on shared goals. Some employers are even looking to employees to set those goals for the business, inviting lower-level staff into the decision-making process.

Finnish paper giant Stora Enso provides an example of how this might work in practice. Faced with the challenge of transforming its business in a tough marketplace, its executive leadership appointed a “Pathbuilder” committee, comprising staff from every level. The committee worked with senior sponsors to respond to mission-critical difficulties as the business reoriented itself. In addition, they invited hundreds of people from the organization to co-create their strategy for quality, engagement, and retention.

The transformation project not only delivered remarkable commercial results (tripling the share price and completely revising the revenue model) but also had positive impacts on talent management. More than 70% of those appointed to Pathbuilder (many not previously identified by the organization’s talent programs) subsequently moved into new and distinct, or more senior roles. Enthused by their opportunity to set the agenda, almost all stayed with the business to put it into practice.

This story is a reminder that employees want to feel they are learning, developing, and progressing in their careers. A recent study from PwC found 47% of CHROs are now looking hard at how to improve career advancement opportunities as part of their retention strategy. That could mean clear career progression ladders for staff who want to move up in the organization, or helping staff to acquire new skills and experience in adjacent roles. The aim is to show employees they have an exciting future if they commit to the employer.

“CHROs who don’t talk to their employees cannot expect to understand what they really want.”

One size does not fit all

Not every employee will have the same idea about what opportunity means. That requires a more targeted approach to talent retention. Younger employees, for example, may be particularly career-focused, with pressing promotion and salary ambitions. Older staff, perhaps with partners who are also working and children to support, may have different priorities, looking for new work experiences rather than more responsibility, and working conditions and compensation packages that suit their lives, such as help with childcare costs or additional holiday entitlement.

CHROs who don’t talk to their employees cannot expect to understand what they really want. Focus groups provide opportunities to drill down into the wants and needs of employees, perhaps focusing on staff identified as key to the organization’s future.

The oft-maligned employee survey can also provide useful intelligence. Advances in technology, particularly in machine learning, can provide CHROs with deeper insights by analyzing written answers to open-ended questions.

Some may find one or more of these answers unpalatable, and that’s fine. It isn’t possible to please all the people all the time. Even in a competitive labor market, most organizations will want to focus their energy on retaining staff who are the right fit, and therefore naturally more open to persuasion. It is vital, however, that CHROs start asking the right questions so that when their employees ask, “Why should I stay?” they can give them the right answers. 

 

Authors

Lars Häggström

Lars Häggström

Senior Adviser, IMD Business School

Lars Häggström is a CBS Executive faculty member and an Executive in Residence at IMD, while at the same time heading up Enable Performance, a consulting company focusing on driving large-scale change in global organizations.

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