Will They Stay or Will They Go?
Keep your best employees from eyeing the door.
By Allison Enright
"Psst! Did you hear the news? Mike over in accounting gave his two-weeks notice.”
It’s a statement that anyone responsible for hiring or managing talent dreads. It costs a lot of money—about a third or more of the position’s annual salary—to find, recruit and train a new employee, and that doesn’t account for the indirect costs, such as the added stress for remaining employees who have to cover the additional work.
But with the economy beginning to stabilize, employers will be opening resignation letters much more often than they have in the last 24 months. According to the Bureau of Labor Statistics, in fact, the number of “quits” in February exceeded the number of layoffs for the first time since 2008.
Why are more professionals eyeing the door? “When the financial crisis occurred, many people were downsized in a short period of time. The employees who were retained were asked to work doubly as hard to fill the void. Companies had a loss of foresight,” says Dale Pearson, director of Midwest operations at recruiting firm Michael Page International.
“The number one reason that someone is open to leaving a role is not compensation,” says James F. Wong, founder of Clear Focus Financial Search, an accounting/finance executive search firm based in Chicago. “If compensation is competitive relative to the marketplace and benefits are relatively close, you are not going to lose a person over that issue. However, you do tend to lose the employee because they don’t feel like they are being challenged or developed,” he says.
That lack of commitment to employee development is going to cost those employers who assumed the recent rock-bottom employee attrition and turnover rates would linger. The voluntary turnover rate for accounting professionals, in fact, hovered above 30 percent for much of the last decade; in 2008 that percentage plunged to 10 percent, according to AICPA data.
People were fearful of losing their livelihoods during the last 18 to 24 months, and a lot were closed off to the new job opportunities available during that time, says Wong. “Candidates’ focus was on doing a really good job so that they could keep their jobs, following the thinking that, ‘The devil I know is better than the devil I don’t know. If I go somewhere else where I don’t have that much goodwill or reputation or relationships I stand to be the last one in, first one out.’”
With many employers forced to make deep and dramatic cuts, a lot failed to think long term about development and succession planning, and instead damaged the implicit social contract they had with employees. “The term ‘you are lucky to have a job’ was thrown around,” says Jeffrey K. Cordes, founder and managing partner of TalentRISE, an end-to-end talent management consultancy based in Chicago. “It was the worst possible kind of thing you could do as an employer.”
Consequently, it is the highest-level talent and most valuable employees who are now warming to the idea of new opportunities. “That group is the most important from a retention standpoint, and those that were treated poorly are the first to leave,” Cordes explains. “They are taking the opportunity to say, ‘This is a great example of a group that I thought had a culture that would support me in good times and bad and I found out that it wasn’t.’ These are the people who are looking over their shoulders and saying, ‘I am confident in myself and my ability to perform, and I will find an organization that will appreciate that.’”
Wong is seeing and hearing the same at Clear Focus. “We are starting to see candidates who want to talk more and more, who are starting to feel a little more confident. They feel like it is time, that the economy is slowly getting better and that they need to get a move on because they haven’t appreciated where they have been in the last 12 to 24 months,” he explains.
This is not to say that all companies and talent managers did a lousy job during the recession. Importantly, it’s those companies that followed best practices during the hardest economic times that are now positioned to take advantage of opportunities for new business growth—and that don’t have to worry about staffing issues.
“The best practice companies did things to weather the storm during the recession and they may have had to reduce their workforce. But they did so in a way that was more natural,” such as by offering early retirement packages, says Cordes. They also modified existing development programs to be operationally more efficient. Instead of paying for employees to travel to company training seminars, they took advantage of eLearning opportunities or advanced telecommuting options.
“Organizations that succeeded the most were focused not on the expense line but on the revenue line and asked themselves how they could position themselves for the recession to end,” says Cordes.
The companies that are struggling now are the ones that “stopped talking about the future with their employees and as a result the high performers stopped seeing opportunities for growth in their own organizations,” Pearson explains.
“Those that did a good job managing through the times and knew how to work through the challenge and keep the staff motivated despite layoffs, they will have lower turnover because those employees feel appreciated and wanted and are willing to stay with them now that there is a change in the winds,” Wong asserts.
If you’re reading this and thinking “uh-oh,” don’t panic yet. Our experts agree that ongoing and consistent communication is essential to assuring that staff members stay positive about their employment with your organization. Regardless of where staff morale is, employees, especially high-performing and ambitious ones, want to know there is a future for them with their employer. You must be willing to invest the time to get to know your employees on a professional and personal level, says Wong.
“Employees want to know they are developing the right skills to get to the next level, and they want to know someone in their organization—their manager—is trying to help them get to the next level. There are many managers that are not in tune with this idea. Get to know your people, get to know what motivates them, what their goals are and help them achieve them,” he explains.
Cordes agrees, adding that, “Reinforcing career progression and executing succession management planning is something progressive organizations use as a great retention tool. It ties to the career development of an employee so they can see a path to leadership.” Doing so keeps them engaged and excited about their role at your organization.
A note of caution, however: You have to be willing to aggressively follow through on any promises you make. “I think there will be a lot of window dressing—a lot of the right words about being committed to employees. But if it is just window dressing it will damage your company reputation even more,” says Cordes.
In addition to reinforcing your commitment to employee development in a demonstrable way, it’s also time to distribute some tokens of appreciation. The obvious ones are monetary bonuses now that the business outlook is brighter, and reinstituting perks that were eliminated when management was in extreme cost-cutting mode. Such moves will help to exemplify the company’s renewed commitment to its employees.
If, however, you’re of the mind that it’s easy to hire good employees when people leave, think again. “Without a shadow of a doubt, it is 10 times more difficult to find the right people now. You have no idea what is in the marketplace and you’ll get 1,000 resumes instead of 100; organizations don’t have the people or tools to sort that kind of thing. They may be hiring to backfill what they had before, but they are not top talent,” Cordes warns.
Wong adds that many misjudge who’s in the pool of the unemployed. “In this environment, their expectations are such that they can get that perfect candidate because unemployment numbers are so high that they should be able to get them,” he says. “It’s a perceived buyers’ market, but it is not as robust as employer’s think,” so your best investment may be in those employees who already have a proven track record with you.