Businesses Finding Employee Turnover Is Growing - and Harder To Stop

Technology and globalization work both ways: they are making jobs harder to keep - but they are also giving the workforce more options. As a result, turnover is higher than ever and the task of attracting new people and of keeping current employees engaged is getting more difficult.

Once they've seen the power they have in the market, will 'human capital' continue to insist on higher returns? JL

Alina Tugend reports in DealBook:

3,300 business and human resource leaders in 106 countries found that this year, “culture and engagement” — or keeping employees — was viewed as the most important challenge over all, edging out the perennial top concern, developing leadership.

Most employees — no matter how many years they have been with a company or how much talent and hard work they bring to the table — feel disposable. And most employers do little to discourage that feeling.

But as the economy rights itself, companies are becoming more concerned about retaining good workers for the long haul.

“It’s the No. 1 issue for H.R. professionals,” said Chason Hecht, president of Retensa, an employee retention consulting firm. Mr. Hecht said the problem was “pervasive across industries, but some are hit harder than others — like health care,” which is scrambling to find and keep people to deal with an aging population.

A 2015 Deloitte survey of more than 3,300 business and human resource leaders in 106 countries found that this year, “culture and engagement” — or keeping employees — was viewed as the most important challenge over all, edging out the perennial top concern, developing leadership.

“In my experience, doing this for 15 years, this is the first time it has scored this high,” said Josh Bersin, founder of the research firm Bersin by Deloitte and one of the report’s authors.

From Wall Street to Washington and in the towers of academia, people are buzzing about what some say is the pernicious focus in corporate America on short-term profits.

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And a study from Spherion, a recruiting and staffing company, of 225 human resource managers showed that far fewer employers were concerned about employee costs this year than last. Instead, one-third of managers said their second-greatest concern — after finding skilled workers — was turnover and retention. That compares with less than a quarter who expressed worries about retention last year.

As the Deloitte report states, “Organizations are recognizing the need to focus on culture and dramatically improve employee engagement as they face a looming crisis in engagement and retention.”

It’s not surprising that employers should worry about losing their best workers as the economy gets better and job options open up. But a vastly changed work culture and the advent of the consumer Internet have altered the familiar cycle.

Benefits are different from what they were 20 years ago. Retirement savings, for instance, have become more portable as 401(k)’s have largely replaced traditional pensions. But the Internet has brought changes that are every bit as radical to job hunting and hiring. LinkedIn profiles advertise workers’ skills and experience to the world. Sites like Glassdoor.com provide insight into a business’s culture that wasn’t available in the past.

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“Workers have changed faster than the workplace,” Mr. Bersin said. So companies, especially older ones, are trying to figure out how to hold on to good employees — if not for the remainder of their working lives, then at least for a healthy part of them.

The premium that employers have placed on retention reflects the high cost of turnover: Experts estimate it can cost as much as twice an employee’s salary to recruit, hire and train a new worker.

And close friends often follow one another out the door. According to John J. Sullivan, a professor of management at San Francisco State University who specializes in human resource issues, when one person leaves, several often follow suit. “So it’s not replacing one person, it’s replacing three to five,” he said.

In any work force, said Professor Sullivan, there is a percentage of people whom employers “would go all out to keep, a percentage whom they would regret would leave but would let them go, and the Homer Simpsons” — or employees who should have already left.

“If you don’t readapt or relearn, it’s time to go,” he said.

Despite the conventional wisdom that those in their 20s and 30s are happy to change jobs every two to three years, research shows that may be more myth than reality.

“Everyone still wants to love and be inspired by their job,” Mr. Hecht said. “What has changed is that people have a lower tolerance than ever if they don’t feel fulfilled.”

In the past, managers had to rely on anecdotes to find out why people were walking out the door. But now, the ability to do online surveys, crunch large amounts of data and track trends means “we have a science behind what works and what doesn’t,” he said.

With the exception of those who work in sales, “pay is not in the five top reasons most people leave,” Mr. Hecht said. A new survey by the Society for Human Resource Management found that companies are increasingly turning to health care and retirement benefits to attract and retain employees.

But the current obsession among employers is worker engagement. Employees are engaged, experts say, when they feel productive, think they are contributing to their company’s mission, have trust and confidence in their managers and are given the opportunity to grow and advance — not necessarily by climbing the corporate ladder, but by learning new skills.

And how to make sure staff members are happy and engaged? Ask them — and not just once a year.

“With annual performance reviews, everyone is alienated, so 50 to 60 percent of companies are completely revamping the way they do them,” Mr. Bersin said.

Instead, Mr. Hecht said, companies need to have a continuing conversation with employees to understand their changing needs and expectations.

According to Mr. Hecht: “Bosses need to say, ‘You tell me what quality of life looks like to you. You tell me if you’re better off with a gym membership or a dog walker or dry cleaning. I can’t give you all three, but I can give you one.’ ”

Not all employees are feeling the love. Spherion also surveyed about 2,000 workers as part of its report and found that this year only about one-tenth of employees thought their companies were putting more effort into keeping them. About a quarter thought their companies were putting in less effort.

Less effort is not an option for EisnerAmper, an accounting firm with more than 1,300 employees. Richard Fisher, a head of the firm’s human resources department, said his workers received daily phone calls from competitors and recruiters looking to poach them.

“It’s definitely an issue, ever since the economy began turning around,” he said. Big accounting firms that laid off workers during the recession now “have to staff up like crazy.”

“We’ve got to do everything to keep our people here,” he said.

Victoria Ghafoor, 27, a senior-level accountant at EisnerAmper, frequently receives calls and emails from recruiters and competitors.

“I get messages to my LinkedIn profile constantly,” she said.

Ms. Ghafoor has been at her company for five years — it was her first job — and says she has no plans to leave in the near future. She is aware that the company is doing more to keep staff members happy, including parties, a drink cart on Friday afternoons — Ms. Ghafoor’s own suggestion — and greater encouragement of workers to feel more ownership of their projects and clients.

To comply with company protocol, Ms. Ghafoor lets EisnerAmper’s human resources department know when she has been contacted about other jobs on her work phone number or work email address.

“I don’t mind,” she said. “It’s probably a better thing for them to know I’m being contacted all the time.”

It is this constant drumbeat that spurs EisnerAmper to try to create a workplace they hope few would want to abandon.

One focus is on providing flexible work schedules and allowing more people to work remotely, said Hayes MacArthur, the other head of the firm’s human resource department.

The company still does annual reviews, but it is working on offering more feedback in real time, Mr. Fisher said.

“One area we need to improve is face-to-face sit-downs telling people, ‘You did well in this area, but you need to do better in this area,’ ” he said. The company regularly offers classes on how to have difficult conversations.

It’s also important to let top talents know how much they are valued before they hand in their notice, he added.

“They have to know where they stand and what we see in their future,” he said. That means spot bonuses, pats on the back and perks like leadership academies that their peers may not receive.

Another strategy is to change the old-fashioned exit interview, which most people feel isn’t effective: Employees who don’t want to burn bridges are often less than honest. Instead, Professor Sullivan suggested, do the exit interview six months after the worker has left, when the former employee may have better perspective.

Even better, Mr. MacArthur said, would be to follow up a few months after a worker has left and find out if he or she has any interest in coming back.

So far, a few employees have decided to “boomerang” to their old jobs, he said. “When someone returns, it sends a great message to the rest of the firm.”