Dear Thankful:
One of the most common refrains from CFOs nowadays is: ‘Why should I care about retention?’
It is a view based on the notion that most employees lack other job opportunities and are thus locked in to their current employer. But this view is misguided for several reasons. Now more than ever, companies ought to be focused on retaining the right employees. There are four specific reasons why retention matters now.
- The ‘Best and Brightest’ Do Have Opportunities. The labor market is actually a tale of two labor markets. Job opportunities exist for college-educated, highly skilled employees; the unemployment rate for this group is less than 4 percent—nearly half that for workers without a college degree. By only considering the average labor market, company executives miss the nuances within the different job segments.
- High Potentials (HIPOs) Are Ready To Move. The Corporate Executive Board tracks turnover risk within different segments of the workforce through our “intent-to-leave” metric. As of the most recent quarter, one in four high-potential workers is considering leaving their employer, compared to one out of 10 other workers. HIPOs have been asked to do more and more work the last several years, even without a corresponding increase in the total rewards their companies offer. Failing to address retention of high-potential contributors will create a leadership gap within organizations as those individuals are tapped for succession
- The Labor Market is Improving and Employees Have an Elephant’s Memory. Slowly but surely, the labor market has made progress toward recovery during the last several years. The unemployment rate is down several points since the worst of the recession. Once the labor market is back on full footing, employees will proactively search for new opportunities or will have recruiters from other organizations attempting to hire them away. Our research shows that when employees are weighing whether or not to leave their employer, about 50 percent of that decision is based on how the company has treated them in the past.
- Departing Employees Badmouth Your Company. CEB exit surveys of more than 200 companies show that only one in four departing employees would recommend their previous employer as a good place to work. The former employees of a company tend to be the most trusted source of information to people that are searching for a new job. This combination is a toxic mix to a company’s employment brand. It means your former employees are sending a signal to other jobseekers: ‘Don’t work for this company.’
SOURCE: Brian Kropp, The Corporate Executive Board, Arlington, Virginia, Jan. 14, 2013
LEARN MORE: In a parallel development, companies are finding that newly hired employees are disgruntled or not measuring up.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.