How can organisations retain top talent?
Author: Justin Harper
Attrition is a problem afflicting almost every organisation – and millennials are the most dedicated job-hoppers. Big data, smart management and clearer progression are the key components of the HR fightback
It’s the knock on the door every manager dreads – and yet it’s becoming increasingly familiar. A high performer has been lured away by a better salary, enhanced status or stronger development opportunities elsewhere, and it appears there’s little you can do to make them stay.
Cue an expensive and time-consuming hiring process, which may not even prove successful, and the bedding in of a new team member, with the disruption and reorganisation that inevitably results. Retaining staff – whether it’s the talented individuals you had earmarked as your future leaders, those with specialist skills that are hard to source, or front-line staff who take their knowledge, contacts and talents with them – has become arguably the pre-eminent concern of business leaders in many south east Asian economies. One recent survey found that 84 per cent of local companies considered it business-critical. And it is, without doubt, a problem that falls squarely in the HR department’s lap.
Shai Ganu, Mercer’s market business leader, talent consulting, Asia region, says: “It is very hard to find the right calibre of people who have both a global and regional skillset. So once you have hired them, it’s important to hold onto them – in this part of the world more than any other.”
Poaching has been rife in sectors such as technology and financial services, where new entrants to the market find it far easier to buy an experienced team already working successfully in a local market than build one from scratch. And while China’s currency woes may precipitate a slowdown in growth right across Asia, the broader structural issues caused by falling birth rates and expansion of acquisitive businesses, both Western multinationals and local stars, are not going away.
Historically, Asia has not suffered high attrition rates, which is down to a set of interlocking cultural and organisational factors. Recruitment systems were based on strong internal labour markets, ‘seniority’ and lifetime employment. Employees had relatively few options when leaving a company. Today, however, average annual turnover in south east Asia stands at 11.5 per cent, up 2 per cent in a year, according to Hays, which says the region is experiencing the fastest growth in attrition globally – a phenomenon it attributes to the continuing increase in foreign direct investment.
HR teams are, understandably, on high alert. “The HR function is built on three pillars – recruiting the right people, engaging with them and retaining them. If you get the first two right, it makes the third a lot easier. Retention shouldn’t be seen as a short-term fix but a continuous process within the HR framework,’’ says Ganu.
In this respect, big data may be the most powerful tool in HR’s armoury. While the introduction of human capital metrics into business practice has been a laborious process, and is prone to hyperbole, the ability to predict turnover and identify the people most likely to leave is one area where metrics genuinely are making a difference.
Sophisticated algorithms can now churn through several factors – including an employee’s pay position relative to their peers, their own performance levels and the abilities of their manager – to assign them a risk of departing the business. Chris Rowley, professor of human resource management at Cass Business School, City University in London, says: “Future-looking predictive analytics uses the relationships between many factors, including tenure, geography, performance reviews, employee surveys and even personality tests, to reveal a complex picture of what motivates people to either stay or look elsewhere.”
The likes of Walmart, Credit Suisse, AOL and Micron Technology are among the companies pioneering such tools, according to Rowley, who sees their use as “part of HR’s transformation from its traditional retrospective and reactive administrative model towards a more strategically integrated contribution to organisational performance”.
Getting up to speed with technology and employing sophisticated algorithms to solve workforce turnover is fast becoming essential, he adds: “Traditionally, HR has looked at the job rather than the person. It has looked to the historical patterns of the past when it comes to stats on turnover, examining labour turnover rates, stability indexes and fringe turnover indexes for what they might imply about the business. But these are all about ‘the job’ and are essentially backward-looking metrics.”
Of course, once at-risk employees have been identified through analytics, the next step for any proactive employer is to find a way to make them stay. Once money has been dealt with as a ‘hygiene factor’ – so staff earn enough to enjoy a reasonable standard of living and do not have to worry about paying the bills – most experts would agree simply raising salaries is rarely the answer. In emerging economies in particular, according to Ganu, career progression and learning opportunities are rated far more highly than hard cash. A survey by Michael Page found that HR departments globally that faced retention issues tended to favour interventions seen as ‘softer’ – including coaching, mentoring and flexible working – when tackling the problem. The simple expedient of offering someone a new job title, or expanding their responsibilities, is often enough.
The inability of pay rises to impact on retention becomes even more obvious when dealing with millennials. The generation born between 1983 and 2001 has a high labour turnover. And by 2020, it is predicted that Asia will house 60 per cent of the world’s millennials.
While it is dangerous to generalise too far, millennials are viewed as educated, technology-savvy, entrepreneurial and creative. They seek challenges and want to be socially responsible, at the same time as valuing work-life balance. Engaging with and retaining this important chunk of the labour market is an ongoing challenge for organisations.
Hays’ latest research suggests employees are increasingly citing work-life balance and better career opportunities as key reasons for moving roles. Alongside salary and performance-related bonuses, a clear career path based on performance, training and development, an energetic work environment and international opportunities are all powerful retention tools. When EY carried out a global survey to ask millennials why they left companies, issues around flexible working were far more likely to be cited.
“Millennials want flexible work arrangements and tend to not just want to be a ‘cog in the machine’. They want to know what direction the firm is going and how they can help get it there. Honest, timely, open and meaningful two-way communications and participation would help address this,” says Rowley.
Anthony Thompson, regional managing director for south east Asia at executive recruitment firm Michael Page, agrees companies need to be more proactive in how they deal with this new generation of workers: “Employees have become more discerning and, while remuneration remains a key factor, we are seeing more and more of them influenced by employer branding, training and career development, investment in new technology, corporate social responsibility and perceived long-term stability. Progressive employers have become more proactive in ensuring that the total employee value proposition is a focus and they are investing in this.’’
For Singapore Airlines, the answer to retaining key employees has been learning opportunities. The business was awarded the title of Singapore’s most attractive employer by Randstad for the third consecutive year and has seen its attrition kept admirably low through an array of training. Cabin crew can enrol in self-directed learning programmes covering everything from languages and culinary arts to leadership and management skills.
Meanwhile, a focus on middle managers reaped dividends for global real estate giant JLL. “Out of our 30,000 employees, we have everyone from janitors to investment bankers,” says Soma Mohanty Garg, its head of human resources for Asia-Pacific. “But we don’t have attrition at the top, while on the shop floor people tend to leave us for very specific reasons.” The real problem, she explains, was “blockages” in managers’ routes to the top given the low turnover in the executive suite. JLL’s answer has been to target development programmes at managers, and initiate talent exchanges where they can work in different parts of the business. When new sectors and business opportunities open up, Garg adds, those managers deemed at risk of leaving should be the first to be offered a change of scenery, a tactic JLL credits with gradually easing its turnover issues.
Sometimes, the issues aren’t so multi-layered. In Singapore, for example, even the most optimistic estimates suggest only 9 per cent of the workforce is fully engaged, a statistic that leaves the city-state lagging other global economic centres, and that inevitably puts staff at greater risk of flight.
And then there is the problem of managers. It is often said that people join a company but leave a manager. The cliché is, most agree, true. For Hays, better line managers are the key to retention. Chris Mead, the firm’s regional director in Singapore and Malaysia, says: “If an employee has good relationships at work, they are more likely to stay with an organisation and feel engaged with their work. Managers should be good at motivating and inspiring their team, managing performance – good and bad – and setting useful goals.” Businesses that do not empower managers to communicate and build strong relationships with their staff are asking for trouble, in his view.
Of course, no company will ever achieve zero turnover. And most wouldn’t want to – it would make it harder to generate new ideas, bring in young talent or open meaningful career paths. Attrition varies greatly by sector; in hospitality and retail, high staff turnover is almost a given, while financial services firms would hope to keep most employees for a number of years, save for extraordinary situations. The problem comes when you are a significant outlier to the rest of your industry.
Thompson says: “Turnover differs from sector to sector depending on the nature of the roles, but 10 to 15 per cent is often considered healthy. In high-volume sales environments, where inexperienced employees are often hired, many companies would consider 20 to 25 per cent to be reasonable.’’ The key, he adds, is to look at the types of staff who are leaving, not just the number – their seniority and specialism could be a cause for concern or might make the high overall attrition less worrisome.
“To determine a healthy level of turnover, first identify your high-value employees,” advises Erman Tan, president of the Singapore Human Resources Institute (SHRI). “For example, if 15 per cent of your staff are categorised as high performers, yet high performers account for one-quarter of all turnover, that poses a concern. Action would be necessary to understand why people are leaving, and what would motivate them to stay – all targeted at retaining your best people.’’
Forward-thinking organisations are tasking HR leaders with targeting attrition, and setting up specific units to undertake exactly the sort of analysis and actions Tan recommends. But it takes time for such interventions to truly make their mark. And in the meantime, leaders will need to get used to receiving bad news about the very people they hoped to build their future around. A macroeconomic slowdown, warns Thompson, does not mean the war for talent can be declared over: “Despite the increased focus on retention, I don’t think there is evidence to support a view that there has been a material reduction in attrition. Companies that do not pay serious attention to this topic will suffer.’’
LinkedIn’s retention strategy
Will a ‘tour of duty’ keep your staff happy?
Most staff retention programmes are fundamentally flawed, argues LinkedIn founder Reid Hoffman, because they have a “fuzzy goal (retain ‘good’ employees) and a fuzzy timeframe (‘indefinitely’)”, which ultimately destroys the trust between an employee and an organisation.
His solution – and a practice that has become the norm at LinkedIn – is for managers to agree a ‘tour of duty’ with their staff. This fixed-term assignment usually lasts between two and four years. When the assignment ends, the employee’s performance and career aspirations are assessed and the next suitable ‘tour’ is mutually agreed on, whether that’s within the organisation or the employee is leaving for other opportunities.
“[This] approach relieves pressure on managers and employees alike because it builds trust incrementally,” says Hoffman. “Rather than an expectation of complete loyalty or job security on day one, everyone commits in smaller steps and… the relationship deepens as each side proves themselves to each other.”
Moving to the tour-of-duty approach could, understandably, lead to anxiety among line managers at the prospect of losing their best talent at the end of the next assignment. But, says Hoffman: “Employ-ees don’t need your permission to switch companies, and if you try to assert that right they’ll simply make their move behind your back.”
The old military maxim that the best defence is a great offence holds true in Silicon Valley. Will other businesses begin to take a similarly broad view of employees’ careers?