Turnover Is Up. Why Money Alone Won’t Solve the Problem
Employers are experiencing pent-up turnover. During the earlier stages of the pandemic, companies saw lower-than-normal attrition rates as people stuck to their employers — partly because they were satisfied with companies’ handling of the crisis and partly because jumping ship wasn’t a safe bet in the teeth of a global pandemic.
Nearly two years on, two in five organizations globally say voluntary attrition rates are higher than usual among mid-career professionals and entry-level professionals (in the U.S., almost half of companies say attrition is higher for both cohorts). The challenge is particularly pronounced in industries such as professional services that rely heavily on knowledge workers. Their take on the problem? By a large margin, employers believe pay is the biggest driver of turnover.
Hence companies are throwing money at the problem by increasing promotions, paying higher than market rate wages and boosting salary/merit increase budgets, according to our survey. Clearly, these are expensive solutions — and ones that are hard to sustain. More critically, financial quick fixes may have a limited impact. Workers face multiple reverberations from the fallout of the pandemic, resulting in a range of new or aggravated sources of stress that weigh heavily on their futures.
Understand Unmet Needs
In the pre-pandemic days, organizations’ packages were rife with perks such as gym membership or in-house baristas. But the pandemic brought to the fore glaring unmet needs: the things in employees’ lives that cause stress and keep them up at night. These things — such as debt, reduced job prospects, precarious health care access, or limited child or elder care — hold people back from performing their best.
Ensuring employees’ bright futures means supporting them to develop and progress, as well as realize their personal purpose.
The more companies understand people’s stress and critical unmet needs, the better they can judge the programs, rewards or experiences that would differentiate their employee value proposition, or better communicate what current programs exist to help alleviate those stressors. Technology, from sentiment analysis to digital focus groups and pulse surveys, means organizations can study and connect workers’ experiences faster and in new ways – bringing the rigor of customer research into the employee experience.
Solve for Stress
Initial analysis of a recent poll by Mercer reveals a tale of two workforces emerging — with unmet needs diverging more and more between lower-wage workers, who are most worried about making ends meet, and higher-wage workers, who are concerned about personal fulfillment and purpose.
This will require different solutions on the part of employers. For lower-wage workers, leading businesses will take a closer look at the role of job design as part of the employee value proposition and total employee experience in order to create a more attractive, quality job. Leading firms will also challenge themselves on what workers really value. While the good news is that companies from Costco to Bank of America are raising the minimum wage, more creative thinking is needed. For example, only 12% of companies surveyed are looking at transportation assistance, and just 4% are considering how workers get paid (e.g., early payment, paycheck access via an app). Data here will be crucial, including salary data that takes into account the creeping inflation affecting people’s purchasing power.
For higher-income and knowledge workers, personal development and empowerment to learn are at the epicenter of the new work deal. Even before the pandemic, 78% of employees said they were ready to learn new skills. Ensuring people sustainability through future employability and skills is now a critical part of the employment contract — and one that employers need to address urgently.
Many firms look to other organizations for answers about how to focus reskilling efforts, hoping this will be relevant to their own employees. This may blind them to their people’s actual needs or target the wrong skills. Ensuring employees’ bright futures means supporting them to develop and progress, as well as realize their personal purpose.
Some Needs Are Universal
Regardless of income, we know that all people want empathetic, enriching, embracing and efficient experiences. With many organizations focused on financial fixes, being ahead of the pack on the four Es is there for the taking. For example, hybrid working is in vogue, but are companies considering how and what work gets done, as much as where it is done? Digital technology goes a long way to removing boundaries in our lives; boundary-less work creates opportunities to meet needs in new ways, such as doing exciting and engaging work from anywhere. Yet, it will also require careful crafting to ensure it doesn’t create new problems, such as the inability to switch off.
Companies will also need to address the often-neglected need for belonging, which is experienced through culture and shared experiences. For example, some organizations are pivoting to higher-quality office space to create a stronger sense of belonging. The challenge will be to ensure that everyone has access to such experiences, not just the privileged who are allowed to be in the room (roomies) while zoomies are left dialing in from the sidelines.
The organizations that challenge themselves about what their people truly need and use technology to seek out the sources of stress to solve will turn the turnover problem around.