An energised workforce is your most important sustainable competitive advantage.
Workplace America 2016, TalentKeepers’ 12th annual report, illustrates key employee engagement and retention trends affecting organisations. For the third consecutive year, over 80% of all employers report that employee engagement is important and they make it a strategic priority. 887 organisations, representing every major industry, participated Workplace America 2016. The results identify many trends associated with keeping and motivating workers, but a purposeful and sustained focus on engaging and keeping well-performing employees is not simply a trend. It’s vital.
Outsourcers have additional challenges when it comes to employee engagement and retention. The very nature of the outsourcing business is to be an on-demand extension of their client’s capacity, which can be turned up or down quickly, or handle work the client doesn’t want or isn’t prepared to do. This creates uncertainty for employees who see jobs coming and going as programs ramp-up or down, based on client need. Additionally, one consistent driver of engagement for employees is the sense of pride they get from working for a high-performing organisation with a well-known brand. For outsourcers, this organisational attachment is more difficult to establish. So, outsourcers must be better at leveraging the other key drivers of employee engagement: co-workers, job/career opportunities and – most importantly – credible leaders.
Engaged employees improve critical metrics. To understand how engaged employees impact your business, link key performance business indicators to employee engagement measures. When respondents were asked what performance indicators their organisation was able to improve through increased engagement, the top five are, well, pretty important:
Fig 1: Customer service ratings are the top key performance metric that improved through a targeted engagement initiative.
What’s the organisational climate like where you work? How’s the trust? Getting enough communication? Are creativity and group problem-solving embraced? Morale and culture rose another four percentage points, easily remaining the area where engagement and retention have the greatest impact on employers:
Fig 2: What part of your company is most impacted by low engagement and high turnover?
One disappointing trend is that fewer organisations are budgeting resources for employee engagement initiatives, this year 61% of employers reported they allocated budget dollars. This is down a full 10 points from 2014, when 71% of organisations had an employee engagement budget. Not only does this make engagement and retention more difficult, but the lack of a formal budget tends to reduce the rigour of how well these programs are executed. If engagement and retention are budget line-items, there is more accountability for project management and results. In short, everything gets more attention when there are dollars being allocated.
Perhaps one contributing factor to shrinking budgets is that too few organisations know the cost of replacing a well-performing employee. Only 23% of companies stated they have calculated the direct cost of turnover such as recruiting, selecting and training a new employee. Even fewer, just 10% know the indirect costs – which are usually higher than the direct costs as they include the difference in performance between a newly trained employee and the seasoned performer who quit. For call centre outsourcers in North America, the average cost to replace a well performing agent is $8,780.
If more outsourcers embraced the true cost of employee turnover, their businesses would be run very differently. Too many have created recruiting and training engines which attract and train talent, only to have them leave in staggering numbers within the first 12 months, many within the first 90 days.
What’s Trending in Workplace America
A Leadership Imperative
Every year in this study we see a clear link between leadership and an energised workforce. We assessed nearly every incentive that could boost the performance of frontline employees. Raising pay, offering better benefits, providing additional job-specific training, and on and on, leader effectiveness exceeded them all.
Here are a couple of the verbatim comments from participating employers: “Leadership support is key to engagement,” and “Employee engagement should be a top priority for our leaders.” We, of course, agree. When asked about the consequences a leader can have, 70% pointed to a strong impact on employee motivation and a willingness to stick with a company or job.
The good news is that more employers are training leaders on how to better engage and retain their team members. The number-one engagement leadership skill being developed is communication, followed by building trust and coaching. These skills are critical for creating a culture where team members willingly give their employers “discretionary effort” and choose to stay for longer periods of time. However, the biggest challenge many organisations face is convincing leaders, especially at the front-line, that they matter when it comes to their team members being engaged and sticking around longer.
Accountability can help here, but what’s more impactful is showing leaders how much impact they really have on their team members. Measuring leader engagement effectiveness and linking it to operational performance metrics is a surefire way to demonstrate the value of engagement in a way that matters most to leaders. Unfortunately, only 55% of organisations are linking engagement to operational performance metrics.
In 2015 Millennials became the largest generation in the American workplace. While they certainly aren’t the only ones glued to a smartphone or walking while texting, this tech-savvy talent pool is making waves in every aspect of the workplace, far from the world of start-ups and new-age organisations. This largely is good news.
To some degree there is always tension between generations – but organisations are feeling the pressure to integrate diverse individuals into cohesive teams. In this year’s study, 80% of all employers assert that their leaders are challenged by managing employees of multiple generations. Yet, only 40% are providing training for leaders on managing multi-generations. One piece of good news here is that only 29% of organisations were providing this sort of training last year, so more organisations are addressing this important leadership challenge.
Technology-enabled programs are another area where generational differences become apparent. Engagement-savvy organisations recognise the need to integrate technology into their engagement and retention strategies. Online surveys, e-learning programs and performance management platforms are the top three technology-enabled engagement and retention tools being used in 2016. Furthermore, organisations are recognising that multifaceted approaches are required to appropriately engage each generation in the workplace. Communication is an easy example: Millennials look for text messages, Gen Xers want an email, and Boomers prefer a memo when getting their news.
The Two Sides of Retention
Employee retention is again a major talent management challenge for many employers, regardless of industry or sector. Keeping valued contributors is getting harder and this study reinforces what many of you know: turnover during the early stages of employment is rising. Attrition at about the one-year mark rose for about 13% of organisations year over year. That’s a big jump.
Viewed another way, the good news is that half of all US employers expect to add employees in 2016. But for 65% of companies, a number of those people will not last the first year, up from 63% of employers in 2015. If you are in a high-turnover industry, such as contact centres, consumer retail, quick-serve restaurants, or construction, you can expect higher turnover in 2016 if you choose not to take concrete steps to improve your employees’ desire to be associated with your organisation.
Reasons employees are choosing to leave varies by tenure, and employers should look to address these unique drivers of unwanted turnover. Team members who quit within the first 12 months on the job cite missed expectations as the biggest reason for leaving. Many times this is due to a need to fill open positions quickly which may lead recruiting teams to “over sell” the job, highlighting the positives while glossing over the less desirable aspects of a position. An effective remedy can be to hold recruiters accountable for early-tenure-turnover, at least the first 30 days.
Team members who choose to leave their jobs after the first year leave for an entirely different set of reasons. Number one is a perceived lack of upward career opportunities, followed closely by a lack of growth experiences in their current role. Indeed, career issues remained the biggest driver of unwanted attrition for the fourth year in a row, although leadership issues are number two and steadily increasing. No wonder that the percentage of organisations citing job and career strategies as being most impactful on engagement and retention jumped from 30% to 40% in 2016.
Five Tactics for Building a Winning Strategy
The purpose of this annual study is to reveal data, insights and tactics that will help you turn ideas into action. Here are five final points to promote your reflection and internal discussions on how best to energise your workforce.
1. Leadership Accountability
Leaders are a relatively low-cost asset (you already pay them) in the battle to engage and retain the quality of talent you need to compete and succeed. The importance of holding them accountable for this part of their role cannot be overstated.
2. Adapt Your Culture to Grow
With the evolution of three generations reshaping the workplace, building your culture will require accommodation and change. Adapting how your workplace operates can create a collaborative culture.
3. Career Growth and Stay Interviews
A positive, constructive relationship between each leader and his or her direct reports, based on trust and communication, provides your best shot at inspiring commitment and engagement in your employees. Leverage stay interviews to enable leaders to better understand what each team member values most in their career, leader, and daily interactions.
4. Metrics Matter
Metrics are ubiquitous today. Use engagement and retention metrics to your advantage to build on existing strategies or to launch and execute new ones. Track and report results.
5. Be Aggressive and Drive Execution
Keep pushing. Demand that your organisation be a place where everyone is proud to work and success is expected. Reward good leaders and hold poor leaders accountable for improvement.