When employee turnover is high or you can’t recruit as you’d like, the first and sometimes only solution for many businesses is to increase pay and enhance benefits.
If this sounds familiar, it’s time to reconsider your HR strategy, because increasing your compensation and benefit costs should not be your only option or first thought.
Instead, a strong HR plan will focus on building employee engagement to deliver the recruitment and retention results you want plus a whole lot more.
This article explains how different elements of a strong HR strategy will support your business plans. The result? A multi-layered web of reasons for employees to want to join your business, do a great job and stay.
We all have to eat and keep a roof over our heads. Which makes pay an important motivating factor for all employees and in any business. But people want more than this.
As Maslow’s hierarchy of needs demonstrates, physiological and safety needs are the bare minimum we need to lead fulfilling lives. Like it or not, when work takes up eight hours of every day, there’s a responsibility on employers to meet our more complex needs. And the best employers have HR strategies that do this.
Source: Simply Psychology
How Our Needs Are Met by Good HR Planning
Your employees’ basic needs are met by pay and benefits which allow people to exist in safety. Ideally, you pay people well enough so they can afford items like holidays and you contribute to pensions to secure their future safety. Policies surrounding health and safety and employee wellbeing ensure that when people work for you their lives are not endangered.
Individuals’ psychological needs are met, in part, by employment. Working with others and feeling part of a respected organisation, whose values match your own, engenders a sense of belonging.
Self-esteem comes from recognition by others of a job well done and a sense of accomplishment by learningnew skills or getting a project over the finishing line. And learning, development and career paths can help employees fulfil their potential, whatever that may be.
Businesses have long embraced the concept of Total Reward as a strategy to meet all of these different employee needs. The theory emphasises the importance of pay and benefits as part of a wider plan aligned to HR and business goals.
While there are a lot of Total Reward models out there, they all agree on one thing: motivation cannot be delivered via a single factor. Because every individual is different, organisations need multiple levers they can pull on to get the best from each employee.
The Aon Hewitt Model of Total Reward
Consultants Aon Hewitt provide the following model which offers a good overview of the different tools that make up a Total Reward kit.
While recruitment and retention are important facets of your HR plans, there’s little point in hiring and keeping hold of employees who aren’t engaged in making the business successful. Which is why employee engagement is at the core of this model.
Total Reward Tools to Attract, Retain and Engage
To attract and retain employees your business needs a plethora of approaches that touch every stage of Maslow’s hierarchy of needs. Aon Hewitt recognise that:
“The broader the definition of Total Reward that is adopted, including a wide range of extrinsic and intrinsic, financial and non-financial rewards, then the more significant the potential impact on employee engagement appears to be.”
In the next section, we break down the different tools available to you and how they link together and impact recruitment, retention and engagement.
How You Do Things
Your recruitment policies should reflect your business values. According to the Society for Human Resource Management, poor cultural fit can cost organisations 50 to 60% of the person’s annual salary.
Define and articulate your organisation’s goals, values and practices through your recruitment policies to enable recruiters to conduct the hiring process appropriately.
Identifying and managing talent is a good way to ensure you keep hold of your best and brightest. Use talent management schemes to identify top performers and those with potential and fast-track their development.
Implemented effectively, research shows they improve recruitment and retention rates, enhance employee engagement and improve financial and operational success.
Too many organisations fail to support managers effectively, particularly new managers who are hired in or promoted internally. In fact, the UK Commission for Employment and Skills say that 48% of managers have not received any form of training during the last 12 months.
Managers significantly impact employees’ wellbeing, capabilities, output and intention to stay with an organisation. Help them to be the best leaders they can be and improve your retention and employee engagement scores.
Policies and practises
Communication is the grease that keeps the wheels turning. Not only do your HR policies and practices help your people know what to do in particular situations but they tell them how to handle them.
While some of these policies will be governed by law, there are plenty of opportunities to insert your business values.
According to research from IBM, treating employees ethically and fairly is one of the top attributes sought by millennials, generation X and baby boomers. From redundancy to parental leave, how you treat your employees sends a strong message.
By law you need to provide particular levels of certain benefits. For example, holidays, sick pay, maternity, paternity, adoption and parental leave.
Good employers take their benefits further sculpting their offering on the basis of what’s important to their employees and their business. For example, Virgin offers new dads up to 12 months paternity leave. That’s 50 weeks over the statutory minimum.
Making this kind of stand makes employees feel supported and enables them to fulfil other areas of their life outside of work and builds a sense of loyalty.
As this graphic from benefits consultancy Thomson’s demonstrates, benefit provision has a direct impact on employee engagement.
Other benefit package enhancements, like above-statutory holidays or higher than average pension contributions fulfil our basic needs for rest and future security. Longer holidays also enable employees to spend time with people they care about, rest and relax and come back to work fully recharged. Everyone wins.
If you believe your employees should go home in the same condition they arrived at work, Health and Safety should be a primary concern.
Today the concept goes beyond personal protective clothing and safety audits to encompass employee wellbeing. Organisations are focussing on supporting employees’ physical and mental health through benefits like private medical insurance and lunchtime yoga or mindfulness sessions.
The aim of both sets of practices is to ensure employees are not just well enough to work but are in optimal condition to provide their best performance. A strong wellbeing package can make you stand out in the employment market and entice the third of UK workers, who would leave a company due to wellbeing concerns, to stay.
The Work Itself
You might pay people exceptionally well but if the work is deadly dull there’s a good chance you’ll lose people to your competitors.
When designing jobs, try to make them as varied, enjoyable and interesting as possible within the realms of the role. When this isn’t possible, it’s critical to have a clear handle on the exact type of person who would suit the role. After all, there’s someone out there for every job.
This will help your recruiters find people who will be a good fit and should help boost your retention figures too.
Empowerment and Collaboration
No-one likes being micro-managed. Which is where leadership and management differ.
A recent report from Standard Life found that employees state the most desirable quality in a business leader is the ability to empower and trust colleagues.
The same research found that SME leaders believe this way of working enables adaptability, encourages creativity and innovation and was seen as central to business growth.
Empower your teams to work collaboratively and allow them to use their initiative and accept responsibility. Not only is this more efficient but it often means goals are exceeded because more skills can be brought to bear.
Learning and Development and Career Opportunities
For employers, having skilled people with the right experience to fulfil current and future roles and maintain company competitiveness has a direct impact on the bottom line.
For individuals, career growth, professional satisfaction and job security rely on building skills and experience that makes them more valuable.
Opportunities to develop can be sought outside the organisation and other employers will often advertise training and development as key benefits. Indeed, research from HR consultants Blessing White found 46% of employees said their next job move was likely to be with another company.
Focus on career development and career conversations to deliver higher performance today and an internal talent pipeline for the future.
According to Blessing White, employees favour secondment and temporary assignment work to develop their skills and experience.
Build commitment to your organisation with strong employee development and your business could become known as a career destination making much easier.
A certain level of employee turnover is a good thing. As long as you keep your good performers and let go of those who won’t be missed.
Good performance management tools are central to communicating what’s expected of employees. They should also provide ongoing feedback as to how employees are meeting these expectations and what they can do to improve their performance.
Traditional methods of performance management that culminate in rating an employee against a scale are increasingly falling out of fashion
There is now a focus on performance motivation which replaces job descriptions with impact descriptions that detail how roles influence organisational outcomes. Individual development plans are an integrated component and performance self-assessment is encouraged.
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Compensation is integral to attracting and retaining employees: pay too little and you’ll attract the worst of a bad bunch. Pay too much and you may not be able to sustain your costs.
Use market data to set affordable, sector-related pay levels to ensure you are competitive when recruiting.
How you increase employees’ salaries should also be established using market-related pay ranges. These can be linked to learning and development programmes and pay should increase in line with performance and skills and experience.
Pay particular attention to apprentices and graduates. These employees are on a steep learning curve and as they quickly become more valuable to your organisation they also become more marketable to other organisations. Reduce your retention risk by conducting six-monthly reviews with significant hikes in pay.
Research from Reward Gateway found that almost half of UK employees would leave an organisation if they failed to receive regular recognition. Yet 34% of senior decision maker respondents did not believe regular recognition significantly impacts staff retention.
If that doesn’t persuade you that recognition is a significant motivating factor, McKinsey Quarterly reports that:
“…praise from immediate managers, leadership attention (for example, one-on-one conversations), and a chance to lead projects or task forces—[are] no less or even more effective motivators than … cash bonuses, increased base pay, and stock or stock options.”
As the Institute for Employment Studies recommends, companies:
“…whose reward strategies are able to strike a balance between extrinsic and intrinsic reward will be in a much better position to … make the whole experience [of work] better for everyone involved.”
Alongside initiatives that show the company takes their well-being seriously and schemes that create opportunities for career growth, recognition is the third point of a magic triangle of employee motivation and engagement.
And, as a plethora of research shows, engaged employees say good things about the organisation they work for, strive for good business outcomes and intend to stay with that business.
People don’t leave jobs, they leave managers. No matter how good your policies and practices, if your line managers fail to communicate and implement them properly, they are pretty ineffectual.
These stats from a recent survey make interesting reading for line managers and organisations:
- 42% of employees have left a job because of a bad boss
- 30% feel their current boss is a bad manager (with lack of recognition and overwork cited as the primary reasons for employees’ dislike)
- 74% say getting on with their boss helps boost motivation
- 33% say a good relationship with their boss is even more important than job satisfaction
This links back to the earlier point about ensuring managers have sufficient training and support to help them do a god job. Get this right and your people will be far more likely to stay.
While senior leaders may not form part of most employees’ daily experience, they nonetheless play an important part in engagement.
Aon Hewitt found that active endorsement of business initiatives by senior leaders means they are more likely to be effective. And frequent, honest communication about the organisation’s direction lets employees know what they can do to help the business achieve its goals.
The research also revealed that the higher levels of engagement amongst senior leaders correlates with higher overall employee engagement levels.
How you promote yourself to the outside world is central to your recruitment efforts. Your brand should be a reflection of your business values and should determine how you present your organisation at every touchpoint across the employee lifecycle.
It can include initiatives such as Corporate Social Responsibility and it can mean you become an employer of choice. Plus, communicating a strong brand is more likely to attract more of the right kind of people who will stay because they’re a good cultural fit.
Enabling Recruitment and Retention Through Engagement
Now you have a good idea about the range of tools you can link up and deploy, you need to know how to measure their effectiveness.
Aon Hewitt recommends three employee engagement measures:
- what employees say about the organisation
- internally – about colleagues, managers, leadership
- externally – to family, friends and people thinking of applying for a job
- this can be measured via employee engagement surveys and exit interviews
- whether employees intend to stay with the organisation
- whether they actually do or not
- measure existing employees’ intention to stay through employee engagement surveys
- measure your turnover with regular reporting and analyse reasons for leaving from exit interviews
- the degree to which employees strive for the business
- whether they are motivated to exert effort for the good of the company
- established via employee engagement surveys and overall company performance metrics
The health of these measures is indicative of the health of your business. If your say, stay and strive results are positive, you should experience the following business outcomes:
- The best employees would stay and lower performing employees would leave voluntarily or be managed out
- Sickness absence and associated costs would be low
- Employee wellness would be high
- Productivity would be high with low health and safety incidents
- Satisfaction and Net Promoter Scores would be high
- Customer retention would be strong
- Revenue, sales growth and shareholder returns would be strong
- Operating margins would be low
Which means that, while implementing the tools outlined will deliver solid recruitment and retention, they will also deliver a whole lot more for your business.
Implementing a Total Reward strategy is like piecing together a 3D jigsaw puzzle. You need to align the right edges and integrate the right pieces with one another to ensure the whole structure can support itself.
The final picture will be an engaged workforce that intends to stay and a strong brand reputation that makes it easier to attract the right people who want to work hard for your organisation.