Many small business owners assume that their company’s power in the labor market correlates with the unemployment rate and general state of the economy. During a hot labor market, characterized as a candidate’s market, they raise wages and shower candidates with gifts ranging from Moleskine notebooks to Swell water bottles. If it is an employer’s market, they slash benefits and wages, try to drive a hard bargain, or turn their attention elsewhere if candidates balk at their strong-arm tactics. But while we are in the current slowing economy, this one is different and the typical playbook doesn’t apply. First, jobs are rebounding fast. Second, many jobs are going unfilled as workers try to avoid jobs that might put them at risk of contracting Covid-19. Third, some workers are finding federally backed unemployment support is a reason not to work. Fourth, many Americans are not located in the areas with the highest employment needs.
The common narrative focuses on the fact that unemployment rates are currently at unprecedented high levels. However, a more important conclusion for employers might be that, given an economic slowing, job openings have remained at unprecedented high levels. Employers should go out of their way to try to attract talent.
Retention — Pay Example
A solid employee — an above-average performer, but not a superstar — gave his manager a two-week notice. (We’ll call him John.) His manager mentioned it to his boss later that day. “Is it a money thing?” he asked. “I’m sure money is a factor,” His manager said, “but he’ll also have a much shorter drive to work. And he won’t have to work as many weekends.” “Tell you what,” the manager’s boss said. “Offer John a 10 percent raise and see if he will stay.”
The manager started to walk away, then stopped. “Would you have given him a raise six months ago?” “Of course not,” the boss said, shaking his head. “But six months ago he wasn’t leaving.” So the manager did and John stayed. For about a year.
Employee retention is a concern for most companies. The thought of losing above-average performers, much less superstars, can feel like a catastrophe — and cause you to make a counteroffer in a last-ditch offer to keep them onboard…DON’T.
The Employee Loses
While your intentions may be good, you may actually do the employee a disservice. According to a survey of more than 100 human resource executives in regards to employees who accept a counteroffer to stay with their current employer:
- Between 60 and 80 percent of senior leaders say the employee experiences diminished trust and compromised reputation within the company
- Nearly 80 percent suffer from a lack of trust and reputation among senior leaders within the company (if you’re a small-business owner, think you)
- Even though they stayed, nearly two-thirds are seen as less loyal
In short, you and others in your company may forgive an employee for wanting to leave, but you won’t forget. You’ll almost surely see the employee through the lens of the counteroffer you felt (in hindsight) forced to make and, no matter how hard you try not to, you will treat the employee a little differently in the future. Even if you do rise above, other employees may not because people usually know what other people make and they almost always resent the person who was given more money to stay.
Your Business Loses
According to the same survey, few employees who stay because of a counteroffer stay for long. One respondent said, “In my experience, counteroffers don’t work 95 percent of the time. And when they do work it’s usually only for the short term — someone who wanted to leave is eventually going to leave anyway.” Another said, “My gut feeling and my observations tell me that people who accept are going to be gone, whether it’s in a year or two years.” Why? While statistics vary, at least one recent survey shows that over half of respondents quit a job because of their boss, and an additional one-third have considered quitting because of their boss.
So, yeah: People who quit jobs often actually quit their manager. More money won’t fix, over the long term, a poor professional relationship.
Changing Employee Expectations
Increasingly, a job is about more than a paycheck; it’s about having a purpose and making an impact. Give your employees meaningful work geared toward solving a worthwhile societal and environmental challenge. Pay higher wages! It’s about supply and demand. Provide meaningful benefits, including quality health insurance and childcare services, if relevant.
In the case of the employee John, his desire for a shorter commute and a lot more weekends off led him to eventually leave. In less than two years since the COVID pandemic began, remote work has gone from something exotic to normal reality. As a result, many companies have found that their employees are reluctant to return to their offices. A recent study by FlexJobs reveals that only 2% of workers want to return to their daily office work. The majority of respondents (65%) said they would like to continue working remotely after the pandemic, while 58% of survey participants are ready to look for a new job if they could not continue to work remotely in their current position.
The main arguments for working remotely seem to be obvious. Firstly, there is the ongoing fear of the pandemic: 49% of FlexJobs survey participants admitted to being concerned about the risk of infection while working in the office. Secondly, remote work has allowed many employees to improve their work-life balance significantly. There is no longer the need to waste time on getting to the office, with some people now having up to two hours of free time daily they can devote to themselves and their loved ones. Unsurprisingly, 84% of survey participants said that the lack of need to travel to work is the main advantage of working remotely.
Economic factors also play an important role in the trend toward remote working: three out of four respondents said that working from home saves them a significant amount on transportation and food expenses. 38% of people surveyed by FlexJobs said they save at least $5,000 a year by working remotely, while one in five respondents said they saved more than $200 a week, or more than $10,000 a year. Employers have also noted that teleworking brings a lot of benefits to their businesses, ranging from reduced office rental costs to the ability to hire employees from other cities and regions with lower salary expectations. Since many companies are forced to cut budgets during the crisis, additional saving opportunities come in handy.
Other times, employees leave in hopes of greater developmental opportunities. Or in hopes of better chances for advancement. Or to gain new skills. Those things you may be able to fix. As long as you address those issues before the employee starts looking for another job. Just as your employees won’t care about your business until your business shows it cares about them, the employees you want to keep want to be loyal — but you have to be loyal to them first.
So be a great boss: positive, encouraging, hard-working, and constantly seeking to improve the skills and careers of your employees. That’s the best way to keep great employees, even those who occasionally wonder if the grass is greener elsewhere:
- Constantly look for informal opportunities to allow employees to expand their skills and continue to shine.
- Ask about their long-range goals and create opportunities that will help them reach their goals. If they eventually want to own their own businesses, your response is simple: Get them involved in everything. If they’re smart and clearly they are or you wouldn’t want to keep them, they’ll recognize the value of those experiences.
- The key is to provide that value before an employee wants to leave. If you do, and the employee still wants to leave? Wish them well. While you might be disappointed, you will at least know you already did everything you could.
Some Final Thoughts
As a leader, bring out the best in people by inspiring them instead of focusing primarily on management or time micromanagement. Build your internal pipeline of talent by providing meaningful skill development training together with concrete upward mobility opportunities. Include all stakeholders in your recruitment efforts: leadership team, employees, HR department, recruiters, vendors, etc. Provide development opportunities outside of the workplace. Employees want to feel valued as human beings and, therefore, cared for in and out of the workplace. Provide flexibility when it comes to location and WFH policies. Promote work-life balance. Set clear expectations and boundaries around availability, and working after hours or at home. Leaders help define the value of well-being improvement through setting personal examples and reinforcement. When the leadership team supports and highlights well-being improvement, employees will follow that example.
These are pragmatic steps companies can take to establish themselves as great places to work and attract the talent they need to grow and thrive. It’s about following the four tenets of conscious capitalism: purpose, conscious leadership, stakeholder orientation, and caring culture, which will foster a true win-win situation in which both employees and employers achieve their respective and collective goals.
For more thoughts on retaining employees, sign up for a personal mentoring session on “Winning The Retention Game”
Copyright ©John Trenary 2021