In a Restless Labor Market, Retention Matters Even More

In a Restless Labor Market, Retention Matters Even More

Willis Towers Watson’s latest Global Talent Management and Rewards survey finds that both hiring and turnover are on the rise globally. In the survey of over 2,000 employers worldwide, more than half said hiring had increased in the past year, compared to just 19 percent who said it had decreased, while 35 percent said turnover had increased in the same period. The report also shows that a significant percentage of the workforce is either looking to leave their job, at risk of leaving, or only staying with their current employer because they can’t find a better alternative elsewhere. Among directors, managers, and middle managers, for example, Willis Towers Watson identifies only 44 percent as “stayers,” while 32 percent are “soft stays” (i.e., would take another opportunity if it came by), 9 percent are at risk of leaving, and 15 percent affirmatively intend to change jobs within the next two years.

In terms of hiring the right employees, the report finds that most employers in mature economies are having trouble attracting talent with critical skills (55 percent), high potential (54 percent) and top performance (56 percent). One-fifth of employers in mature economies said it was difficult to keep employees. These figures are even higher in emerging markets. These findings are consistent with signs we’ve seen recently that the labor market is increasingly talent-driven, as even on a global level, employers are chasing a limited pool of highly skilled employees.

A high-turnover labor market is a significant challenge for employers because the cost of turnover can be very high, especially among senior managers. CEB Corporate Leadership Council members can use our Turnover Cost Calculator to measure how much money they stand to save by improving retention rates. Beyond its directly costs, turnover is even more expensive when you consider the potential for innovation that your organization can lose along with a high-performing or high-potential employee. Ben Eubanks of Lighthouse Research tells a story of just such a loss at ATD’s Human Capital blog:

In the past I served as the HR director for a global government services firm. One of our employees, a software engineer, earned approximately $70,000 per year. If that person left, we would have lost that position, which would have required time, effort, and resources to fill for the unique skill set. Let’s estimate that total cost to be $100,000. What’s interesting is the $100,000 figure is actually a relatively minor amount when compared with the overall value of the employee and her innovative ideas.

One day on a whim that employee developed a new method for licensing hardware and software to the government. That bloomed into a multimillion-dollar product line and became a steady source of organizational revenue. However, if we looked only at the “normal” cost of turnover, we would have seen an impact of $100,000, not several million dollars.

Eubanks urges employers to “view employees as appreciating assets, with a higher future value,” and this is especially true for managers and knowledge workers. The impetus to keep these high-value employees on board is leading to innovations in retention like stay interviews and artfully designed career paths that give young and hungry employees a range of experiences within the organization. CEB Corporate Leadership Council members can read more about what the best companies do to develop and retain their high-potential employees here.