EMPLOYEE RETENTION CHALLENGES OF A TIGHT LABOR MARKET
By John Wright
The number one staffing challenge across industries is the inability to find and retain qualified workers. This poses significant challenges not only for businesses and policymakers but also for the broader economy.
Despite the wealth of information available regarding what different generational cohorts—baby boomers, Gen Xers, and millennials—seek from employers, there are a number of programs and incentives not being utilized as widely as one might expect. Incentives that address the work environment, career development and compensation are attractive, and these are being offered by a plurality of middle market companies.
But age can have a profound impact on the way potential employees view incentives. While most baby boomers and Gen Xers might see the inherent advantages of retirement plans and health care benefits, for example, fewer than half of millennials place value in these incentives. Many incentives being offered by a majority of companies are important to this cohort; conversely, fewer organizations are offering the benefits with universal value.
What Companies Are Offering
In industries ranging from manufacturing to retail, health care to finance, what are companies offering to attract and retain qualified employees?
Health Care & Retirement: These are the foundational benefits that, depending on the company, may include options for cafeteria plans, wealth protection, health reimbursement, saving accounts and the like. However, and perhaps not surprisingly given their perspectives on health and long-term issues, these benefits are among the least valuable to younger adults when considering employment.
Feedback: A majority of companies are offering opportunities to have input on how work is done. According to a recent survey of construction workers, feeling “in on things” was second only to feeling “appreciated for a job well done” as a workplace priority. Establishing a work environment where team members have opportunities to offer relevant input can go a long way toward making employees feel like their contributions matter—and making them want to stay. And to meet that primary value, many companies are offering recognition programs as a relatively easy and low-cost effort that provides a high return on the investment in terms of work performance and employee retention.
Compensation: It should not be surprising compensation is among the top attractions offered by companies. Fifty-six percent of middle market executives anticipate increasing compensation levels and offering competitive incentive compensation arrangements in their efforts to recruit and retain labor. Total compensation considerations aside, it is worth remembering compensation and benefits are not the primary attractions for employees—more often, it’s the quality of the job.
Professional Development: Other somewhat traditional offerings that appeal to employees who want a clear career trajectory include internal and external training or education. From apprenticeship programs to work arrangements with colleges and universities to individual professional development courses, companies understand these programs are some of the most effective ways to identify, develop and retain the skilled workforce they need.
What Companies Should Consider
Conclusions in studies of the behavior and values of different generations range widely, but whatever the perspective, these studies make it clear understanding what drives potential workforce talent is critical to recruitment and retention. By focusing on traditional incentives more than what potential employees truly value, many companies are missing opportunities to engage and retain the talent they need.
These are a few of the trendier, non-traditional incentives employers would do well to consider:
Flex Time: While boomers in general may not want to work from home, this option becomes more popular with each successive generation. Most millennials view work-life balance to be the most important factor in evaluating job prospects. Of course, due to the unique nature of particular jobs, not every industry can offer flextime to employees. But many industries and business cultures can tolerate employees working on various schedules. In these cases, as long as the work is completed on time, it may not matter what time of day it gets done or where. The value of flexible arrangements across the generational board suggests more companies need to consider these work programs. Businesses will have to consider how much actual face time they want, the technology they need and what policies to put in place for this option.
Upward Trajectories: Members of every generation want to know how their employers will help them prepare for their professional futures. But less than half of middle market executives offer formal programs to help employees define career paths within their organizations. With half to two-thirds of Gen Xers and millennials expressing interest in becoming bosses or managers, every company’s HR toolset should include clear and realistic trajectories that show every employee the promise of a solid career. Formalized mentoring programs should be among those tools. If companies are finding that helping employees define their career paths is an effective means to retaining them, then providing guidance along the way can play a significant role in that effort.
Extracurricular Opportunities: Social activities for employees are another relatively easy and low-cost incentive for any demographic. Yet with just over half of survey participants engaging employees through social activities, this could be categorized as an underutilized approach. Policies for volunteer days or other opportunities to give back to the community also play into more than half of millennials’ decisions to accept a job offer, and three quarters or more of Gen Xers and boomers participate in such programs, yet only about one-third of companies present company-sponsored opportunities to support community and charitable efforts.
Finding The Balance
Workforce needs differ among industries, not to mention specific companies. Given the importance of millennials in the workforce—by 2030, the cohort is anticipated to make up 75 percent of the labor market—companies would be expected to cater to that generation’s workplace preferences through their recruiting and retention initiatives. But millennials are not the only ones working or looking for work today. Boomers, with all of their experience and knowledge, are putting off retirement and working longer; and Gen Xers who are raising families need to work as well. Companies need to identify which generation holds the talent they need and adjust their recruiting efforts accordingly.
Some offerings companies should seriously consider are relatively easy and inexpensive to execute; others are more expensive and complex. To attract and retain a desired workforce in a tight labor market, however, management will need to strike a balance between the incentives they can afford to offer and those potential employees value.
John Wright is the Market Managing Partner for Austin and San Antonio at RSM US LLP. The RSM US Middle Market Leadership Council (MMLC) survey, the primary source of research for this article, is available for download.