Employers are facing more severe talent shortages than they have seen in decades. While the particulars differ, the evidence of talent shortages is widespread:
- Voluntary unplanned turnover—the “quit rate”—is increasing.
- Pent-up departure demand—the “want to quit rate”—is also increasing.
- Open position and time-to-hire rates are increasing.
- Early voluntary departure of new hires—less than eighteen months—is increasing.
The effects of the COVID-19 pandemic cannot be understated. These short-term factors are responsible for some of the most acute staffing challenges occurring in 2021. Workforce burnout and depression, extended unemployment benefits, increased family care needs, and other post-pandemic disruptions are presumably short-term.
However, there are also longer-term, lasting echoes that will transform hiring and retention for the foreseeable future. Trends toward remote work, flexible scheduling, and shorter terms of employment were pushed further by the impact of the COVID-19 pandemic. Employers will have to contend with these transformations to the employer-employee relationship far beyond 2021.
Globalization and technology. Globalization and technology have reached a point where the world is so highly interconnected and rapidly changing that adaptability has replaced stability as the strategic imperative.
Job security is no longer a guarantee. Institutions must be flexible, so employers can no longer pretend to offer job security to even the most loyal employees. Individuals must fend for themselves and their families, so employees must be prepared to sell their work to the highest bidder.
Shorter terms of employment. Employer-employee relationships become less and less long-term and hierarchical and increasingly short-term and transactional as new modes of work continue to emerge. First there was temping and part-timing, now the gig economy.
More flexibility. Employers have learned from the COVID-19 pandemic that they must be even more lean, flexible, and adaptable (read: smaller real estate footprints and fewer permanent workers). Many employees, for their part, are recalibrating their career ambitions and plans, opting—at least for now—for more life in the balance with work.
Meanwhile, the supply and demand curve for employees promises to continue to be unforgiving to employers. By 2022, individuals born in 1990 and later will comprise greater than 33 percent of the North American workforce, with similar figures for Western Europe and Japan, and even higher percentages in parts of South America, Africa, and Asia. Organizations with high percentages of young workers will face an increasingly transactional workforce, not hesitating to request greater flexibility and other concessions in their working arrangements.
The Talent Wars are Costly
When open position and time-to-fill rates are high, teams remain perpetually understaffed. There are five costs:
- Sales realization opportunities are lost, and over-promised purchasers are ultimately disappointed due to unfulfilled orders for services and products.
- Current staff members become overcommitted as they seek to complete additional work for positions that remain unfilled. Overcommitment syndrome leads to mistakes, delays, relationship friction, diminished morale, and burnout. Combined, these factors ultimately contribute to increased turnover.
- Overtime costs increase.
- Perpetual understaffing workarounds become entrenched in bad habits.
- New hires do not get sufficient attention in the on-boarding and up-to-speed training processes.
When good employees choose to leave, there are additional costs.
Replacement costs. When you lose an employee, you will incur the costs of recruiting, on-boarding, and up-to-speed training for a replacement.
Lost return on investment (ROI) on talent development. You will lose (often to your competitor) the recruiting, on-boarding, and up-to-speed training investment you have made in the departing employee.
Disruption in workflow and relationships. There is usually an increased work burden on remaining employees. When a good employee leaves suddenly or not on good terms, the disruptions are greater.
Diminished morale and copycat departures. When good employees leave, sometimes this triggers other unplanned departures. The instability caused by turnover also decreases team morale.
Loss of bench strength. The greater your turnover among good employees, the less robust your bench strength of homegrown talent for other positions throughout the organization.
These costs make it highly important for employers to identify and mitigate the leading causes of voluntary departures among the best talent.
Top Four Causes of Early Departures
There are four reasons most employees leave within two years of being hired.
Buyer’s remorse. This results from the employer overselling the job to potential candidates. The newly hired employee is disappointed by the real conditions of the job as compared with representations or promises made during the hiring process. Remember, it is always better to leave a position unfilled than to overpromise and fill it with the wrong person.
Inadequate on-boarding or up-to-speed training processes. This occurs when the first days and weeks of a new hire’s employment are not rigorously scheduled with interactions, experiences, and assignments designed to make a connection between them and the new organization. That means clearly presenting and continuously reinforcing the mission, values, history, culture, people, and work. It is important to transfer ownership of at least one concrete task, responsibility, or project to every new hire.
Hand-off to a disengaged or unsupportive manager. This is when the manager does not provide clear expectations, regular feedback about performance, resource planning/troubleshooting/problem-solving, or give credit and reward for high performance.
Limited flexibility. This could mean flexibility in anything from assignment choice, to schedule, to location or workspace, to any other preferred work condition.
Top Five Causes of Mid-Stage Departures
While hiring was postponed during the COVID-19 pandemic, many employees were similarly choosing not to leave their jobs. As hiring continues to favor potential new employees post-pandemic, the pent-up departure demand will release, resulting in a wave of turnover among mid-stage employees.
There are five leading causes for mid-stage departures, which will soon contribute to mass departures if not addressed.
Sustained overcommitment syndrome with no end in sight. Chronic overcommitment syndrome results in siege mentality—when all incoming requests, assignments, and opportunities feel like an assault. This inevitably leads to burnout.
Disengaged or unsupportive manager. When someone’s manager does not engage in regular, ongoing, one-on-one conversations about the work with them, they will stagnate. They may feel their manager does not provide the guidance and direction to set them up for achieving their best work. Or, they may come to resent the manager for failing to recognize the great work they do. An employee may also perceive a manager’s lack of engagement as representative of how valuable they are to the organization as a whole.
Limited flexibility. This may be flexibility in anything from assignment choice, to schedule, to location, or any other preferred work condition. Now that employees have seen it is possible to achieve nearly universal work-from-home conditions, they are more skeptical of employers or managers who refuse to offer sufficient flexibility.
Lack of career path. The best employees will leave when there are no clear steps toward role/position growth or career advancement.
Relationship conflict. This could be cliques, ringleaders, or other exclusionary social formations, or growing friction resulting from a lack of clear communication when it comes to collaborative work.
Six Steps to Gaining a Strategic Staffing Advantage in 2021 and Beyond
There are six steps essential to gaining a strategic advantage as an employer in the talent wars of 2021-2022 and beyond:
- Define a clear value proposition.
- Build and maintain a supply chain of applicants.
- Be very, very selective.
- Stay in close dialogue between hiring and day one.
- Structure on-boarding and up-to-speed training.
- Turn every manager into a chief retention officer.
Step One: Define a Clear Value Proposition
For each role, you need to frame a clear value proposition. The employer side of the transaction is always the same—employers want to get as much of the highest priority work done as well as possible, as fast as possible, with the least possible cost or friction. The employee side of the transaction is more complex and variable—employees want to earn money, have favorable working conditions, and make a positive contribution to the mission.
Every employer value proposition is based on a balance of eight factors that employees value most. We call these the dream job factors.
Performance-based compensation. How much is baseline pay and benefits? Are they comparable to your competition? Are there clearly defined opportunities to learn more based on extra mile effort and results?
Supportive leadership. Is there an immediate manager who provides regular guidance, support, and direction? Will they make expectations clear and provide regular feedback and recognition?
Role and responsibilities. What is the nature of the actual work itself? Is it difficult, repetitive, or tedious? Or, is it interesting and valuable? Is it mission driven? Does it have positive, meaningful results?
Location and workspace. Is the work done in a particular place in a specific geography? Or can the work be done from anywhere? Sometime? All of the time? If there is a particular place, is it pleasant?
Scheduling flexibility. Is the job full-time, extra time, part-time, flex time? Is there any ability to set one’s own schedule? Occasional scheduling accommodations?
Training and development. Are there formal and informal opportunities to build new, relevant knowledge and skills? Is there a chance to become a deep subject matter expert? Or to build a wide repertoire?
Relationships at work. Is the workplace welcoming and inclusive? Are there opportunities to build productive and mutually supportive working relationships with colleagues, leaders, clients, or decision makers?
Autonomy and creative freedom. Is it clear what exactly is up to employees, and what is not? What is required in every job? What is allowed? Where do employees have discretion in how they complete their work?
Very few, if any, employers can provide every employee with optimal choices in all the dream job factors. But you have to offer something. The less you offer in one category, the more you must offer in another. One job may offer only heavy lifting with very little autonomy or creative freedom. Then the question will be simple: What do you offer? Scheduling flexibility? Location flexibility? Supportive leadership?
COVID-19 has changed how we work. If the dream job factors weren’t a part of your organization’s repertoire prior to the pandemic, they probably are in some shape or form now. If not, it’s time to take action.
Step Two: Build and Maintain a Supply Chain of Applicants
Depending on your optimal staffing mix, you may build your staffing supply chain using a mix of internal professionals, expert external partners, and technology.
Who internally on your team is responsible for attracting applicants from appropriate talent pools? Is it hiring managers themselves? Are they winging it, all alone? Or are they supported by staffing and recruiting professionals from HR? Who is responsible for framing the attraction message? Preparing the materials? Delivering the materials? Explaining and answering questions?
There are two goals—to make the process as simple and easy for the applicant as possible and to diversify your sources of hiring as much as possible.
Step Three: Be Very, Very Selective
The biggest mistake hiring managers make is continuing the “attraction campaign” until the candidate has accepted the job, and sometimes until the new employee is already at work. They are so desperate to get someone in the door, they make promises they cannot keep or hide the downsides of a job. We call this “selling candidates all the way in the door.” Do not overpromise in the attraction process. That leads right to the number one cause of early voluntary departures for newly hired employees—buyer’s remorse.
It is better to leave a position unfilled than to fill it with the wrong person. You need a fast and rigorous selection process using all the current best practices—online pre-screening, aptitude and personality assessments, behavioral interviewing, job previews, and phased-in hiring (sometimes called probationary hiring).
Step Four: Stay in Close Dialogue Between Hiring and Day One
If there is lag between hiring and day one for a new hire, it is important to keep that person engaged in the meantime and set them up for a solid start.
Maintain a high level of communication during the intervening time, not just from human resources or some other anonymous corporate office, but from the hiring manager and the team the employee will be working with. Have key people on the team reach out and schedule one-on-one conversations.
Step Five: Structure On-Boarding and Up-to-Speed Training
New hires almost always walk in the door with a spark of excitement. The question is—do you pour water on that spark or gasoline? If you want to ignite the spark, focus on them from the moment they walk in the door. Day one is the most important day; then week one, and then months one, two, and three.
Picture the United States Marine Corps and their on-boarding and up-to-speed training program for new recruits. For thirteen weeks, recruits undergo intensive training, acquiring the physical and mental skills and sense of shared mission required to do a superior job. The Marine Corps doesn’t pay much and the job is both difficult and dangerous. Yet, they are able to recruit 40,000 new Marines every year, with a washout rate that is so low it can hardly be measured.
You do not need obstacle courses or firing ranges in your own organization. What matters is replicating the intensity, the connection to mission, the feeling of shared experience and belonging, the steady learning, and the constant challenge. It means taking new employees seriously from day one, and every other day after that. The longer you sustain that intensity, the better
Step Six: Turn Every Manager into a Chief Retention Officer
Managers with the greatest control over turnover. That is, when low performers are removed or guided toward improvement by the manager, and high performers want to stay, do the following:
- They are highly engaged, so they know what’s going on with the work at all times and make better decisions as a result.
- They are in a regular, ongoing dialogue with every direct report, spelling out expectations every step of the way.
- They build authentic rapport by talking about the work, planning and providing regular feedback, troubleshooting, problem-solving, scorekeeping, and recognition.
- They do their best to reward people for their contributions, not just with money, but by offering more opportunities and flexibility when it comes to assignments, schedule, location, and other preferred work conditions.
Organizations with the greatest short, intermediate, and long-term retention rates among high-performing employees are not just those with the policies and programs to support the kind of dream job flexibility employees want. By far the most important factor is the investment in systematically training and requiring managers to engage, guide, direct, and support employees in their day-to-day experience at work. In manager-directed workplaces, manager buy-in, support, engagement, and facilitation are the keys to the success of any workplace flexibility practices intended to benefit employees. Without manager-led execution, these programs risk becoming irrelevant at best.
The effects of the COVID-19 pandemic will be felt in hiring and retention for years to come. Employers will have to work much harder to attract, hire, train, and retain the best talent today.
There are no shortcuts or quick fixes—this is more true today than ever before. Employers must commit to defining a clear value proposition, engaging with each and every new hire fully, investing in their training and development, and building a culture of strong leadership. If they don’t, someone else will.
EDITOR’S NOTE: This article is adapted from the whitepaper titled Winning the Talent Wars: Hiring and Retention for the New Hybrid Workplace, which is available on the author’s website rainmakerthinking.com.
Bruce Tulgan is a best-selling author, an adviser to business leaders all over the world, and a sought-after keynote speaker and management trainer. He is the founder and CEO of RainmakerThinking, a management research and training company. He has authored numerous books, including the best-seller It’s Okay to Be the Boss, Not Everyone Gets a Trophy and his newest book from Harvard Business Review Press, The Art of Being Indispensable at Work.