Worldwide Trends in Employee Retention Report

Worldwide Trendsin Employee Retention:How to Keep Your Best Employeesin Any MarketBy Huntley Manhertz, Jr., Ph.D. Developing the 21st century workforce TM

Whether you’re thriving in a rapidly expanding bullmarket or floundering to escape the grips of a bearmarket, attracting and retaining talented employees iskey to long-term success.Ongoing technological advances, a shift fromcommodity-based to intellect-based markets, andmajor fluctuations in global economies continuallyforce organizations to adapt and adjust. Successfullyresponding to such change requires many things—notthe least of which is a competent, competitive, andcommitted workforce.But how do you create a competent, competitive,committed workforce? How do you incent youremployees to maximize performance and remainengaged? And perhaps most important, how do youensure your best employees stay?Study BackgroundIn a recent research study, AchieveGlobal explored why workers leavetheir jobs, how such attrition impacts businesses, and what can bedone to minimize it.We examined some of the most critical issues managers face whenbuilding a talent management strategy. Key questions included: • How likely are people to leave their current positions? • What categories of workers are most likely to leave their existing jobs? • How is turnover impacting businesses? • Why are employees leaving? • What best practices do businesses use to retain their best employees?Examining international trends, the study also explored questionssuch as: • How does employee attrition differ in other parts of the world? • What talent management practices are used to improve retention in other regions?

The result? Compelling insight into international Although organizations worldwide share similarand regional trends in talent management, with the challenges and views on the importance of strategicbottom line being that employee retention involves talent management, there are differences in labora two-pronged approach of creating development markets from one region to the next. Specific marketopportunities for key employees and providing and business realities ultimately define how companiesincentives that strengthen loyalty. operating in those regions manage their talent.And while market conditions might seem to indicatethat fewer opportunities mean more employees arehappy to stay put, participant responses indicate that Research Summarythe opposite is true: A significant number of workers Study goals:(23 percent in the United States) expect to leave theirexisting positions within a year, leaving no doubt Investigate key trends in employee retention,that—without active talent retention strategies in including:place—attrition continues to be a significant threat. • Why people leave their jobsFindings: International Trends • How to effectively retain themWhile workforce challenges are top of mind at manycompanies, research continues to imply a direct link Key findings:between employee turnover and lack of effective • Nearly 1/4 of the respondents indicatedtalent management or leadership1. It’s clear that talent they were planning to leave their job inmanagement is a global challenge. the next year • Top reasons people leave:Around the world, social realities such as populationshifts have a direct effect on talent retention. In the —— Lack of growth and developmentWestern world, for example, retiring Baby Boomerswill create countless vacancies across a variety of —— Lack of respectindustries. In Europe, vacancy trends are likely to —— Lack of adequate compensationincrease as a result of low birth and immigration rates,making access to younger workers more difficult. In Conclusions:China, the single child policy has led to a deficit ofskilled workers, particularly in urban areas. • Key ways to retain employees: —— Offer competitive compensationThese massive shifts will likely be further exacerbatedby trends in education, such as the number of —— Ensure employee recognitionstudents graduating with specific degrees in eachregion, and the creation of partnerships among —— Offer growth and developmentbusinesses and education systems to prepare students opportunitiesfor the job market. —— Ensure a healthy work-life balance1 See a Spring 2007 study by IBM’s Institute for Business Value and Although not new findings, these keyWashington-based Human Capital Institute, and a 2006 study by Cindy retention practices are not being implementedMcCauley and Michael Wakefield in the Journal for Quality and Participation, in many organizations.Volume 29, Issue 4. Worldwide Trends in Employee Retention | 3

Figure 1 Percent distribution of managers reporting employee retention issues within their organizations by international region 50% 47.0 Asia Europe37.5% USA 30.1 29.7 28.9 25.7 25% 23.2 21.0 20.3 19.9 18.1 17.0 14.012.5% 4.0 1.1 0.7 0% Concern focused on It’s a widespread Turnover problem occurs within Retention is not an Other key positions problem certain employee groups issue in our companyIn the United States, where a shrinking economy means in particular, many organizations face challenges indecreased revenues, managers are racing to fill gaps in filling key positions as they seek to become moretheir leadership pipelines while creating performance- competitive.driven cultures to maximize efficiency and productivity.As such, talent management programs managed by HR Organizations worldwide are weighing the benefits ofare designed to address rapid turnover, high attrition, employee inclusion and engagement while factoringand ways to fill key positions. in the appeal of work-life balance. Such strategies are strengthened with advancement and compensationManagers in Germany also are challenged to provide components that meet the needs and expectations oftalent management solutions for their key retiring highly talented employees.employees in order to reduce the loss of knowledge andleadership expertise. And in Asia, accelerated market Factors Influencing Employee Mobility andgrowth requires managers to develop new skills training Attrition: Who’s Leaving and Whythat responds to changes in their business models. Is employee retention a global business priority, or is itAs labor markets become more competitive and specific to certain functions or groups?employees become more mobile, they must developstrategies to stem high attrition rates while focusing on The findings of this study indicate that retention issuescorrecting “rapid hiring turnover.” impact organizations differently from one geographic region to the next. For example, as indicated in Figure 1,In Europe, HR functions responsible for the entire U.S. organizations reported that the highest percentagetalent management process focus on rapid hiring as of turnover occurs within specific employee groups.a result of turnover, skill gaps in key positions, and In Asian organizations, specifically in India, retentiondifficulty filling key positions. In the United Kingdom is an issue throughout all departments and divisions. Figure 2 50% Percent of managers reporting Asia on employee groups with the Europe 37.5% highest levels of attrition USA 25% 12.5% 0% Under 25 yrs Women IT Frontline Mid-Level Top Executives4 | Worldwide Trends in Employee Retention

And in Europe, specifically in the United Kingdom and While attrition affects IT workers and frontlineFrance, respondents were more likely to report that managers most severely in Europe, it’s worth notingretention was not an issue at all. that the reasons are specific and can be addressed through new or updated talent management strategies.Further, managers in China, India, and Japan allreported experiencing the most challenges in retaining Organizational Impact of Retention vs. Attritionexecutives. Compared to other regions, Asia also Not surprisingly, organizations that face high employeereported challenges in retaining mid-level managers, turnover often suffer negative residual effectsparticularly in the Chinese and Indian labor markets. among remaining employees. Managers everywhereManagers in China and Germany reported that agree that dysfunctional turnover (attrition amongretention is a challenge among IT employees, while in high performers) is more costly than functionalthe United States, managers reported that women and turnover (attrition among poor performers) becauseminorities are more likely to have high attrition rates. dysfunctional turnover often leads to low employeeAnd in the United States and Singapore, organizations morale, lack of knowledge transfer, and/or deterioratingare more likely to experience retention challenges with product/service quality.employees under the age of 25. See Figure 2 on Page 4for details. The effects of high employee turnover can ripple throughout many levels of an organization. As indicatedThe AchieveGlobal study asked managers to identify in Figure 4 on Page 6, the AchieveGlobal study askedthe three factors that cause the greatest employee managers to identify how turnover affects theirturnover in their organizations. The findings revealed organizations. Across regions, managers noted thatthat, internationally, employee attrition is largely a attrition affects critical success factors such as:result of: • Employee morale1. Insufficient compensation and benefits • Community relations2. Lack of growth and development opportunities • Knowledge transfer3. Contributions not being appreciated by management • Quality of production • Employee relationshipsSee Figure 3 for details. • Financial performance of the organizationSecondary factors cited as affecting employee turnoverinclude skills not being a good match for the position, Figure 3 Top mentioned factors influencing attrition Lack of growthpersonal factors, and unfair treatment. Top mentioned factors influencing attrition Compensation Not being appreciatedThe broader picture to emerge from these findings 50%is that in Asia and the United States, Generation Y*workers and frontline managers are among the groups 41.3%most likely to leave their current positions, followedclosely by women and mid-level workers. 32.5% 23.8%* Generation Y refers to people born between 1980-2005. 15% Asia Europe USA Total Worldwide Trends in Employee Retention | 5

Figure 4Average rating of Managers’ agreement with the negative impact of turnover (on a 5-point scale with 1=no impact and 5=great impact) Community relations USA Europe Financial performance of the organization Asia Employee relationshipsQuality of production or services produced and delivered Knowledge transfer Employee morale 2.8 3.0 3.2 3.4 3.6A negative impact on any of these factors can knowledge transfer are all serious concerns relating todevastate an organization. Employee morale is key to employee turnover, there are more tangible concernsproductivity and output. Community relations—or the as well. These include the costs of:perception of social responsibility in the marketplace— • Separation (including exit interviews,is critical to positive publicity and exposure. And paperwork, and unemployment)knowledge transfer/management, production quality,and employee relationships all contribute to the final • Hiring and pre-employmentfactor on the list: the company’s financial performance. • Training • Lost productivityComparing these factors among organizationsinternationally, the study revealed that U.S. Effectively Improving Retentionorganizations with retention issues are more likely Managers we talked to identified four importantto face low employee morale and knowledge transfer strategies that employers would be wise to implementissues than European or Asian organizations. European in their efforts to retain valuable employees:organizations with high employee attrition are morelikely to be challenged with employee relations, while 1. Offer competitive salary, benefits, and incentivesAsian organizations with high employee attrition are packages:more likely to see deteriorating community relations. • Provide compensation and benefits commensurate with position.While employee morale, community relations, and If you had to choose three things that every employer should do to keep valuable employees, what would those be? “ I would choose: 1. Engaging employees, 2. Opportunities to learn, develop, and be promoted, and 3. Better compensation (not just pay)”. - AchieveGlobal Survey Respondent6 | Worldwide Trends in Employee Retention

• Ensure compensation is appropriate to talent minimal. Instead, this is the time when talent and work. management strategies are more likely to emphasize • Provide compensation as per market value. growth and development opportunities or maximize awareness of and appreciation for the organization’s • Offer competitive benefits. learning environment.2. Ensure employee recognition for a job well done: • Offer adequate recognition. Conversely, in a bull market, organizations are more likely to offer additional rewards or increased • Establish individual initiative recognition compensation for a job well done. In such conditions, programs. companies also might be more inclined to invest in • Provide reward and recognition talent management technology systems. for performance. While market conditions will always affect how • Share strategy direction and results. companies go about the business of managing3. Offer career development opportunities: talent, it’s important to note that wise managers • Offer appropriate opportunities for progress. remain focused on the task at hand—not allowing • Make external training available. retention strategies to succumb to either the bears or the bulls. • Promote cross-training when appropriate. }4. Ensure a healthy work-life balance and allow • Offer competitive salary & benefits. flexibility: Key Strategies • Recognize employee contributions. • Build a healthy work environment. for Employee • Develop career strategies. • Allow flexibility to improve work-life balance. Retention • Provide a healthy work-life balance. • Be realistic about expectations and workload.The study revealed similar strategies already being Conclusionimplemented across regions by organizations working An organization’s success is directly linked to itsto retain valuable employees and improve overall ability to access and retain an appropriately talentedemployee retention. These include: and skilled team of employees. That’s why talent management and retention are critical business • Leveraging optimal compensation and benefits strategies. packages to attract and retain talent • Creating employee engagement plans to ensure One might assume that global economic and social open communication channels changes translate into a decreased tendency to change • Providing a learning environment through jobs, ultimately causing some employees to feel trapped employee training and development in their existing positions or disillusioned about possible advancement opportunities. • Implementing talent management technology systems to manage all aspects of the employee This study, however, found the opposite to be true. experience, from recruitment to retirement Employees reported high possibilities of leaving their current positions within the next year. For employeesAn organization’s market and economic conditions who plan to leave—and even for those who plan totend to determine relevant talent management stay—there are some key strategies that employers canstrategies. For example, in a bear market—when implement to reduce attrition.organizations are minimizing expenditures and everydepartment is engaged in cost-cutting exercises—the The findings of this study suggest that to achievelikelihood of increasing compensation and rewards is success, every organization must assess its use of Worldwide Trends in Employee Retention | 7

recruitment, development, and retention strategies,and align those strategies with the broader businessstrategy and organizational objectives. Without activetalent retention strategies, organizations are likely tosuffer increased attrition and its residual effects ofdecreased employee morale, challenges to knowledgetransfer, and interruptions in both employee andcommunity/customer relations.Finally, the AchieveGlobal study reinforced that inorder to retain top talent, organizations mustimplement initiatives such as developing superior,talented employees; securing adequate or superiorcompensation; fostering growth and development; andoffering a balanced work-life experience.About the StudyThis study used online surveys with managers oforganizations from the United States, the UnitedKingdom, France, Germany, China, Singapore,India, and Japan. For the purposes of comparisonand analysis, the results were summarized into threegeographical regions: the United States, Europe,and Asia. Human Resource and business functionsmanagers were selected from correspondingcountries to represent professionals with hiring andstaffing responsibilities, with a total of 738 managersparticipating in the study.8 | Worldwide Trends in Employee Retention

About the AuthorHuntley Manhertz Jr., Ph.D., directs strategic researchfocused on organizational management of humancapital for the 21st century on behalf of AchieveGlobal,and its global subsidiaries and partners. His morethan 10 years of market consulting experienceincludes work with both Fortune 500 companies andstartups in industries such as consumer packagedgoods manufacturing, retail, and market researchconsultancies.Dr. Manhertz is proficient in strategic planning,market analytics, and business case developmentas it relates to brand strategy, price, and advertisingand consumer behavior. He earned his doctorate ineducational leadership and policy studies with a minorin economics from Indiana University-Bloomington. Worldwide Trends in Employee Retention | 9

About AchieveGlobalIn the 21st century, the level of human skills willdetermine organization success. AchieveGlobalprovides exceptional development in interpersonalbusiness skills, giving companies the workforce theyneed for business results. Located in over 40 countries,we offer multi-language, learning-based solutions—globally, regionally, and locally.We understand the competition you face. Your successdepends on people who have the skills to handle thechallenges beyond the reach of technology. We’reexperts in developing these skills, and it’s these skillsthat turn your strategies into business success in the21st century.These are things technology can’t do. Think. Learn.Solve problems. Listen. Motivate. Explain. People withthese skills have a bright future in the 21st century.AchieveGlobal prepares you for that world.10 | Worldwide Trends in Employee Retention

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Worldwide Trends in Employee Retention Report

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