After decades of corporate discourse about the war for talent, it appears that the battle is over, and talent has won. Employees today have increased bargaining power, the job market is highly transparent, and attracting top-skilled workers is a highly competitive activity. Companies are now investing in analytics tools to figure out why people leave, and the topics of purpose, engagement, and culture weigh on the minds of business leaders everywhere.
Our research suggests that the issues of “retention and engagement” have risen to No. 2 in the minds of business leaders, second only to the challenge of building global leadership.1 These concerns are grounded in disconcerting data:
- Gallup’s 2014 research shows that only 13 percent of all employees are “highly engaged,” and 26 percent are “actively disengaged.”2
- Glassdoor, a company that allows employees to rate their employers, reports that only 54 percent of employees recommend their company as a place to work.3
- In the high-technology industry, two-thirds of all workers believe they could find a better job in less than 60 days if they only took the time to look.4
- Eighty percent of organizations believe their employees are overwhelmed with information and activity at work (21 percent cite the issue as urgent), yet fewer than 8 percent have programs to deal with the issue.5
- More than 70 percent of Millennials expect their employers to focus on societal or mission-driven problems; 70 percent want to be creative at work; and more than two-thirds believe it is management’s job to provide them with accelerated development opportunities in order for them to stay.6
The employee-work contract has changed: People are operating more like free agents than in the past. In short, the balance of power has shifted from employer to employee, forcing business leaders to learn how to build an organization that engages employees as sensitive, passionate, creative contributors. We call this a shift from improving employee engagement to a focus on building an irresistible organization.
Time for a change
One of the issues we must address is the aging idea of an employee engagement survey. While such measures of engagement have been used for years, organizations tell us they aren’t providing modern, actionable solutions.
Consider the typical process: Companies deploy annual surveys to benchmark a company’s level of employee satisfaction from year to year. Most use vendor-provided surveys that claim to be statistically validated ways of measuring engagement.
The marketplace of survey providers, which is around $1 billion in size, is largely staffed by industrial psychologists who have built statistical models that correlate turnover with various employment variables. The pioneer in this market, Gallup, promotes a survey of 12 simple factors that statistically predict retention.7 Other vendors have their own models, many focused on the characteristics of leadership, management, career opportunities, and other elements of the work environment.
While none of these models are “wrong,” companies tell us the surveys don’t prescribe actionable results. In a recent survey among 80 of the most advanced users of engagement surveys, only half believe their executives know how to build a culture of engagement.8 Among the broader population, the percentage is far lower.
Consider the radical changes that have taken place at work: Employees operate in a transparent job market where in-demand staff find new positions in their inboxes. Organizations are flattened, giving people less time with their direct managers.9Younger employees have increased the demand for rapid job rotation, accelerated leadership, and continuous feedback. Finally, the work environment is highly complex—where we once worked with a team in an office, we now work 24/7 with email, instant messages, conference calls, and mobile devices that have eliminated the barriers between our work and personal lives.
These changes to the workplace have altered the engagement equation, forcing us to rethink it. For example, a well-known pharmaceutical company found that its executives and scientists in China were leaving the company at an alarming rate. The annual engagement survey provided no information to help diagnose this problem. By running a statistical analysis on all the variables among these departing high-potential workers, the company realized that in China, unlike other parts of the world, people were expecting very high rates of compensation increase every year. The job market there was highly competitive, so people were being poached based on salary progression alone.
Today more and more companies are deploying analytics solutions to predict retention, correlating factors such as compensation, travel schedule, manager, and demographics to understand why certain people are less engaged than others. But the answers are hard to find: High-technology companies, for example, throw benefits at employees to see which ones stick—unlimited vacation, free food, health clubs, parties, stock options, and fun offices are common. Do these all result in high engagement? Most companies can’t really tell you.
So what matters today? How can we create an organization in today’s work environment that is magnetic and attractive, creates a high level of performance and passion, and continuously monitors problems that need to be fixed?
Make work irresistible
Our research suggests that we need to rethink the problem. There are three issues to address:
- Companies need to expand their thinking about what “engagement” means today, giving managers and leaders specific practices they can adopt, and holding line leaders accountable. Here we suggest 5 elements and 20 specific practices.
- Companies need tools and methods that measure and capture employee feedback and sentiment on a real-time, local basis so they can continuously adjust management practices and the work environment at a local level. These tools include employee feedback systems as well as data analytics systems that help identify and predict factors that create low engagement and retention problems.
- Leaders in business and HR need to raise employee engagement from an HR program to a core business strategy.
A refreshed model for engagement
After two years of research and discussions with hundreds of clients, we uncovered five major elements (and 20 underlying strategies) that work together to make organizations “irresistible.” These 20 factors fit together into a whole system of engagement in an organization, one that is held together through culture.
A note about compensation and benefits
Most studies show that compensation is an important factor in employee satisfaction. Research by Aon Hewitt, for example, shows that it ranks among the top five drivers (but is not number one). In this article, we do not discuss compensation because much research shows that pay is a “hygiene factor,” not an “engagement factor.” In other words, in most cases if compensation is not high enough, people will leave—but increasing compensation does not directly increase engagement (with certain exceptions).
One organization we studied told us that among the highest-potential employees, the organization could directly correlate pay increases with retention—but among the remaining 90 percent of the workforce, compensation simply had to be competitive and fair within job families. Our discussions with clients confirmed that once pay is competitive and fair, the 20 issues we discuss in this paper have a much greater effect.
This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum.
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Author: Josh Bersin is the founder and Principal of Bersin by Deloitte at Deloitte Consulting LLP.
Image: Matteo Achilli works with one of his assistants in his office in Formello. REUTERS/Tony Gentile.