Most headhunters won’t give their clients this advice but they should!
When most headhunters hear the words ‘we have high staff turnover’ instantly get dollar signs in their eyes. Here’s a client that will have lots of demand for our services they imagine…
Employers consistently under predict the cost of staff churn to their business. Whether it be an account that is lost because a favoured account manager leaves, projects delayed due to absence of key skills or the impact of a constantly shifting corporate culture caused by high staff turnover.
Often companies only react to a critical staff member leaving after they have served notice. They try using some form of counter offer which are rejected 80% of the time as candidates’ minds have already moved on to their nice shiny new role. A strong Employee Value Proposition should act as preventative medicine to reduce staff walking out the door.
I thought I’d try and write a little about a longer-term strategy that clients can use to actually reduce their staff turnover. I believe firms that are well managed with a great EVP will be better long term customers for Salt. These firms will likely have actual profits they can invest in support services, a growth agenda, a better proposition for candidates and the staff we place with them will be happier and are more likely to ask us to build their future teams. Win, win, win.
We hear all the time about the ‘war for talent’ in the market from our clients. However, we rarely hear any complaints from companies that offer the following combination of features:
- Top 20% salaries vs the external market
- Transparent career planning
- An inclusive, self-directed culture
These three pillars should make up the Employee Value Proposition (EVP) for your business.
To build an effective EVP and thus reduce churn employers should reduce the amount of competition in the market for their staff by paying them salaries that are as a minimum in the top 20% of the market rate. This single step reduces your level of competition for talent fivefold compared to paying in the bottom 10% of the market.
There is a very strong psychological factor at work when you adopt this strategy. Pride, greed, fixed expenses and vision of self, provide a strong psychological barrier that prevents candidates from accepting a pay cut when moving firms. Thus, there is strong inertia caused by human psychology that means employees in top paying companies will retain talent far longer. These companies have less of their competition making credible approaches to their staff and thus staff have less options to leave even if they hate the company culture, their boss, everything!
On the flip side companies that pay salaries in the lower half of the market ALWAYS have churn issues. That’s great for head hunters like me but devastating for a company’s profitability and growth. There is no way around this rule it is economic reality I’m afraid.
‘How can I benchmark my firms’ salaries vs what other companies are paying?’
This is a question often thought but rarely spoken by HR managers I deal with. The answer is surprisingly simple, ask a recruiter specialized in a particular field and they will be able to instantly give you relevant data, for free! If you don’t have the luxury of external recruitment partners why not simply setup interviews with 5-10 candidates and garner the information first hand?
This information should be gained BEFORE you put together hiring plans and budgets to minimize fruitless searching for ‘unicorn’ candidates with rare expertise that is not accurately budgeted for and thus doesn’t exist. Salary benchmarking should take place at least every quarter as market dynamics shift rapidly.
When staff don’t know not what their future progression looks like it’s a sure-fire route to losing them. When approaching candidates my teams are often frustrated when candidates have a promotion or pay rise scheduled in the next 3-6 months. It makes candidates much, much more ‘sticky’ in their current role.
‘I should probably wait till I get the promotion and then I’ll decide if I want to look externally’ is the usual response from these candidates.
Once they have got the promotion candidates often then say
‘I have just been promoted and would like to learn the ropes in my new role before moving…’
Note it’s not the giving of the promotion that elongates the staff member’s tenure, it is the communication of the intent to promote. Without knowledge of their next career step candidates will naturally be curious as to what options exist outside their firm. Promote often and as early as possible to retain your rising stars.
Cultural development in firms either happens unconsciously (90% of companies) or consciously (the top 10%).
In firms that allow their culture to develop unconsciously, that is they take no active decisions as to how, who or why they make hires, run incentives, team building activities etc. etc., the culture simply becomes a mish mash of the personalities that have been hired.
In digital firms, such as those Salt serves, this can be challenging as to make a successful digital team you need developers, sales people, entrepreneurs, designers, support staff and so on. Stereotypes attached to different job types will tend to pervade where conscious inclusivity tactics don’t exist. Thus, the entrepreneur or CEO of the business is recommended to decide on what companywide culture they wish to create, as early on in the company formation as possible. To make a firm live and breathe a positive culture all decisions should have a cultural check box ticked before being made. A conscious culture should act like a magnet on staff’s personalities, making developers more communicative, sales people less brash, creatives a little more grounded and on.
I’d strongly recommend that decision makers decide on a culture that values people, their contribution and their effort above all else and you will be most of the way towards a loyal, productive workforce.
Here’s the bad news:
These three elements of an effective EVP will cost companies both time and money!
However, when properly backed by top management I have found investments in these three areas produce some of the most startling ROI you will find in business.
Happy employees are more productive every day, sell more product, write more code and deliver more projects. The cost of having an effective EVP should thus be one of the first things all firms budget for.
Combining these three elements will allow a firm to create a winning EVP, reduce churn, expand profits and grow their business.
I welcome comments from business owners and employees on this blog and look forward to spreading further ideas on this topic in the future.
Richard Smith is the head of Salt UAE. He has worked as a headhunter across the U.K., Netherlands and for the last 6 years in the UAE where he has placed candidates in industries such as digital, finance, civil engineering, IT, pharmaceuticals and others. Richard is passionate about connecting the best talent with businesses, and consulting with companies to delivering best practice in recruitment. In his blog column, he shares his expertise and gives valuable insights into the recruitment market.