Employee Retention is the Antidote to the Labor Shortage

The labor shortage has grabbed headlines across the country. Since the great layoff in the spring of 2020 the labor market has been the tightest it's been in my lifetime. Lots of debates have surfaced over whether the lack of elasticity is good for workers or ruinous to the economy, but the fiercest debate has been about what we should do to "get people back to work".

The effects of the labor shortage are undeniable; companies with formerly razor-thin margins (mostly restaurants and small retailers) are going out of business or declaring bankruptcy , we're seeing longer wait times for healthcare and food service , supply chain pile-ups are delaying consumer durable orders by months and manufacturing supplies by even more , materials and parts are also on a huge delay . Here in Michigan, the automotive industry is suffering a massive slowdown because of a microchip shortage . There has been a surge in strikes, walk-offs, and mass quits as well. And this is only a partial overview!

Relying on the right policy cocktail to address these problems seems unlikely to pay off as well. Many industry pundits and employers were banking on the end to expanded unemployment benefits, but most states who nuked their expanded benefits didn't see any major increase in hiring (some even saw further declines) and while it's still early, the federal government's termination of UI hasn't seemed to push people back to work as many had hoped.

So if it wasn't the obvious unemployment Boone, what is keeping people at home? Some have speculated about unhealthy working conditions, a lack of childcare, and stagnant wages. Yet none of these prove to be a simple fix if they're even a reason at all; vaccine mandates are wildly unpopular for many of the workers whom we need physically present at their workplace , paid leave and universal childcare subsidies seem to have been paired out of the infrastructure bill currently circulating congress, and wages across the country have been ticking up.

It's time to give up on simple fixes. The most important takeaway for employers is that this is not the market you want to be losing employees in. The US has seen a record number of quits this year , some of those people are leaving the workforce entirely, some are taking other jobs. Every employee quitting in favor of a competitor or the allure of home life is future productivity lost.

It's time to adopt an employee retention policy that acknowledges the monumental cost of turn-over in the middle of the biggest labor shortage we might ever see.

Will it cost money? Undoubtedly. Probably a lot! But the cost is nothing compared to the endless cycle of costs when faced with tackling a sporadic turn-over rate.

The four pillars of an effective retention strategy are:

Work-life Balance

A balance between work and life is one of the most defining features of an employee retention program. For far too long employers have thought they could throw above market-rate salaries at people and ask that work subsume much of their life in return. The lack of childcare, a taste of compensated life without work, and ever-increasing demands for more productivity have obliterated this strategy.

Below are some popular ideas to make work-life balance more than just a platitude to be extolled by brands on social media:

• If possible, go remote or hybrid: This is a no-brainer and it's easy. If you're worried about productivity, make the policy contingent on conditional benchmarks being hit.
• Revamp the Paid Time Off/Holiday policy: paid time off, holidays, sick time, bereavement etc are all effectively free; all you're losing is short-term productivity gains. Remember, the point of doing this is realizing long-term productivity gains by not having to constantly hire and train people.
• Offer your own paid family leave time: just because the government doesn't require this doesn't mean you can't offer it, it just means it's really easy to beat the market average time offered. There are a lot of cool ideas here, companies can even offer to subsidize employee childcare costs . These things go a long way, especially with young workers.
• Overstaff rather than overwork: Kill the consultant in your head. Trust that your most productive and knowledgeable employees are working their highest capacity, if they're getting burned out hire them an assistant, an apprentice, an intern, or just another employee to do the job. It will undoubtedly be cheaper than trying to backfill a burnt-out employee.

Career Growth

Nothing will race an employee to burnout faster than feeling stuck in a redundant job. Any job needs to see the chance to move up or at least give the impression that it is constantly evolving and that the employee doing the work won't be doing the same thing every day until they retire. It doesn't require making every employee vice president, but it does require some creativity.

Here are some ways to generate quick wins in employee retention using career growth:

• Raise the wage and the stakes: throwing money at your employees sometimes works, but if you can couple this strategy with career growth it's even better. Offer additional duties in leadership or training, have them take on work that leverages their skills and knowledge, and work with them on relevant job title changes to reflect a forward-moving career path.
• Schedule it out: meet regularly with your employees to discuss their career goals and where they'd like to end up, put a plan in place to get there. If promoting this employee out of production would hurt productivity, schedule the promotion far in advance. This gives the employee something to look forward to and gives you time to replace their productivity.
• Make it a policy: if possible, make promotions based on tenure or performance a policy that employees can count on. This way no one will be guessing what their next step will be or when it will come. The uncertainty of that next step is often what drives people to start looking elsewhere in the first place.
• When in doubt offer the job shadow: for some companies promotion or moving departments just isn't a possibility. You can still show a vested interest in the career of your employee by offering them the opportunity to shadow with other departments, schedule out a day or a few hours to learn what others do and are responsible for.

Impact

All employees are equally deserving of your retention efforts in this market, but retention of young employees is especially lucrative for the simple fact that they have more working days ahead of them. More than generations prior, young people today want to feel like they are making an impact at work. Three times as many Millenials said they were revaluating work than any other generation according to a McKinsey poll . Some employers interpret this as offering a volunteer or philanthropic opportunity, but this is missing the larger point that young people want to feel that the work they are doing is itself impactful.

Here are some ways to give employees the sense that what they are doing every day has an impact beyond themselves:

• Think about and communicate the meaning behind work: The first step is to consider the impact behind every job. What does the successful fulfillment of the duties of this position do for the company and, in turn, for the things external to the company? Whatever the answer to this question, be sure to communicate this to the employees in those roles as often and in as many different ways as possible.
• The bottom line is not the finish line: We all know money is important, but when speaking to the impact of work, the value of the work needs to be contextualized in different terms than just how much money it's making the company or the employee. Giving employees projects and deliverables that directly impact the growth of the company or furthering the vision of the company is an excellent way to inspire buy-in and make the nature of the work more meaningful.
• Make room for collaboration: In school, we all hated group projects, but we also weren't paid to complete them (might have helped!). Here in the professional world group projects can be a welcome reprieve from the singular nature of daily tasks and nothing communicates a shared company objective more than literally sharing the objective by working towards accomplishing it with others.
• Carve out repetitiveness: The road to burnout is paved with repetitive tasks. To the best extent possible, anything you can do to schedule out new and different duties that rely on decision making, intuition, and/or critical thought will go very far in cutting down the sense that the work an employee is doing is boring, meaningless, and requires little thought.

Value

Whenever the topic of employee retention is brought up, especially in the media, compensation is the first thing that comes to mind. This makes sense because for so long, pay increases have become the way in which employers show that they value employees. However, salary is only part of the equation. It's important to consider ways to value employees outside of income, especially because it will set employers apart from those just using salary for talent acquisition and retention.

Here are other ways you can show employees their work is valued besides increasing their salary:

• Invest in your employee's future: 401k matches and retirement plans translate a much larger sense of value than many employers realize. It's imparting to employees that they are valued beyond the time they are productive in the company. Still, only about half of all employers offer a 401k plan. Even if they do, 20% don't offer a match. The first step is offering a plan, the second step is offering even a modest match, but above and beyond is making the matched funds immediately vested. Less than a third of companies do this.
• Invest in your employee's health: While paid time off and vacation are good ways to help mental health, an employee's physical health - and more importantly their family's physical health - is an essential show of value. The obvious but more expensive route is contributing more for employee health insurance, particularly the family plans, but other options include offering sick time, offering paid leave to care for sick family members, and simply giving paid time off to visit doctors, hospitals, mental health experts, and dentists.
• Invest in your employee's education: Nothing communicates the value of someone's knowledge and skills more than investing in those things with real dollars. Tuition reimbursement plans are a popular tool of a lot of employers, but training courses, apprenticeship programs, and trade school courses are all options as well. The bravest thing an employer can do is offer tuition reimbursement with zero clawback/payback period.
• Invest in your employee's community: Most employees still live relatively close to their worksite and even if they don't, they spend time around that worksite driving to work, utilizing childcare, eating out, etc. An employer who donates volunteer efforts or money to local parks, signs up to sponsor local school events, or gets involved with local hospital charities is an employer people can be proud to work for. This might not be the deciding factor in whether to stay at a company, but it certainly helps.

The old adage "people don't leave bad companies they leave bad managers" is only a half-truth. While people certainly leave their jobs because of bad managers, they also leave in spite of good managers because companies aren't equipping those managers with talent retention policies.

There is no magic bullet, but it's time to get more creative about talent retention instead of pretending the old-school tricks of salary bumps and sign-on bonuses are going to work. Don't let your lack of talent retention strategy become your competitor's talent acquisition strategy.

Data and final graphic from: https://wfhresearch.com/

All illustrations by Abby Lane