Employee retention: It starts at the top. Culture, engagement and top performance best practices for CEOs

2 Employee retention: It starts at the top . Culture, engagement and top performance best practices for CEOs

INTRODUCTION

While employers across the United States face a multitude of challenges—attracting talent, mitigating risk and increasing profitability, just to name a few—one area consistently rises to the top of business owners’ priority lists: employee retention.

A recent poll by Human Resource Executive Online found that respondents ranked employee retention as one of the top three HR challenges employers face today.1 This is unsurprising, considering the high price of employee turnover: Replacing an entry-level employee alone can cost 30-50 percent of the position’s annual salary.2 This significant cost of time and energy associated with finding the right talent to fill the position can place a heavy burden on already strained organizations.

So, in simple terms, what makes employees stay? How can employees become more engaged in and satisfied with their work environment? In an era when U.S. companies are under increased financial and regulatory pressures, it has become critical to develop a team of loyal employees committed to long-term growth.

Outlined below are several components of an employee retention strategy for business owners and employers to think about when building a dedicated workforce.

“ Replacing an entry-level employee alone can cost 30-50 percent of the position’s annual salary.”

1 “What’s Keeping HR Up at Night.” Human Resource Executive, 2014. < http://www.hreonline.com/pdfs/H7_8-14p39UpNiteCharts.pdf>

2 Borysenko, Karlyn. “The Cost of Employee Turnover.” LinkedIn, 2014. < https://www.linkedin.com/pulse/20140701121556-17497251-the-cost-of- employee-turnover>

3 Employee retention: It starts at the top . Culture, engagement and top performance best practices for CEOs

COMPENSATION

Pay employees too little, and they will feel undervalued, frustrated and look elsewhere for employment. Pay them too much, and employers could be setting themselves up for failure in an unsustainable business model.

Finding a balance between these two extremes is crucial to creating a successful organization and satisfied workforce. In fact, just last year, compensation was among the top five areas ranked “most important” by employees in a Society for Human Resource Management (SHRM) survey, along with benefits, job security, trust between employees and senior level management, and respectful treatment of employees.3

The first step to ensuring employees are satisfied with a competitive but reasonable compensation package is to conduct a compensation analysis. This begins with an accurate and detailed job description, so the employer or HR manager understands the responsibilities and requirements of the role. The information collected will help determine an appropriate salary range when compared with national benchmarking data.

Next, employers should set expectations early: Define a clear compensation policy that addresses common questions, including how often employees should expect a raise, whether they receive overtime pay, and whether their salary is based on productivity or tenure at the company. This policy should then be communicated clearly and effectively to current employees as well as new hires— a step many organizations skip. Not even half of the 7,600

employers surveyed by job data firm PayScale Inc. embraced transparent communication around pay, despite three-quarters of them offering their employees bonuses in the past year.4

The final step is to create a structured incentive program to better motivate employees to set and achieve both personal and professional goals. By defining clear objectives and measuring performance, employers can determine workers’ productivity and set reasonable expectations in the future, while employees can point to tangible successes in the workplace and gain subsequent rewards. A company-wide incentive program based on individual goals and targets keeps employees challenged, interested and focused on future growth and development within the organization.

Compensation is a critical factor in workplace satisfaction and motivation, and the policies around it should be communicated effectively to avoid confusion down the line.

Unsurprisingly, compensation is a critical component of employee workplace satisfaction.

3 Ibid.

4 “Compensation Best Practices Report 2016.” PayScale Inc, 2016. <http://www.payscale.com/cbpr>

4 Employee retention: It starts at the top . Culture, engagement and top performance best practices for CEOs

CULTURE

What is company culture, and why is it important? In SHRM’s 2015 survey, the association defined corporate culture as “the shared attitude and mannerisms held by the members of the organization”—something that nearly half of the employee respondents ranked as “very important” to workplace satisfaction.5

Culture can encompass the organization’s values, future vision, beliefs, mission, in-office norms and general atmosphere. It can help to create an environment of respect, trust, innovation and purpose to motivate employees and improve workplace productivity, and can also be shared with clients, customers and the general public to establish a unique identity and/or brand. Employers should define their organization’s culture in clear terms and communicate it to their workforce via email, staff meetings, office-wide flyers, etc. Demonstrating company culture can also be included in

employee performance reviews; for example, if an employee can identify three ways he or she adhered to one of the company’s core values while interacting with a client or customer, the employee may receive an additional bonus or another incentive at his or her next review.

Hosting events outside of the office is another way to reinforce workplace culture and engagement; for example, if “giving back” is a key value of the organization, plan a service-oriented event during one weekday each quarter or year to encourage positive, out-of-office interaction. It is critical for C-suite executives and senior leadership team members to participate in such events to reinforce the company’s culture and create a sense of unity and teamwork among the workforce.

Employee feedback also is a crucial part of establishing a company’s culture; listening to and actively

engaging with employees can not only provide critical insight into the attitudes and feelings of the workforce, but also it shows the employer is genuinely interested in employees’ thoughts and well-being.

Finally, it is imperative for most organizations today to foster a sense of work-life balance among their workforce through greater flexibility. This could mean allowing employees to work from home occasionally, offering a more liberal vacation package or permitting employees to determine their work schedule. This, however, has to be adopted company-wide and start from the top down; demonstrating that company leaders also take vacations, leave early or work from home can better unite the workforce around the common value of work-life balance.

5 Ibid.

5 Employee retention: It starts at the top . Culture, engagement and top performance best practices for CEOs

BENEFITSWhy this discrepancy? One reason is the common mistake of a “one size fits all” approach to benefits. It goes without saying the health insurance needs of a recent college graduate are drastically different than those of a 40-year-old with a spouse and two young children at home. Depending on the demographic breakdown of their workforce, employers today most likely will need to offer multiple benefit plan options to ensure employees feel satisfied and taken care of, no matter their situation.

With that being said, employers should not only offer multiple, customizable plans for employees to choose from, but they should help employees and new hires determine which plan is right for them. HR managers or other new hire coordinators should be well-versed in the company’s plans and what different types of needs they address. Being able to have a frank and in-depth conversation with employees about how to best meet their health needs with the available plans will help individuals feel comfortable and secure in their decision.

Access to a comprehensive benefits package at a relatively low cost remains a top priority among U.S. workers. While benefits was ranked one of the top three most important elements of job satisfaction in SHRM’s 2015 employee survey, not even a third of the respondents were satisfied with their current benefits package.6

6 Ibid.

6 Employee retention: It starts at the top . Culture, engagement and top performance best practices for CEOs

PERFORMANCE MANAGEMENTSimilar to the compensation policy and incentive plan, a performance review program is essential for business owners and their workforce to share expectations regarding job performance and subsequent financial rewards. To create a comprehensive performance management program, employers should determine employee review frequency; while many organizations conduct annual reviews, others may prefer quarterly reviews or more informal check-ins after large projects.

Next, employers should set the parameters around positive performance within the company. This can include both company-wide goals as well as job-specific skills and responsibilities employees can work toward on an individual basis. Employers can use benchmarking data, available through many industry-specific associations and groups, to set reasonable goals and measure success. Employers should also help employees set personal goals that can include anything from seeking higher education outside

the office that relates to their day-to-day duties, to learning a new language or gaining a new certification or license in their industry. These individual goals engage employees to continue personal and professional development both in and outside the workplace. Upon meeting these criteria, employees should receive constructive feedback from their managers or supervisors as well as a previously decided upon bonus or pay raise at their next performance review.

Peer feedback can also provide clarity around an employee’s performance and encourage workplace engagement; some managers now use feedback and reviews from peers to better understand employees’ day-to-day behavior and performance. Employers can set expectations and meet their staff’s needs through a performance management program that provides constructive feedback and encourages excellence and continued improvement for employees and the organization as a whole.

Employee retention has become a critical issue for U.S. employers across industries.

Finding, hiring and keeping the right people is a necessary process for organizations seeking to grow and ultimately succeed in their market. Unfortunately, many business owners seem ill-equipped or unable to stop the high turnover trend occurring in most industries today: In a 2014 survey, more than half of the employer respondents reported struggling with retaining top performers in their organization.7

By developing clear policies around compensation, culture, benefits, risk mitigation and performance management, employers can work toward a more dedicated workforce that is committed to personal growth within the organization as well as the organization’s overall success.

CONCLUSION

About IdilusHR

IdilusHR is a professional employer organization (PEO) that has maintained a constant commitment to high-quality service since its founding in 1999. IdilusHR is comprised of industry experts with a combined 100+ years of experience in the fields of human resource management, business and payroll administration, accounting, benefits planning, organizational development and information technology.We specialize in developing employee training and improving employee satisfaction to ensure business owners retain their top performers and focus on future growth.

To learn more, please visit www.idilushr.com.

7 “2014 Global Talent Management and Rewards Study.” Willis Towers Watson, 2014. < https://www.towerswatson.com/en-US/Insights/IC-Types/Survey-Research-Results/2014/08/2014-global-talent-management-and-rewards-study-making-the-most-of-employment-deal>