As the economy and job market continue to improve, the retention of key talent becomes more challenging. Even if employees are generally happy with their current situation, they still may test the waters of the job market just to see what is out there. As a result, employers are finding it more difficult to retain their strongest performers, high potential talent and individuals in critical jobs, according to a new survey of 526 companies conducted by WorldatWork, Hay Group and Dow Scott, Ph.D., professor of human resources at Loyola University Chicago.
Turnover is always costly to employers but the specter of losing key talent is particularly worrisome for employers. "The cost to replace top performers is much higher than for your average worker," says Kerry Chou, a practice leader at WorldatWork in Scottsdale, Ariz. These costs come not only from the process of replacing the employee but also on the missed returns generated by a high performer's contributions. "When you factor that in, the cost of replacing top performers and people with critical skills goes up almost exponentially," says Chou.
Although constrained merit pay and incentive budgets could be playing a part for restless talent, Chou notes that pay is not always the key driver when an employee chooses to leave an organization. "Many people assume that pay is one of the top reasons why people leave," he says. "While pay is usually in the top ten reasons for leaving, it is not always in the top five reasons. However, pay does become more important as the talent of the individual increases."
More recently, the stress of layoffs and economic uncertainty have caused companies to ask for quite a lot from their employees for the past few years. That is likely to have taken a toll on these individuals. "People have been doubling up on jobs and responsibility so productivity on a per-employee basis is probably at its highest level," notes Chou. "But that comes at a cost. As the economy and labor market improve, employees who have been overburdened are going to test the market for their skills."
Companies at greatest risk of losing key talent are likely to be those that have not done enough formally to recognize and reward these employees. Although the survey found that 60% of companies identify key talent, this can take the form of anything from informal discussions between managers and employees to formal processes for managing key talent and pay differentiators that are spelled out in the compensation philosophy and strategy.
"It is important for employers to have these discussions with key employees in order to let those employees know that they have been identified as high performers and what that means in terms of their career, mentoring and development," says Chou. "The point is to make sure that employees see that the company is investing in them for the future. Having these discussions is a crucial part of retaining these high performers because it kickstarts the process and doesn't cost anything other than the time of those involved."