Retaining Talent in Times of Scarcity:
The Time to Act is Now
by Winston L. Tan, Managing Principal
Note that this article was first published in the Northwest Public Power Association’s monthly Bulletin magazine.
[F]or years we have all heard that Baby Boomer demographics would significantly impact the way we do business in the energy industry. This cry has come from so many sides that many have been numbed because it would seem that the Boy Who Cried Wolf has made another appearance.
Over the past year I have seen attrition strike utilities that have previously experienced almost no turnover, saddling managers with a seemingly unmanageable number of personnel changes in mission critical roles. Recruiters observe that almost every functional area within the energy industry faces the challenge of a decreasing supply for experienced talent compared to the demand for that same talent. The most immediate example of this appears to be in craft labor and engineering, due to the cur rent climate of capital construction; however, the demand is moving toward the mid-management and executive ranks. For this industry, which has been known for extreme longevity, it now appears that the cry of “Wolf” may be right.
Upcoming normal retirements are the easiest to plan for and manage. It’s the unexpected turnover that can cause costly disruption in the organization, threaten mission critical processes, and literally throw your training/develop mental dollars out the window. How can your organization avoid becoming another casualty in the battle to retain critical talent? The answer is to approach the issue comprehensively, which will result not only in success in retention, but in increased overall organizational vibrancy.
Assess and optimize key retention drivers
Job one is to optimize your company’s key retention drivers and work to minimize the negatives. What is it about your organization that makes it an attractive place for people to stay? Is it tangible like outstanding compensation or medical benefits, or is it organizational culture and management style? Where is it that your organization is least competitive in your employee value proposition? Rather than guess at the answer, a direct employee attitude survey is an excellent way to identify your key retention drivers and also measure any number of issues from management style to satisfaction with core benefit offerings.
Recognize potential weaknesses
According to Lanie Prouse, managing director for Mycoff, Fry & Prouse, LLC, certain conditions within an organization make efforts easy for recruiters and can also be known as the “Three Best Ways to Lose Employees.” As you review the following, consider your own organization:
- Company instability (perception of financial viability, recent or recur ring management changes, perception of a lack of innovation or progress, or workplace stress)
- Employee stagnation (limited advancement potential, few opportunities for cross training or opportunities to learn, or perception that to move up necessitates leaving the company to gain more breadth and scope)
- Uncompetitive compensation and benefits (feeling underpaid, lack of incentive opportunity, poor benefits packages, raises inconsistent with performance, or employees feel they must leave in order to raise their compensation to market levels)
Implement knowledge retention strategies
If you have identified any of the above conditions, now is the time to be proactive in averting a talent crunch. First, start with deploying a knowledge-retention strategy which identifies critical knowledge and business practices, and then develop procedures, tools, and contingency plans for transferring that knowledge within the organization. Then spread critical knowledge throughout the organization by cross-training, developing latent management skills, and giving employees responsibilities outside their typical areas of responsibility. Finally, encourage employees to participate in industry and non-industry education and net working. Include access to executives and you will discover that a defensive risk management strategy will actually build bench strength and personal development — both key retention drivers.
Focus on compensation…cash is still king!
Despite the stream of thought that suggests work and the environment are huge motivators, I still contend that compensation is the essential component to attract, retain, and motivate. Cash is still king and people want to be compensated at what they believe to be fair market value. If not, they begin to consider their options.
So what is market value? Due to a flood of information available through the Internet and other sources, employees see numbers which range from reasonable to ridiculous. A compensation plan resolves this confusion by identifying a target market strategy and establishing a plan to get employees to that target.
Within the labor market, salaries are constantly changing. Surveys provide a snapshot view into that dynamic arena and are typically available on an annual basis. As such, employers must continually monitor the market to ensure that employees are compensated to reflect market changes.In addition to annual market changes, individual progression within ranges cannot be neglected. The following chart imposes an organization’s compensation plan (midpoint) curve against current employee salaries for clerical to senior management job families.
Ideally, compensation should be directly related to an individual’s skills, abilities, and performance, as well as to the current market rates. Whenever possible, reward employees by compensating for performance and talent. Retention tools (multi-year rolling incentives, etc.) and supplemental benefits will also go a long way to enhance your company’s value proposition and make it more difficult for employees to consider leaving.
The time is now
In anticipation of workforce scarcity, successful employers will proactively monitor the labor market and ensure that total rewards are competitive long before being forced to do so as a result of an outside recruitment. Return on investment is critical to every business. Ben Franklin said, “An ounce of prevention is worth a pound of cure.” If he was correct, adopting retention strategies today will provide an exponential return on investment, starting with employee retention and extending to engaged employees, enhanced productivity, and business continuity.