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The Cost of Turnover: Hiring and Retention In a Tight Labor Market
The storm that is the current labor market rages on. Companies across the country are battening down the hatches and focusing on retaining employees. Here’s why you should too.
For more than a year, the U.S. has seen a surplus of jobs and a shortage of workers in a labor market that’s been deemed “stubbornly hot” by leading economists. Known as a “tight” labor market, this trend is likely caused by:
- Declining labor force participation primarily among Baby Boomers (55+) and women who left work during the pandemic to provide childcare
- Increase in quits, particularly in low-wage jobs
- Increase in reservation wages* which extends job searches and feeds job vacancy rates
*Reservation wages are the lowest wages that employees will accept for a new role.
In response to these factors, wages are rising and many estimate that American workers are making more dollars per hour than they were prior to the pandemic.
*Catch Up Before You Keep Reading*
For a more thorough and nuanced look at current labor trends, check out last week’s edition of America Back to Work.
Money Isn’t Enough
Beyond wages, some companies are expanding health benefits to sweeten the deal for employees including reproductive benefits–which historically don’t make budget cuts.
Another surprising retention movement among leading organizations? Employee-first career development. More companies are investing in learning and development–with the goal of tapping into employees’ intrinsic motivations.
Recently, AFP’s president and CEO called out the unprecedented nature of this employee retention movement:
“In virtually every recent CFO survey…they identify recruiting, developing, and retaining talent as their #1 challenge. However, time after time, learning and development initiatives are the first programs to fall to the budget axe when expenses need to be cut, even when these investments are directly aligned with strategic projects.”
But, not this time.
This seemingly simple observation says so much about where the U.S. labor market currently stands. Wages have risen to meet employee demands, but for the modern worker: that’s not enough.
As such, employee-focused programs previously deemed nonessential are now making their way into standard practices and core strategy. Companies are enlisting new (expensive!) tactics and reaching deeper into their HR toolboxes to recruit, develop, and retain talent.
All of this points to one thing: there is a long-term change in the making that will tip the scales for employees.
One change that we think is here to stay? Quality control in the hiring process–and, many industry leaders agree.
A recent study by leading recruiting platform, Top Echelon, reports that 40% of candidates reject offers because another company made an offer faster. Another, by Employ Inc., reports that nearly 50% of workers would not apply to a company again if they had a bad candidate experience.
From the start, the modern worker expects an efficient, easy, and transparent experience. They look at the process as a microcosm of what it would be like to join your company–treating every interaction as a clue into workplace life.
The candidate experience also sets the tone for future engagement, motivation, and feelings towards your company. Employ Inc. predicts that 71% of employed workers are open to taking other jobs, making it more critical than ever to start your retention efforts as early in the hiring process as possible.
Hiring Is Retention
These days, hiring is about so much more than recruiting. Your hiring process and team are a candidate’s introduction to your company–a first impression. And, you know what they say about first impressions…
“Hiring” now extends far past recruiting and interviewing; it’s about quality onboarding, comprehensive training, culture-building, and more–all the things that make an employee more likely to stay.
That means–these days–hiring is retention.
But, Wait. Why is Retention So Important Again?
Employee retention has always been important. It’s just very important right now.
For one, employees that have been with a company for a long time are likely to be more engaged and productive. Longstanding employees have a wealth of institutional knowledge to work more effectively and are more likely to handle customer interactions with care. Mostly, employee retention is about cost.
Simply put: recruiting and hiring are expensive. Large U.S. employers spend upwards of $1trillion on finding and recruiting replacement workers annually–towards advertising, screening, onboarding, training, etc. The disparities in engagement and productivity only compound those costs.
The American workforce is becoming choosier and the current tightness of the labor market gives modern workers more choices than ever before. The reality is that (pricy) turnover is an ever-present threat–making retention efforts more urgent than ever before.
Have Them At Hello
As such, it’s time to design a hiring process that looks like the best cross-section of your organization–so that quality candidates won’t pass you up. And, it’s time to start incorporating retention tactics into your hiring strategy–so you don’t lose them.
Think intentionally about who candidates are interacting with at every stage and what elements of your organization you want to showcase. Get clear on your why (the messaging you will use to get a candidate through the door) and methodize it all (the where, when, and how).
We’ll help you think through these categories Wednesday on the blog when the America Back to Work series returns. We’re sharing our top tips for creating a hiring process that will have candidates hooked from day one–and make them more likely to stay.
Plus, mark your calendar for another episode of America Back to Work: Expert Interview Series on November 8 at 1:00 p.m. Join us on Twitter Spaces to hear from Beacon Talent founders, Dave Berk and Juney Ham, on turnover in the current labor market and its high price tag.
Reserve your spot here!