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THE CHALLENGE OFTALENT RETENTION INTODAY'S GLOBALISEDECONOMY

Mohd Hanif Ismail and Adrian Chia

n today's volatile global economy, organisations arestruggling to establish and maintain an effective andaffordable attraction, retention and engagementskategy. Along with accelerating changes intalent markets and workforce demographics thataffect how employers find and keep employees,cost challenges continue to play a major role -and will do so in the decades to come. ln fact,for companies in many parts of the world, costcontainment remains the greatest concern.

Never in recent history have we seen such rapid changes ineconomies and workforce demand and availability. Even asorganisations continue to rein operational costs, many push highertheir expectations for employee and financial performance. As aresult, the workforce is often demanded for greater efforts withoutthe compensation of greater rewards.HR Asia looks at several recent surveys and reports on talentengagement and retention to identify the common themes incoming up with a workable strategies to deal with the issue of talentretention in today's globalised economy.2AI2 - 2OT3 TALENT MANAGEMENT ANI)REWT,RDS SURVEYfhe 2012 - 2013 Talent Management and Rewards Survey byWorldatWork and Towers Watson, which surveyed 1,605 employersglobally found companies having difficulty attracting and retainingthe high potential and critical-skill employees necessary to increasetheir global competitiveness. Almost three in four organisationsreport difficulties attracting critical-skill employees, and more thanhalf report difficulties retaining them.

The survey also found that not all employers are taking advantageof opportunities to aitract and retain high-value employees byoffering the rewards most important to them. Growing globalcompetition is resulting in demand for the right talent to be strongerthan ever with the stakes for attracting, keeping and engagingcritical-skill talent heightening.ln addition, data from Towers Watson's 2012 Global WorkforceStudy show that employees are experiencing high levels of stressat work. ln the Talent Management and Rewards Survey, morethan half of all employers report that employees have been workingmore hours than normal for the past three years. Nearly as manyemployers (43%) say they expect to maintain that pace for the nextthree years as well.As they shoulder these growing challenges, it's no wonderemployees are increasingly anxious, risk averse and security-minded. ln the Global Workforce Study (GWS), workers continueto express serious doubts about accountability, preparedness fortheir futures, career advancement and, most critically, rewards fortheir performance.The complexities of managing a global workforce - addressingexternal factors affecting the competitiveness of cost structures,sourcing talent and understanding people across cultures -have rendered the work environment unsettling, at best, for bothemployers and employees. And through this uncertainty, oneconstant is the pressure to tightly manage cosis.According to the study, organisations continue to shift some oftheir increasing cost and risk burden onto employees, while at thesame time try to find a formula to avoid the potential impacts of thisstrategy on attraction, retention and business performance.

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None of which speaks to engagement, which will be threatenedif this pace continues. Employers have essentially driven hrgherperformance while at the same time depleting the fuel that powersthe engine of the organisation. Asking employees to work so hardfor so long is not conducive - and not only to individual employees,but the organisation itself as a whole.However, while this report presents a frank perspective on today'swork environment, it also highlights the organisations that get theemployer-employee balance right - and win significant returnsfrom doing so. As employers endeavour to deliver profitablegrowth in a period of economic volatility, their focus needs to beon crafting and communicating an employee value proposition(EVP) that helps to attract and retain employees with critical skills,and engage all workers by striking a reasonable balance betweenemployee and employer needs.Achieving these objectives requires focusing scarce programmeresources on the key drivers of sustainable engagement, andsharpening and differentiating the organisation's EVP for criticalemployee segments.Some companies are more effective at this than others. The result?Organisations that have segmented the workforce and that delivercustomised EVPs for critical employee segments are nearly twiceas likely as companies with more tactical and less integrated EVPsto report financial performance substantially above their peergroup.Key findings from the survey:Attractioni:( Almost three-quarters of survey respondents (72o/") cileproblems attracting critical-skill employees.)i( About six in 10 have difficulty attracting high poterrtial and top-performing workers (60% and 59%, respectively).)ia ln addition, 43o/o have problems attracting diverse employeepopulations.Retention,i.. Almost six in 10 companies report difficulty retaining critical-skillemployees; similar proportions have difficulty retaining high-potential employees and top performers.;* More than four in 10 respondents also cite issues retainingemployees with tenures of 18 months to three years.Sustainable Engagement,ii Employers that have segmented the workforce and delivercustomised EVPs for critical employee segments are more thanfour times more likely to report that their employees are morehighly engaged than organisations with more tactical and lessintegrated EVPs.;i( More than three times as many employees (58% versus 16%)are highly engaged at companies that have highly effectiveEVPs than at companies with low EVP effectiveness.2OI2 ATTR.H,CTION AND RETENTION SURVEYAccording to Mercer's 20l2Attraction and Retention Survey, morethan 40% of participating organisations are expanding their overallworkforce in 2012 compared to only 27% in 2010. Moreover, fewerorganisations today than two years ago are making selectedreductions to their workforce (16% versus 25%, respectively) Yetdespite this positive news, almost twice as many organisationstoday are reporting reduced levels of employee engagementcompared to two years ago (24o/o versus 13%, respectively).

"Employee loyalty has been eroding the past few years due tocompanies' responses to the economic downturn," said LoreeGriffith, Principal with Mercer's Rewards consulting businessin the US. "Actions like layoffs, pay freezes and limited trainingopportunities have created an evolving employment deal foremployees due to uncertainty about what is expected and howemployees will be rewarded. Meanwhile, firms are still aggressivelymanaging people costs while finding ways to re-energise and re-motivate engaged employees."Mercer's 2012 Attraction and Retention Survey examined thechallenges, strategies and tactics organisations are using topromote employee attraction, retention and engagement, Thesurvey included responses from more lhan 470 employers acrossall industries throughout the US and Canada.Turnover is another factor contributing to the attention erlployersare placing on employee engagement. Almost 60% of participatingorganisations are anticipating increases in voluntary turnover asthe job market and economy continue to improve. Additionally,Mercer's survey shows that certain positions are more sought-after than others because of skills shortages and market demand.These "hot jobs" include information technology, R&D/scientificengineering and executives/top management."Employees with the 'right' skill sets are in demand," said Loree."Despite the increase in hiring, many firms are experiencing talentshortages due to critical gaps between skills employees possessand skills businesses need. Now more than ever, firms need toengage and develop their high potential employees and criticalworkforce segments."Rewards, both cash and non-cash are continuing to play animportant role in fostering employee engagement and retention,particularly in times of reduced base pay increases and smallerbonuses. According to Mercer's survey, merit increases are back,with the large majority (95%) of organisations providing some formof increase lor 2012.However, cash rewards are not the only consideration. As of 2010,organisations today are continuing to enhance the use of non-cashrewards to drive employee retention and engagement, particularlyduring times of limited merit budgets.The most prevalent non-cash reward programmes implemented byorganisations over the past 1 8 months include: communicating totalreward value to employees (offered more by 25% of participatingorganisations), use of social media to boost employees' workexperience (25%), formalised career paths (22%), internal/externaltraining (22%) and special recognilion (22%).Many of these programmes are consistent with those used twoyears ago. However, more organisations are using programmessuch as social media and team building events to enhance thework experience. ln addition, the provision of training programshas expanded since 2010.Although use of non-cash rewards continues to grow, top rewardelements that organisations expect to have the biggest impacton employee engagement and retention in 2012 are base payincreases (reported by 50% of participating organisations), followedby vertical career progression (47%) and leadership development(46%). Other reward elements that are viewed as moderateimpacts on employee engagement and retention include variablepay, health care benefits, work life programmes, performancemanagement, time off programmes and training.

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"While non-cash programmes like work ltfe initiatives and formalcareer paths are important for employee engagement all thetime, employers must revisit pay in light of the changing businessenvironment to stay competiiive, retain their top-performingemployees and ultimately buy or build required skills for the future,"said Jeanie Adkins, Partner and Segment Co-Leader of Mercer'sRewards consulting business in the US.TALENT 2O2O REPORTThe economic turbulence of the past few years has created a talentparadox: amid stubbornly high unemployment, employers still facechallenges filling technical and skilled jobs. Deloitte first uncoveredthis modern contradiction from the employer side in its report,The Talent Paradox: Critical skills, Recession, and The lllusionof Plenitude.To help employers gain a better understanding of the latestemployee attitudes and emerging talent trends, Deloitte ConsultingLLP teamed with Forbes lnsights to conduct a survey of employeesworking at large companies worldwide. The September 2012repod, the fourth in Deloitte's Talent 2020 series, surveyed 560employees across virtually every major industry and global region.ln this new Talent 2020 report, Deloitte turn its focus to theemployee perspective on the talent paradox.Through the lens of the employee, this paradox produces someinteresting findings. ln Deloitte's most recent global survey ofemployees, B0% indicated they plan to stay with their currentemployers in the next year-a significant 4S-point swing comparedto its 2011 survey. Yet, at the same time, nearly onethird (31 %) ofsurveyed employees reported they are not satisfied with their jobs.These findings highlight the fundamental question in the employeetalent paradox: Are employees truly satisfied? Or are they simplyaccepting their fate by "making do" with their current employersbecause of a difficult job market?Companies seeking to thrive given today's challenging competitionfor talent cannot give way to complacency in the face of seeminglyhigh retention numbers. Nor can they neglect iheir talent andretention strategies based on the erroneous "employees have fewoptions in a tight job market" sense of security.lnstead of addressing broad concerns with turnover - as seenin previous surveys - employers now face a more targetedchallenge. They need to adjust their talent management initiativesto focus on retaining employees with critical skills who are at a highrisk of departure and the capable leaders who can advance theircompanies despite continuing global economic turbulence.Based on the survey results and on Deloitte's analysis of the talentmarket, Deloitte has identified three emerging challenges:Engage employees with meaningful work...or watch themwalk out the door:Employees value meaningful work over other retention initiatives.Survey respondents who reported companies using their skillseffectively were found to be more likely to stay with their currentemployer.

)k A majority (42%) of respondents who have been seeking newemployment believe their job does not make good use of therrskills and abilities" Moreover, surveyed employees who areplanning to switch companies cited a lack of career progress(37%) and a lack of challenge in their jobs (27%) as the two topfactors influencing their career decisions.Focus on "turnover red zones":Turnover intentions appear to be concentrated among specificgroups of employees at certain points in their careers, creating"turnover red zones" or employee segments at high risk ofdeparture. Effective retention strategies should be aligned withthe needs and desires of critical talent, especially when'theybelong to groups with a high risk of turnover.;,l' Employees with less than two years on the job expressed thestrongest turnover intentions, with 34% indicating they expect

to have a new job within a year. Keeping high-performers andhigh-potentials beyond two years appears to increase theirlikelihood to pursue a career - or part of a career - with yourcompany.*a Just over one-quarter of all Millennials surveyed (26%, age 31and younger) reported that they plan to leave their employersat some time in the next year-the highest of any generaiionalgroup.When it comes to retention, employees are telling us thatleadership matters:A workforce is far more engaged and committed when it trusts itsleadership, receives clear communications about corporatestrategy, and believes its leaders have the ability to execute

that strategy. In other words, employee retention is not simply aHR function; it should be driven by business leaders.* More than six in ten employees (62%) who plan to stay withtheir current employers reported high levels of trust in theircorporate leadership, while only 27o/o of employees who planto leave express that same trust. ln addition, 26% of those whoplan to leave their jobs in the next year cited lack of trust inleadership as a key factor of their departure.From the various surveys and reports pertaining to the topic, it isclear that the challenges of crafting effective employee retentionstrategies are definitely complex and multi-faceted. The strategiesof employee retention are definitely not restricted to only salariesor non-cash incentives, but also encompass the aspect of trustand respect of and by the management, clear career directionand ample growth opportunities amongst various others - many ofwhich perhaps lie outside the realm of traditional HR. Sentimentsof being undervalued, lack of decision making power and lack ofcoaching and feedback are some of the most popular reasons forsomeone to leave an organisation. Tackling the challenge of talentretention through compensation alone may work on a shorttermbasis; but ultimately, not holistically addressing the issue will onlyresult in the demise of the organisation in the long run. lll