Better Benefits, No Headaches
5 Surprising Mistakes in the War for Talent
5 Surprising Mistakes in the War for Talent
In the midst of a historic labor shortage, employers are often their own worst enemy.
After more than a year of sky-high resignation levels and record-breaking job openings, it is clear that America’s War for Talent will be larger, costlier, and lengthier than all but the most pessimistic analysts predicted in 2021. For better or worse, this phenomenon represents a serious long-term shift in the labor market that will likely prove more impactful to American businesses than even the covid-19 pandemic.
While most people probably didn’t encounter the phrase "War for Talent" until recently, it actually dates back to 1997, when a team at McKinsey & Company first coined the term. In some ways this team was ahead of its time, as major economic recessions in 2001 and 2007-09 dampened the country’s labor demand and allowed businesses to ignore many of the trends and forces that ultimately led to today’s titanic labor shortages.
The most consequential of these trends is the country’s ongoing demographic drought, which has created an environment where human capital is increasingly scarce. For decades, America’s average age has been going up while the average family size has been going down, resulting in a working-age population that is proportionally smaller than it used to be. If economic cycles are like ripples and waves, demographic shifts are like tides. Every sailor knows that you can bob and weave your way through rough waves, but you cannot sail against the tides forever.
Adapting to this survival-of-the-fittest environment is shaping up to be one of the most important workforce challenges of the 21st century. If you lead any sort of business today, you’ve probably encountered the effects of this phenomenon in the form of rapid turnover, difficulty filling key positions, and candidates or employees simply ghosting you without a word of explanation. Unfortunately, many well-intentioned employers are addressing this crisis with an outdated and ineffective playbook that may be making their retention problems worse.
With that being said, let’s explore five common ideas about retention that sound good on paper but may lead to surprisingly poor results in the War for Talent:
Focusing on Retaining Employees
This one seems very counterintuitive – after all, isn’t retention the whole point of this article? However, directing managers to keep their people isn’t necessarily a sound business strategy, especially in a tight labor market.
This makes more sense when you consider the actions that would likely ensue from such an edict. How would you feel if you heard that your boss or board were trying to “keep” you? Flattered perhaps, but eventually trapped. You would begin to question their decisions about your career progression, about your development, about your assignments – and rightly so! Do they have your best interests at heart or the company’s best interest? People don’t want to be “kept” in their roles.
Instead, change just one word: Focus on growing your employees
This distinction might seem superficial, but it’s important. Managers who are told to keep their employees will often take it as an invitation to pull the easiest (and most expensive) lever they have, which is to increase pay. However, research shows that after a certain point, this is more of a short-term retention band-aid than a real, systemic fix.
Employee pay is curious in that it functions as a strong dissatisfier when it is too low, but only a weak satisfier when it is generous. This means that after an employee’s pay expectations are met, further compensation increases have rapidly diminishing returns. To be clear, employees should absolutely be compensated fairly and feel as though their work is properly valued – thinking that a cool office, great culture, or your awesome personality will make up for inadequate pay is shortsighted. However, once pay is fair, managers need to focus on growing their employees rather than simply paying them to not leave.
Instead, consider what would happen if your manager asked you to be sure your people are growing. This leads to wholly different conversations. What interests them most? How are their skills improving? What feedback or stretch assignment could be helpful? (What’s more, many growth drivers are free!)
Remember, not everybody can be kept, but all employees can be grown.
Telling Employees That They Are the Company’s Most Valuable Asset
I have to admit that I used to love this expression. However, there are two reasons why business leaders should consider retiring it. First, people are not actually assets of the company. The company doesn’t own anyone, and they do not appear anywhere on the balance sheet. So, in effect, you are both bragging and lying at the same time about something that cannot be true.
What’s worse is that 100% of companies who abide by generally accepted accounting principles actually consider people an expense, often the largest expense by far. What do good managers do with expenses? They minimize them. See the problem here? So regardless of what you say about people being an asset, your company most likely isn’t treating them that way.
A simple tweak fixes these two problems: treat the trust of your people as your company’s most valuable asset. In his book The Loyalty Effect, author Fred Reichheld and his team at Bain & Company modeled how business leaders would act if they resolved to treat their relationships with their employees like an expensive piece of equipment or a valuable financial investment. The two major takeaways from this thought experiment were that 1) employers would take better care of their people, and 2) employers would do everything they could to ensure that employees stay as long as possible.
Interestingly enough, these outcomes align well with many best practices for employee retention. By imagining the trust and relationships with our employees as being like valuable investments, we treat them better! Managers should take this analogy to heart and act on it. If you invested a million dollars into a piece of equipment, you would do preventative maintenance, install software updates, and keep it in optimal working order. Consider doing the same for your people.
Stressing the Importance of Corporate Values
While conventional wisdom says that a company’s culture and values can act as a great positive differentiator, pushing these narratives too hard can actually backfire. In their 2007 book The Leadership Challenge, authors James Kouzes and Barry Posner found that clarity of company values only positively impacts employee commitment when other conditions are met first: namely, that employees 1) have a high degree of understanding about their own value preferences, and 2) find that their organization’s culture and values are compatible with these.
In fact, they discovered that emphasizing company values when these conditions were not met could actually drive commitment down. In addition to this, they found that employees who were clear on their own values were about 25% more engaged than those who weren’t, regardless of whether the employees in question were even aware of their company’s stated values.
Ultimately, this is an argument for stressing the importance of personal values. Managers should care a bit less about whether employees can recite company literature chapter and verse and more about whether they are able to articulate their own value preferences. So instead of cramming recruitment and onboarding materials full of the same old content about how great your organization’s culture is, take the time to have individualized value conversations with candidates and employees.
Striving to Help Employees Balance Work and Life
There is no doubt that burnout is a serious problem in the United States. Reports of exhausted, overwhelmed, and under-supported employees have exploded since the covid-19 pandemic, and it is likely that the inability of employers to address this issue has played a large role in the Great Resignation of 2021-22.
The go-to remedy for burnout is to promote “work-life balance”. However, this solution leaves a lot to be desired. When most people are told that they need to achieve a better work-life balance, their reaction is simple: they work less. That’s it.
Is that really the answer? It may be for someone who’s consistently putting in 70-hour weeks. But most people aren’t doing that, and the question of work-life balance for your average employee is a bit more nuanced.
At the end of the day, the problem with the idea of work-life balance is that it positions work and life as diametrically opposed in a zero-sum game. If you work hard, you must be neglecting your life. If you’re enjoying life, your work must be suffering at work. This is neither helpful nor true.
Because of this, I suggest striving to help employee improve work and life. By removing the idea that these two things are in conflict, employers open the door to better outcomes and higher engagement. Shifting the conversation enables a healthier discussion about triaging competing priorities, tending to mental health needs, and living a productive and fulfilling life both inside and outside of work.
Offering More Training
Of course, nothing is inherently wrong with training. When an employee is lacking skills that are required to perform the core duties of their job, or when an employee wants to move into a new position that requires additional expertise, training may be a good and appropriate solution.
However, there’s a good case to be made that training has become over-prescribed in recent years. Training is passive, expensive, and time-consuming. Training is one-size-fits-all. What’s worse, most training is poor. When dealing with unmotivated and disengaged employees who are at risk of leaving, training can actually exacerbate their discontent.
In these situations, employers would do better to offer more development. Development refers to a more proactive, personalized, and open-ended quest to identify areas where employees want to improve and provide them with resources, guidance, and support.
Businesses should think critically about the role that development plays in retention and consider building a customized development plan for as many employees as possible. Leveraging mentor-mentee relationships, assigning a specific budget for holistic development programs, and greenlighting “stretch” assignments that allow employees to explore new duties and responsibilities can go a long way in improving performance while also preventing attrition.
I hope these simple ideas inspire you to think differently. In the War for Talent, there will be winners and losers. Changing even five simple words may help determine how you come out the other side.
For more advice on navigating this difficult retention environment, check out this blog: Policies Alone Won’t Keep Your Employees... But a Supportive Environment Will.
Related News & Updates