The uncomfortable truth that CEOs must face about employee retention

During the 'Great Reflection,' employees quit the workplace in their droves as COVID-19 forced them to re-evaluate whether their roles, companies and even their careers were really making them happy. Many employees emerged from this period of soul-searching with two big questions on their minds: "What’s in it for me at work? And is it enough?"

In a concerted bid to optimize employee retention and attract new talent, CEOs have acquiesced to their calls for more competitive salaries, more accommodating policies and better benefits, such as remote working arrangements, mental health days or a compressed working week at the same pay. Many employers are even stepping in to support their staff as the cost-of-living crisis begins to bite, awarding pay rises and one-off payments to mitigate inflation's impact. In its recent report, the CIPD found that 30% of employers intend to increase wages in 2023 to help employees, while 15% plan to introduce or improve benefits and 13% plan to offer bonuses/allowances.

But, of course, the funds to pay for these benefits have to come from somewhere and in the current climate and ensuing recession, there is simply less money around. Leaders are now caught between a rock and a hard place: with rising inflation pushing up prices across the board, corporates cannot possibly sustain the financial cost of meeting these growing demands indefinitely — and shareholders are unlikely to accept the resulting erosion of returns. The consequences of maintaining the current trajectory to boost employee retention are very real: if the cost of benefits packages continues to soar, the average cost-per-employee rises, possibly bringing down employment rates in the process. But who pays the price for all this? Your consumer or your employees?

Organizations have been giving more and more financial benefits to employees — but regardless of efforts made they have still seen a rise in ‘Quiet Quitting’ and tenure reduction (a phenomenon that had begun before the pandemic), as evidenced by declining job tenures. So, why has this drive to please and grow employee retention through monetary rewards led to a weaker not stronger employer-employee relationship?

Organizations need to ensure they offer benefits that meet the needs of all employees, yet there are instances in which blue-collar workers have been offered poorer packages than their white-collar counterparts; junior employees have been passed over in favour of senior colleagues; and young parents have received more support than those caring for their elderly family members. Too often, it seems like people that are already in favourable positions hold outsized power when it comes to negotiating enhanced terms.

One thing’s for sure: money can’t buy happiness at work. Nor can it buy loyalty or employee retention. Employees who are led by extrinsic motivations ultimately set themselves up for career disappointment and dissatisfaction. In the process, they are also likely to lose sight of the reasons they joined the company. Now is the time for employees — and the younger generation in particular — to take a closer look at the things that they really value at work. What's important? What is their purpose? What do they enjoy about working there?

The reality is that people don’t join companies — or leave them — for their holiday entitlement, stock options or childcare policies. They join companies because they identify with the brand, value the opportunities for learning and development and recognize the chance to work with interesting colleagues, while also fulfilling their own professional potential. In other words, employers should support their employees in searching for a personal purpose at work by identifying and understanding their wants and needs. It is time for employers to rethink profoundly their employer value proposition: why would you join us? What is so much better in the experience here? It cannot possibly just be money driven.

There are some useful lessons to be learned here from older generations in the workplace — many of whom have stayed loyal to the same organization for decades, through personal trials and tribulations and through economic cycles. Why have longstanding employees stayed with the company for so long? In many cases, their length of service is likely to be driven by intrinsic factors — such as a decent salary, a good fit for their skills and working with people they like — rather than by extrinsic motivations, such as free bicycle schemes and sports classes in the workplace.

CEOs can use mentorship programmes to understand what keeps longer-standing employees happy within the organization and then use that knowledge to foster greater loyalty among their younger cohorts — and to make their companies more desirable, without paying more to achieve it. Another lever might reside in the training of managers themselves: after all, giving love, joy and purpose are very different to giving directions and pay increases.

In the current climate, we are fast approaching a tipping point at which the demands of employees for ever-more generous benefits and more favourable conditions cannot be sustained — particularly when the end result is less loyalty to their employer. If CEOs are to strike a balance between meeting employees’ demands to optimise employee retention and keeping shareholders and consumers happy too, they will need to go back to basics — redesigning workplace policies that are inclusive, sustainable and genuinely valuable for employees. The answer lies in giving employees joy instead of money.