Trends in 2010 People Investment

Trends in 2010 People Investment

In past issues of the Corner Office Gazette, we have stated that one of the major issues for the CEO and Board of Directors in 2010 is retaining key executives and employees for the long-term so they will be there at the time of recovery. In parallel, we believe it is also crucial to keep all employees increasingly involved with your business (i.e. – keep their heads in the game while all of this economic flak is flying around them).

This is to insure that your work force is productive and as stable as possible in this difficult market. This is called “employee engagement” by the HR profession – and is a subject of much interest and research. A very common way to measure “employee engagement” is through employee-attitude surveys. Focus groups and online forums can also be sources of this information for the employer. In past lives we would simply call this “morale”.

In April of this year, Mercer Consulting conducted a survey of more that 320 employers in the US and Canada on a number of subjects including employee attraction, retention, engagement and workforce planning. It is called the Mercer 2010 Attraction and Retention Survey. The employers surveyed generally have used the survey methods discussed above to gather data & trends on employee attitudes and morale. The most common vehicle used appears to be the traditional employee survey applied in parallel with other quantitative and less rigorous techniques for data collection.

The Mercer survey results are interesting and provide some possible insights regarding:

  1. What employers found to be the most powerful tools in the battle for employee retention and engagement (hearts & minds); and
  2. On a different subject, what surveyed employers expected and planned to do in the hiring market for the coming year.

Two survey results are shown in the following charts.

 Trends in 2010 People Investment (chart #1)

Many people will always say that money is the most basic motivator of employees. While there is some truth to such comments, Wilkening & Company has advised its clients that perceived fairness by the employee and their belief that the company has their long-term interest in mind will always have the larger motivational and bonding impact on most employees. That is why we have consistently warned clients against increasing employee uncertainty and risk by broadly freezing or reducing salaries (and all pay) in the face of company economic difficulty.

The Mercer survey seems to support our position by stating that most employees find salary the most important decision factor driving retention and morale (41% of respondents). It also suggests that if an employer tries to substitute a dollar of new salary increase for a dollar of new variable pay, such an exchange will not be seen positively. We are also not surprised by the relatively low perceived impact of training and career development in this market. As is the case in most business downturns, this is a year for surviving, not for discussing careers and skill development.

Trends in 2010 People Investment (chart #2)

In some quarters it is believed that the economy is recovering and signs of workforce expansion is either beginning or is underway—in the face of lingering (and unprecedented) 9%+ unemployment. The Mercer survey results suggest that there now may be guarded optimism in the market as 45% of employers are actively hiring employees to replace those they may be losing to the market or other forms of attrition. This can be compared to last year when many companies were actively reducing staff levels—and rarely hiring. The fact that 27% of surveyed employers are planning to broadly expand their workforce is also a change from last year—and perhaps the more striking 2010 statistic.

What should your take away from these survey findings be? We think two conclusions.

  1. Make sure you continue to take care of your key employees—if you want them around in 2011-12. And, do not “fool around” with their salaries, or offer promises of making up salary loses with the new bonus.
  2. Start to rethink or reinforce your 2010 staff-reduction and hiring strategies. Your competitors may be starting to (re)invest. Can you afford not to consider the same? This is particularly true in the sales and marketing areas.

We believe that the above findings reinforce our long-standing belief that the companies that attract and retain the best and most-experienced employees will emerge from this economic downturn quicker and stronger. How are you positioned to emerge from 2010?

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