Companies Using Employee Engagement to Attract, Retain Top Talent

June 29, 2010
A Mercer survey found that 27% of participating organizations are expanding their overall workforce, while only 3% have instituted broad-based reductions.

As the economy recovers and workforce expansion rises, concerns about engaging employees and retaining critical talent are top of mind for many organizations, amid continuing cost pressures.

Mercer's 2010 Attraction and Retention Survey found that more than one-quarter (27%) of participating organizations are expanding their overall workforce, while only 3% have instituted broad-based reductions. By comparison, Mercers Leading through Unprecedented Times Survey conducted in May 2009 showed fewer firms (12%) indicated they were hiring/expanding overall, while more firms (15%) instituted broad-based reductions.

Cautious optimism prevails, however, as almost half (45%) of organizations are hiring to replacement levels only, while another 25% are hiring just for critical areas among select staff reductions.

According to the survey findings, almost half (47%) of organizations that assessed employee engagement over the past 12 to18 months report that levels of employee engagement have increased.

"Higher levels of engagement can be a result of reward and talent programs adopted by employers that creatively seek a balance between responding to employee needs and coping with cost pressures," said Loree Griffith, a principal with Mercer's rewards consulting business. "Employees desire to preserve their jobs may have also contributed to higher engagement levels demonstrated by a willingness to go the extra mile, be resilient and embrace change."

While the most common way to assess employee engagement is through employee surveys, more than half (53%) of organizations also gauge employee engagement through informal interactions with leaders, managers and employees. Focus groups and online forums are used by 33% and 7% of organizations, respectively.

Despite efforts to engage employees during a difficult year, organizations have growing concerns about whether their valued employees will stay once the economy recovers. Almost two-thirds (62%) of companies believe that voluntary turnover will increase as the economy and job market continue to improve. Moreover, the survey shows that certain positions are more sought-after than others because of skill shortage or market demand. These roles include R&D/scientific engineering and sales, followed by information technology and executives/top management.

"Typically, engaged employees are less likely to seek job opportunities outside the company and therefore, have a more positive impact on both individual and business performance," said Griffith. "By identifying talent needs necessary for future growth, employers can implement the appropriate steps for developing employees internally or hiring staff externally."

As the job market picks up and concerns about engagement and retention remain at the forefront, cost pressures still loom. According to Mercers survey, slightly more than two-thirds (67%) of organizations will be influenced equally by external competitiveness and internal affordability when making pay decisions. However, about one-quarter (24%) of organizations report that affordability will have a greater impact on pay decisions.

Over the past 18 months, amid limited pay budgets, organizations increased their use of non-cash rewards as a means to enhance employee retention and engagement. Rewards offered more during this time period include communicating the value of total rewards to employees (27%), work-life programs (22%), formalized career paths (21%) and special project opportunities (20%).

Despite past emphasis on non-cash rewards, for 2010 and beyond organizations plan to focus on money as well as career development to retain and engage the right talent. Leading reward elements perceived to have the strongest impact on employee retention and engagement for 2010 are base salary increases (41%), short- and long-term variable pay (36%), and training and career development (35%). Interestingly, approximately one-quarter of organizations report that programs such as work-life initiatives, employee communication campaigns and time-off plans -- elements of importance during the past year and a half -- will have less impact on employee retention and engagement going forward.

"Non-cash programs like career pathing, increased communication to employees and work-life initiatives are important in fostering employee retention and engagement regardless of the economic environment," said Griffith. "However, as recovery occurs, employers want to revisit pay as a means to staying competitive and retaining top-performing employees."

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