3 strategies for winning the post-pandemic war for talent
How much did Goldman Sachs lose when Omer Ismail left the firm last February?
Short answer: a lot. Ismail ran Goldman’s successful Marcus consumer-banking business, which he had helped to create. Now he’s working for a direct competitor, Walmart’s still-unnamed fintech startup. Marcus has grown impressively since its 2016 launch, to more than 5 million customers, but Walmart will be able to offer its financial products to over 200 million customers it serves every week. Asked about Ismail’s move, a Goldman spokesman said, “Our business has serious momentum and a deep and growing bench of talent.” Nonetheless, consider the value of what walked out the door with Ismail. He knows every mistake Marcus made as it grew, and, more important, he knows Marcus’s strategy.
Employee turnover doesn’t always involve such high stakes, but it’s always expensive—and employers worldwide are entering the most tumultuous turnover environment in memory. The winners will be those that see the tumult as an opportunity, playing offense, not defense.
Like everything pandemic-related, employment is changing at warp speed. After millions of workers abruptly lost their jobs in March and April 2020, employers are now rehiring many of them at a frantic pace, or trying to. A labor shortage, the least of most companies’ worries just three months ago, is suddenly a near-crisis across industries.
One reason is that millions of people are choosing to leave their jobs. In the U.S., the “quits rate”—the percentage of workers quitting their jobs voluntarily—matches the highest it has ever been in the 20 years the government has calculated it, 2.4%. That’s the most recent data, for March; a further rise, into record territory, wouldn’t be surprising. Cooped up at home with family members, some employees found a new perspective on life and work. Liberated from the office, millions moved from cities to suburbs. Now, asked in a poll by the Robert Half staffing firm what they will do if their employer requires them back on site, 34% of professionals working from home said they’ll look for a new job.
Others, especially in customer-facing jobs, are still afraid to go back to work. Even with school out, some parents aren’t rejoining the workforce because they aren’t ready to send their kids to their usual summer programs, or because they’re caring for someone with COVID-19 (recent seven-day average of daily cases: 17,154). With employers desperate for more workers, the result is simple economics—strong demand plus low supply equals high wages, another factor enticing employees to switch jobs.
Adding up the costs of job turnover is an inexact science, with most estimates falling between 0.75 and 1.5 times the departing employee’s pay, and much more for high-level positions. Costs include not just recruiting and interviewing, but also lost productivity, training the new employee, the chance of choosing the wrong person and having to start over, plus the departing employee’s knowledge being used against the company and in some industries the value of the customers that departing employees may take with them.
How to find opportunity in the tumult? Three ways.
Reassess current employees
When the economy is growing smoothly, as it was for the four years before the pandemic, it’s tempting to believe that a company’s whole team comprises A players. Now, the unprecedented challenges of the past 15 months have brought out differences that were not apparent in the good times, and you can see who the real A players are. As Warren Buffett says, “You don’t know who’s swimming naked until the tide goes out.” If some of the B and C players are thinking of leaving, or even if they’re not, you may want to help them toward the door. That can work out well if you also…
Even in this seller’s market, you can be sure some employers aren’t showing their star performers all the love they deserve. With so many employees looking elsewhere, make sure the best ones are looking at you. Claudio Fernández-Aráoz, a former top headhunter with Egon Zehnder, now a lecturer at the Harvard Business School, says employers should “list three to five great players they would have liked to have hired over the past five years and then check in with those people.” If they’re still working from home, so much the better; they can speak more freely. But it’s all for naught if you don’t…
Keep your own stars
That may be the largest opportunity in today’s Wild West job market; just keeping all your stars is a win. But they won’t stay on board if they don’t know how much you value them, and many employers fail to differentiate their treatment of stars nearly enough. To see how it’s done, consider the Los Angeles Dodgers. The team’s highest-paid and lowest-paid players have the same job title, starting pitcher. The Dodgers pay Cy Young Award winner Trevor Bauer $31,333,333 a year; they pay Phil Bickford $407,911 (figures from the Spotrac player contract website). Bickford’s salary is 1.3% of Bauer’s. That’s real differentiation in a business where performance is measured mercilessly; pay differences are similar in other professional sports. Few employers would dare to differentiate pay so radically, but if you’re giving average performers a 2% raise and great performers a 4% raise, those stars are easy targets for competitors.
While the differentiation concept is simple to illustrate with pay, don’t assume your stars are obsessed with money. Some may be; others may value autonomy or potential advancement more highly. Whatever it is, make sure your stars are getting plenty of it.
Many employers today are struggling to keep merely competent workers as well as stars. They (and all companies) should know that the most powerful factor in retaining employees at every level isn’t pay or perks or the WFH policy. It’s the quality of a worker’s relationships with other employees, including their boss. Fortune’s list of the 100 Best Companies to Work For demonstrates this truth annually. Look at Wegmans Food Markets, an East Coast grocery chain that has been on the list for 24 consecutive years. When employees were questioned about the company for the most recent list, the word they used most often was “family.” In an industry with an annual turnover rate estimated to be 100%, Wegmans’s rate has been around 27% for part-time employees, 6% for full-time.
Relationships are the key to keeping great people, and nothing that valuable comes easy. You can’t improve relationships quickly; as the post-pandemic labor market gets tighter in the near term, you can only reap what you’ve sown. But you can also start the long-term project of building a workplace that attracts and keeps top-tier people. With economists predicting a slow-growing labor supply for years to come, it’s an investment that’s guaranteed to pay off richly. How often do you find one of those?
Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.