“Where do you see yourself in the next five years?” It’s a common question faced when interviewing for a new job and asked by managers to gauge individual development plans (IDP) and career goals. A lot can happen in five years, and if everyone answered that question realistically — the answer would be “not here.”
According to the U.S. Bureau of Labor Statistics, from 2018-2020, the median employee tenure for wage and salaried workers hovers around four years.
With the mass exodus known as The Great Resignation in full bloom, Gartner predicts that U.S. employee annual voluntary turnover is likely to jump nearly 20% this year, from a pre-pandemic annual average of 31.9 million employees quitting their jobs to 37.4 million quitting in 2022.
Why Do People Leave Their Jobs?
Four interconnected hallmarks of the employee experience that dictate whether an employee stays or leaves a company include: wanting to be valued, heard, seen and to have agency (flexibility or a sense of control).
There are many ways to show people that they are valued, heard, seen and have agency over their workplace and career, but as Pew Research found in 2021, the top five reasons why people left their jobs in 2021 were:
- Pay was too low
- No opportunities for advancement
- Felt disrespected at work
- Because of childcare issues
- Not enough flexibility to choose when to put in hours
The Hustle’s study found that pay was the number one reason people left their jobs. The World Economic Forum and McKinsey had similar findings, with pay topping the lists as to why people decide to leave their jobs, in addition to career advancement. If those two reasons are so common, why can’t we invest more in internal mobility and pay raises as opposed to replacing new employees?
The Business Case for Recruitment or Retention
We have heard repeatedly that exit costs of an employee leaving are incredibly high; “If you’re hiring for a job that pays $60,000, you may spend $180,000 or more to fill that role,” writes Katie Navarra. The performance and productivity hit and sequential burnout remaining employees might feel is not something to ignore. After all, people are the core of a business. If the exit costs of an employee can be three times the employee’s salary, what is the cost of a pay raise?
Companies are currently budgeting an overall average pay increase of 3.4%. However, the average salary bump for leaving a company can amount to more than a 30% increase. Pay compression, also known as wage or salary compression, “occurs when there’s little difference in pay between employees regardless of differences in their respective knowledge, skills, experience or abilities.” Pay compression can also be caused by pay not outpacing rising inflation.
Inflation doesn’t only impact workers’ pockets and standard of living — the increase in the cost of goods and services affects business budgets as well. Businesses can’t just raise salaries without also raising prices for their offerings, reallocating budgets, restructuring or other compensation measures. Unfortunately, upskilling and reskilling are not always the viable solution to protect against the effects of inflation and looming layoffs, but can be an effective countermeasure in the right environment. Some companies have a culture fraught with potential for change agility and are adept at creatively responding to change.
If the financial incentive for an employee to build skills and experience and stay at a company is less than what an employee could receive for learning and then earning elsewhere, any recruitment and training investment return can go unrealized. There is a financial incentive for companies to strategically invest in employee retention over external recruitments — more than that, there is shared value creation.
Are You Learning and Earning?
If a person grows in their career and pursues learning, do good things happen for both the company and them personally? What rewards will a person receive when they learn and improve their skills, and hopefully improve performance at their organization?
A recent LinkedIn report states, “Learning leaders can create more robust, sustainable programs by connecting skill-building to career pathing, internal mobility and retention. However, many L&D pros haven’t made this connection yet. While 46% of L&D pros said upskilling and reskilling was a top focus area this year, internal mobility, career pathing and employee retention fell toward the bottom.”
Upskilling and reskilling without any tie to career mobility and compensation is a recipe for an employee to leave seeking a new opportunity and higher pay and benefits to compensate them for their new value-added skills and experience.
The advice to stay at a job has often been distilled down to this false dichotomy: Are you learning or are you earning?
What if you can do both?
End-to-End Employee Experience: Start by Valuing Your Employees
What is the perfect people solution to achieve optimal business performance to compensate for career opportunities tied to financial rewards? What career movement makes sense for the individual’s strengths, motivations, experience and business needs? From a technology standpoint, how do you connect learning systems to skills to your internal talent marketplace and financial incentives?
There are many ways to reimagine employee retention, but L&D leaders should start with an exercise in showing your people that they are valued, heard, seen and have agency. Start by asking employees what they need, what is working, what is not and drill into the “why” when it comes to building the employee experience. Ask managers. Ask a diverse cross-functional group of people from different perspectives and especially the people responsible for benefits, talent, learning, finance, career coach experts, psychologists and even your data scientists or technical teams that can help automate information sharing and reporting. Gather data on why people leave and stay. Perform stay interviews.
Then, digest the information and look for trends. If you lack psychological safety for people to share authentic insights at your organization, go through exit interviews in addition to your company reviews online. L&D leaders need to work closely with HR and the finance team to optimize the hiring process while also staying focused on upskilling and motivating employees to pursue career growth and learning opportunities that are financially compensated. Invest in your current people with career-connected learning and rewards.
Start small, test, ask, listen, iterate and grow. Grow your people and show them in every action that they are a valuable part of your organization — because they are.