Organisational development

The Pyramid of Retaining Employees

How can you retain employees when the number of open vacancies in the labour market is bigger than the number of jobseekers?

From 2020 onwards, the number of vacancies has increased while the unemployment figures have decreased, which has led to tension in the Dutch labour market (CBS, 2022). Therefore, employees face many possibilities to switch to other employers. In a recent study of McKinsey (2022), employees rated three aspects of employee experience as most and equally important arguments for leaving a job:

  1. Not having caring leaders (35 percent)
  2. Having unsustainable work performance expectations (35 percent)
  3. Lack of career development and advancement potential (35 percent)

This shows that employers have difficulty in offering the right support and perspective to employees.
We see both in theory and in practice that there are multiple layers of actions an employer needs to execute to retain employees for a longer period of time.

Motivators of employees in theory – Past & Present

While the wide variety of vacancies and the possibility to switch to other companies is a favourable development for workers and job seekers, employers are less satisfied with this changed labour market. So, a normal reaction of companies is to take actions to retain their current employees as much as possible. But what do employers do to make their current employees want to stay longer within the company?

Historically, one of the most obvious tools for a manager to retain an employee is proposing better primary and secondary employment conditions than the competitor or ultimately making a counteroffer to the employee who wants to leave (HBR, 2022). This is a quick response from the manager – such as giving bonuses, promotions, grants, or benefits – to temporarily regain a sense of control over resource availability within the department. This tool is therefore mainly focused on the short term and focuses less on the long term.

Having the best primary and secondary employment conditions or making a counteroffer is not a ‘’one size fits all’’ solution for every situation. But how to approach those cases that don’t fit?

In general, we can say that the motivations of employees have changed over the last decade from traditional (what employees found important in a job in the past, such as a good salary), to less traditional ones. What employees found important in a job in the past differs from what they find important nowadays. According to the research of HBR (2018), there are three main motivators: career, community, and cause.

1. Career
Career is focused on having autonomy, utilising your strengths and learning & development during work. It is the intrinsic motivation that drives employees to work for a certain employer. Giving employees autonomy will result in many advantages, such as experiencing higher job satisfaction, encouraging creativity and innovation and a culture of trust (Betterup, 2021).

2. Community
Community is about feeling respected, cared about, and recognised by others. This point has everything to do with inclusion: creating an environment where people can manifest themselves as who they are to value their unique talents and perspectives.

3. Cause/Purpose
This third motivator has to do with the organisation’s mission, vision, and purpose. Employees want to be able to identify themselves with those principles. More importantly, they feel the urge to make a meaningful impact with the work activities they perform.

Although these valuable insights are known to most employers, they find it difficult to put it in practice. As an HR Consultancy, Quintop makes people and organisations more successful by delivering HR Transformation with passion, quality and a hands-on mentality.
With 25 years in the business, we have our fair share of experience with the challenge of retaining employees. In this article we share some examples of our own experiences through the years and our model ‘’The Pyramid of retaining employees’’.

Motivators of employees in practice – The do’s and don’ts

But the question still is: what does work and what doesn’t work to retain employees? To answer this question, we enlisted the help of two partners of Quintop: Marja van den Tweel and Wilco Bontenbal. Both have years of experience in national and international companies.

What does not work?

We first asked them what they notice from practice that does not work to retain employees. Wilco mentioned that in the past the focus was on financial rewards, such as offering a higher salary, bonuses, or discounts. In the banking sector, for example, a mortgage discount was often offered. However, companies have seen the negative consequences of these rewards over the years. The employee turnover was certainly reduced considerably, but at the same time the motivation, performance, and the generation of new ideas of their employees did not meet the expected level.

Marja also confirmed this: “I do not believe that people in the end work for salary. It is only part of the equation. Trying to retain employees by salary only is not sustainable at all.” Some organisations have such good salary conditions that employees feel they cannot leave. In essence, people do not only work for money, but if too much is paid, people only work for that. In such cases, they lack intrinsic motivation and therefore do not perform as expected.

What does work?

First, Marja and Wilco both agree that there must be a certain level of social and financial certainty, before one can entirely focus on the tools to retain employees. For example, there must be a healthy and safe working environment with competitive employment conditions. In addition, the culture you want to pursue must match the employees you want to retain, so that you can align your resources and activities to retain them.

Marja also stated that that people are driven by appreciation and satisfaction. These two concepts are very close to each other: “You perform a job that makes you happy while you achieve something. In the end, you are valued for that. I have seen this throughout my working life. Being a manager for more than 10 years, the following questions have always been very important: Does your job make you happy? Are you able to achieve your goals with it? And are you appreciated for that?” The manager plays a crucial role in this. Therefore, leadership development should be each company’s focus. For example: A company in the service industry has an extensive leadership program that every people manager must follow. As a result, the company has highly competent managers who show good leadership and pass this on to their employees, the potential future managers.

Wilco agreed on this. In addition to being an employer providing the basic needs of an employee – a pleasant and safe working environment in which, for example, ergonomic office chairs, good facilities, and the option to work from home are available – the manager has an important role. In practice, the latter means having good conversations and actively asking about how the employee feels, what his or her ambitions are, etc. In this way, there is room for personal development and you, as an employer, can ensure that you facilitate your employee as good as possible during the time that the person is working for the organisation. For example, Wilco stated: “Managers must realise for instance that employees sometimes want to grow into higher or other positions than the organisation foresees, so ask the question: how can we facilitate that?” He currently has a project at a company that examines per group in the organisation – such as high potentials, young professionals, or experienced managers – how they can help these employees to move on to other or higher positions.

What has been changed?

According to Wilco, retaining people no longer means wanting to retain them for 20 years, but rather a reduced term. Employees have become much more sensitive to job hopping and gaining knowledge at several companies than at just one or a few companies. Moreover, this finding can even work to your advantage as a company due to accessibility of highly competent people.

In addition, purpose – especially among young professionals – is becoming increasingly important when choosing a job, such as making a positive contribution to the environment or pursuing charities. Employees want to be proud of the organisation where they work.

The Pyramid of retaining employees

There is not necessarily a golden rule now, as there may have been in the past through financial compensation such as salary, mortgage discounts or higher bonuses. It is a fact that the average employee turnover within an organisation is much higher than a decade ago. In our experience, employers must accept that employees want to grow quickly in their career, also within other companies.

And if general management wants to increase the opportunity to retain employees (longer), make sure that the employees can be proud of the company and the job they have. This can be done by looking at what the company’s contribution is to the world, but especially by translating this into what the employee’s contribution is to these goals.

This visual is a representation of our main findings which we call “The pyramid of retaining employees”. To retain employees (longer), you will first have to provide for the basic needs, but as a company you are ideally also concerned with the purpose of the company.

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References:
CBS. (2022, November 03). Spanning op de arbeidsmarkt. https://www.cbs.nl/nl-nl/visualisaties/dashboard-arbeidsmarkt/spanning-op-de-arbeidsmarkt

McKinsey. (2022, October 23). Gone for now, or gone for good? How to play the new talent game and win back workers. https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/gone-for-now-or-gone-for-good-how-to-play-the-new-talent-game-and-win-back-workers

HBR. (2022, May 11). The downsides of making a counteroffer to retain an employee. https://hbr.org/2022/05/the-downsides-of-making-a-counteroffer-to-retain-an-employee

HBR. (2018, February 20).The three things employees really want: Career, Community, Cause. https://hbr.org/2018/02/people-want-3-things-from-work-but-most-companies-are-built-around-only-one

Betterup. (2021, December 3). Autonomy at work is important (now more than ever). https://www.betterup.com/blog/autonomy-in-the-workplace

Questions?