Economic downturn drives change of focus for HR, claims new survey

The economic downturn has created new priorities for Human Resources, including a greater focus on organisational performance and less emphasis on recruitment, according to a new survey which claims that HR teams are being asked to do more with less.

Economic downturn drives change of  focus for HR,  claims new survey

The Employee Engagement and Retention Survey 2009 – by TalentDrain, an employee engagement specialist – examines the impact of the fragile UK economy on HR strategies, HR budgets and employee turnover. It also highlights why ‘new starters’ join and leave organisations and it reveals the factors that HR teams overrate and underrate in relation to employee attraction and attrition.

Developed from a survey of HR practitioners in 336 organisations, the survey finds that almost a third of the respondents (30%) have changed their HR strategy, switching their focus from recruitment (56% are giving this a lower priority) to areas which more directly impact on organisational performance. 72% of organisations are putting greater emphasis on performance management, 67% on organisational communication and 54% on employee engagement and retention. This change of focus is often linked with the added challenge of a cut in the HR budget. 38% of organisations have reduced their HR budget by more than 5% and 13% have made cuts of over 25%.

The research authors – Ron Eldridge and Anthony Miles – claim that the key challenge for HR teams now is to enable organisational performance.

“HR teams are having to rethink their priorities and many are trying to redirect their resources away from recruitment,” said the authors. “The new strategic focus, even for organisations that have not cut their HR budget, seems to be around identifying, engaging and retaining those employees who are high performers, whilst more proactively managing any areas of underperformance.”

According to the survey, 27% of organisations are experiencing less employee turnover. Annual staff turnover rates, however, remain high. 24% of organisations have a turnover rate in excess of 20%. Three quarters of organisations claim that staff turnover has a negative impact on their effectiveness. Despite the economic downturn, 56% of organisations say they would like to reduce their rate of voluntary turnover.

“The fact that figures for voluntary staff turnover are coming down in some organisations suggests that employees are becoming nervous about quitting their jobs in the current economic climate,” said the authors. “Without natural attrition, there is a danger that motivation and productivity can plummet because disengaged people don’t actually want to be there but they have nowhere else to go.”

7% of organisations have seen an increase in the turnover of their top talent.

“Even in a downturn, high performers are in demand,” said the authors. “Despite organisations reporting a decrease in general turnover, talent groups are maintaining more of their normal rate of movement. The increased emphasis on performance management shows that retaining talent is even more critical in the current climate.”

The survey highlights that a growing number of organisations are now allocating a budget and articulating a specific strategy for employee retention (32% this year, compared with 20% in 2008). 95% claim to have implemented retention initiatives over the past year, including improving the induction process; enhancing employee communication and involvement; increasing learning & development opportunities and improving the skills of line managers.

The survey underlines the problem of staff turnover for anyone who is still recruiting. It finds that 12% of organisations lose over 15% of new recruits in the first six months.

The authors argue that resolving this issue of early attrition will be a key HR priority in 2009. “Organisations can improve their performance, and save money, by placing greater emphasis on engaging new employees and enabling them to be successful more quickly. Given the current economic climate, there has never been such a strong organisational need for this focus.”

However, the survey shows that 32% of organisations do not collect any feedback from their new starters. Of those that do collect feedback, 55% ask about the induction process, 37% ask about the recruitment process and 33% ask new recruits whether their pre- joining expectations have been met. Less than a quarter of organisations (24%) ask what actually attracted them to join the organisation and only 19% ask what factors affect their level of engagement.

TalentDrain has compared the survey findings with separate data it has collected from 957 new starters in a range of occupations and industries. The comparison reveals factors which HR teams misjudge in terms of their importance for the attraction and attrition of new starters.

“HR teams and new starters agree that what the actual job entails, the potential for progression, training & development opportunities, the physical working environment and the pay and benefits package are all attraction factors,” said the authors. “However HR teams tend to overestimate the importance of the brand and the reputation of the organisation and they underestimate the importance of other factors, such as mentoring from line managers, which new starters say they value.”

HR teams and new starters broadly agree on the factors that typically drive new employees to leave an organisation.

“Both see the nature of the work and a ‘mismatch between expectations and reality’ as the reasons for early attrition,” said the authors. “However HR practitioners wrongly assume that many new recruits leave because they’ve made the wrong vocational choice whereas many actually walk because they’re unhappy with their ability to progress – or their pay/benefits, work-life balance or training & development opportunities – or because they’ve lost confidence in the organisation.”

TalentDrain’s report highlights the importance of ‘person- organisation fit’ for employee engagement and the need to ensure that candidate expectations are as close to reality as possible.

“If new starters are citing the potential for progression, the nature of the work and work-life balance as attrition factors, it begs the questions of what their expectations were in these areas and what lead to this,” said the authors. “Early attrition is a major financial burden and if organisations are now facing a recruitment freeze, it will be more important than ever for them to hold onto their new starters.”

The report examines some of the approaches that organisations are taking to help candidates decide whether the job offered is right for them, prior to joining. 48% have ‘candid conversations’ with candidates, usually at the interview stage, and 30% arrange for potential hires to discuss the realities of work with existing employees.

The report also outlines that the most popular method of collecting exit data (used by 79% of organisations) is face-to-face exit interviews. 36% of organisations use exit surveys, however only 18% make these surveys anonymous, despite the fact that 43% of respondents believe that anonymous surveys are more likely to collect honest exit data. 42% of organisations claim to have implemented interventions based on the results of their exit data.

(Source:  http://www.consultant-news.com/article_display.aspx?p=adp&id=5468)

Richard Reid is the founder of Pinnacle Proactive, Specialising in the Employee Assistance ProgramStress ManagementStaff Retention & Absenteeism. Take a Proactive Approach to Growing Your Organisation & its People. For more info visit http://www.pinnacleproactive.com

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