Deloitte Ort Jet seminar - talent management priorities in a recovering economy

Talent Retention: A Strategic Imperative in a Recovering
Economy

David Conradie, Director: Deloitte Consulting (Pty) Ltd
ORT JET Seminar
17th August, 2012

Agenda

Why the concern about talent retention? Why Now? 3

What can organisations do to keep their employees from leaving? 28

The Generational Divide – ―One Size Does Not Fit All‖ 38

Contact Information 50

-2-

Why The Concern About Talent Retention?
Why Now?

Deloitte‘s two longitudinal survey series have focused on emerging
global talent issues and trends
Talent Edge 2020 Managing Talent in a Turbulent Economy
(2010-2012) 2009-2010
Redrafting talent strategies for the uneven recovery— Has the Great Recession Changed the Talent
The latest Talent Edge 2020 edition is based on a Game? Six guideposts to managing talent out of a
survey of 376 global senior executives and talent turbulent economy—Throughout 2009, Deloitte’s
managers. Findings from this study highlight how longitudinal survey series took the pulse of business
companies are tackling the evolving talent challenges
and talent leaders in the marketplace as
and reshaping their talent strategies in uncertain
organisations navigated through shifting economic
economic times (January 2012).
conditions. This report summarises those findings
Click here to access
and identifies six key guideposts executives should
consider as they move past the recession and face
the challenges of the new economy (April 2010).
Building the recovery together—What talent expects Click here to access
and how leaders are responding—This study probes
divergences between the attitudes and desires of three
generations of employees and the talent strategies and Managing Talent in a Turbulent Economy: Where are
practices being utilized by employers. This report you on the recovery curve?—This report surveyed 335
features results from the March 2012 survey that polled global executives and finds that companies which
356 employees at large businesses across the globe ―walk the walk‖ on leadership not only have the right
(April 2011). programs in place to develop their leaders effectively,
Click here to access they have a different view of the world—and a jump on
their competitors (January 2010).
Click here to access
Blueprints for the new normal—This inaugural Talent
Edge 2020 report features results from an October
Managing Talent in a Turbulent Economy: Keeping
2010 survey that polled 334 senior business leaders
your team intact—The study examines employees’
and human resource executives at large global
businesses. This report explores talent strategies and perspectives on retention, their turnover intentions,
unfolding employee trends related to retention and the and how their responses vary across the different
new challenges posed by the recession workforce generations and in comparison to
(December 2010). employers’ perspectives (September 2009).
Click here to access Click here to access

-4-

The talent paradox: Executives are realizing that despite unemployment
levels peaking, the prevailing talent shortage continues unabated

Surveyed organisations conducting/
anticipating layoffs
53%
51%

41 %

36%

13%
Yes

6% No
Don't know

Past 6 months Next 6 months

Source: Talent Edge 2020: July 2012, Deloitte.
As used in this document, ―Deloitte‖ means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal
structure of Deloitte LLP and its subsidiaries.

-5-

As part of their focus on competing for talent, almost half of the surveyed
global executives are concerned about voluntary turnover

49% 47% 71%
of surveyed executives of surveyed executives of surveyed executives
recalled that voluntary predicted an increase in expressed high (43%)
turnover at their voluntary turnover at or very high concern
companies increased in their companies over (28%) about losing
the last 12 months the next 12 months critical and high-
potential talent

Source: Talent Edge 2020: Redrafting talent strategies for the uneven recovery, January 2012, Deloitte.

-6-

Our research shows that executives are right to be worried as there is
typically a cyclical rise in voluntary turnover after a downturn

Quit level of employees vs. Quit level of employees vs. Conference
unemployment rate Board Consumer Confidence Index
4000 11.0 4000 140

10.0

Conference Board Consumer Confidence Index
3500
120

Quit Level (in Thousands of Employees)
3500 9.0
Quit Level (in Thousands of Employees)

8.0 3000
100

Unemployment Rate
3000 7.0
2500

6.0 80

2000
2500 5.0

60
4.0
1500

2000 3.0
40
1000
2.0

1500 1.0 500 20
1/1/2001

7/1/2001

1/1/2002

7/1/2002

1/1/2003

7/1/2003

1/1/2004

7/1/2004

1/1/2005

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1/1/2006

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1/1/2007

7/1/2007

1/1/2008

7/1/2008

1/1/2009

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1/1/2010

7/1/2010

1/1/2011

1/1/2001

7/1/2001

1/1/2002

7/1/2002

1/1/2003

7/1/2003

1/1/2004

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1/1/2005

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7/1/2007

1/1/2008

7/1/2008

1/1/2009

7/1/2009

1/1/2010

7/1/2010

1/1/2011
Date Date

Quit Level in Thousands of Employees, Total Nonfarm, Seasonally Adjusted Quit Level in Thousands of Employees, Total Nonfarm, Seasonally Adjusted
Unemployment Rate, Seasonally Adjusted Conference Board Consumer Confidence Index

Source: Bureau of Labor Statistics, St. Louis Federal Reserve Economic Data.

-7-

Down from 65% in 2011, our recent research shows that only 20% of all
surveyed employees are considering leaving their jobs in the next 12 months

Employees who expect to
80% stay with their current During the past year,
employer

55%
65%
Employees who have been,
plan to, or are currently
seeking new employment 46%
of employees have
45% moved to new jobs,
received a promotion
35% or changed roles with
their current
20% employers – all
factors that might
make them less
inclined to move
2009 2011 2012
during the next 12
months

Sources: * Talent Edge 2020: July 2012, Deloitte.
** Griffeth, R. W., Hom, P. W., & Gaertner, S. (2000). A meta-analysis of antecedents and correlates of employee turnover: Update, moderator tests, and research
implications for the next millennium. Journal of Management, 26, 463-488.

-8-

Surveyed executives feel concerned about retaining employees who might be
the most likely to leave . . .

Surveyed executive predictions regarding voluntary turnover over the
next 12 months by generation

12%

12%

12%
Very High

High
35%
30%

20%

Millenials/Gen Y Gen X Baby Boomers

Source: Talent Edge 2020: Redrafting talent strategies for the uneven recovery, January 2012, Deloitte.

-9-

. . . But they might not have a good handle on which employees they risk losing

Surveyed employees seeking new employment by generation*

Baby Boomers
44%
I am passively looking for new are looking
23%
opportunities passively
23%

33%
I plan to begin looking for new Millennials
21%
employment within the next 12 months
41% are preparing
to look

38%
I am currently seeking new employment 58% Gen Xers are
32% already
looking

Babay Boomers Generation X Millennials

*Survey participants could choose more than one response.

- 10 -

Why are surveyed employees looking to leave their employers?

Top 10 factors that would cause surveyed employees to look for new
employment over the next 12 months

Lack of career progress 27 %

New opportunities in market 22 %

Dissatisfaction with supervisor or
22 %
manager

Lack of challenge in the job 21 %

Lack of adequate bonus or other
21 %
financial incentives

Lack of compensation increases 21 %
Non-financial
Lack of job security 20 %
Financial

Excessive workload 20 %

Lack of trust in leadership 17 %

Inadequate or reduction in benefits
15 %
(i.e., health and pensions)


- 11 -

20%
The 20% of surveyed employees looking to leave their companies
believe key talent programmes are seriously lacking

 Uncertain career paths
• A significant percentage of surveyed employees planning to leave their current employers (30%) believe
their companies do a ―fair‖ job of creating career paths and challenging job opportunities, compared to only
7% who rate this key talent metric as ―excellent‖ or ―world-class‖

 Little leadership development
• 47%, surveyed employees who do not expect to stay at their current employers rate their companies’
leadership development programmes as ―fair/poor‖ rather than ―excellent/very good‖

 Lack of trust in leadership
• Only 26% of surveyed employees planning to depart believe their companies inspire trust in leadership
effectively (―excellent/very good‖), compared to the 46% who rank these efforts as ―fair/poor‖

 Difficulty retaining top performers
• Of those surveyed employees who expect to depart, 41% believe their companies are doing a ―fair/poor‖
job retaining top performers, compared to 29% who label retention efforts in this area as ―excellent/very
good‖

 Inadequate training programmes
• Nearly half of the employees surveyed (47%) who plan to leave their current jobs believe their companies
are doing a ―fair/poor‖ job managing and delivering effective training programmes; just 23% rate training
programmes as ―excellent/very good‖

.

- 12 -

The cost of voluntary turnover is significant…and perhaps not well
understood

 Direct financial costs for recruiting,
attracting, and training a new
employee are fairly fixed and typically
less than 50% of the position’s
annual compensation
 Indirect costs are wide-reaching and
66%
can vary from 50% to 150% of the of surveyed executives
position’s annual compensation, believe voluntary
including: turnover will actually
• Lost productivity increase their
• Impact on customer relationships
companies‘
profitability**
• Knowledge drain
• Burden to employees who must take on
additional work*

Sources: * ―Talent-Based ROI – Ways to Improve Employee Impact to the Bottom-Line,‖ 2008, Deloitte; ―Where did our employees go?‖ Deloitte Review, Issue 5, 2009;
Society for Human Resource Management, ―Cost of Turnover,‖ SHRM Briefly Stated ROI Series, November 1, 2005;
** Talent Edge 2020: Blueprints for the new normal, December 2010, Deloitte.

- 13 -

In addition, talent shortages can have a significant impact on business
effectiveness

 Limited productivity and efficiency
 Limited ability to achieve innovation
requirements
 Limited ability to achieve quality
improvement objectives
 Limited speed to market of new
products/services
 Detriment to customer relationships
 Limited ability to grow fast enough to
meet customer demand

Executives who are counting on a ―jobless‖ recovery can risk being caught
without the skills and leadership they need. When the economy heats up, these
companies risk a ―resume tsunami” — where employees with a desire to switch
jobs take increased confidence from better times and seek out new opportunities
in the talent marketplace

- 14 -

Awareness is Not Enough

 The real surprise is that even when companies are aware of what the primary
causes of voluntary employee turnover are, they are simply not doing enough to
eliminate them.
 Too many employer organisations are still relying on tangible, easy-to-implement
solutions that revolve around pay, benefits, trendy perks, despite widespread
recognition that the most powerful solutions revolve around the more challenging
intangibles, such as good management, a healthy corporate culture and authentic
leadership.

- 15 -

What Can Organisations Do to Keep Their
Employees From Leaving?

Organisations should consider first identifying their critical workforce
segments and then develop/update retention plans

 Critical workforce segments are roles
within an organisation that:
• Drive a disproportionate share of key
business outcomes Only
• Influence an organisation’s value chain
significantly
• Are in short supply from the respective
labor market
40%
 Critical workforce segments include roles of executives surveyed in
central to execution of the business October 2011 reported that
strategy their companies had an
 Within critical workforce segments, critical updated plan in place to
leaders/executives should also be manage retention
identified

Designing retention plans specifically to meet the needs/expectations of
critical employees and executives can significantly improve the value of
talent management investments
Source: Talent Edge 2020: Redrafting talent strategies for the uneven recover, January 2012, Deloitte.

- 17 -

Identify CWS: Not all workforce segments drive equal value
No two businesses, even those from the same industry with similar customers and similar
business goals, will have identical formulas for talent. Each company will need to have its
own distinctive talent strategy. Development of a talent strategy starts with the identification
of critical workforce segments.

Specialists Critical
Reflect Workforce
Critical
Segments
Specialists:
alignments
Reflect alignments
5 Workforce
Consists of
formed where Segments:
formed where
companies do highly skilled,
Consist of highly
companies do not skilled, highly
highly trained
not have the
have the existing
Critical Workforce
Specialists trained individuals
Difficult to replace skills
existing skills individuals who
skills and cannot
develop them -in
and cannot -
4 Segments who drive Build
drive a
a Borrow
disproportionate
house cost effectively
develop them disproportionate
percentage of
in house cost percentage of
revenue growth
effectively revenue growth
3 Buy Rent
Flexible Core
Labour Workforce
Reflects Core
Flexible Labor: Reflects the
Workforce:
alternatives
Reflects alternatives 2 Flexible Labour Core Workforce backbone ofRedeploy
Reflects the
Reduce
companies can use
companies can the company the
backbone of
use meet periods of
to to meet
companywell are
who are who
periodsdemand for
high of high
well-trained on firm
trained on
demand for or the
employees
processes but
processes but
need to lower costs
employees or the 1 knowledge and
knowledge and
need to lower skills are easily
skills are easily
costs 1 2 3 4 5 replaced
replaced
Impact on value chain
Considerations
 Do you know what segments of your workforce are providing the most value to the organisation?
 How much is your business spending to recruit and nurture talent that is not critical to the business?
 Do you know where the gaps of critical skills exist and corresponding market availability?
 What cost-effective alternatives exist for sourcing the capabilities that your business needs?
- 18 -

Identify Critical Workforces: Sample in Financial Services
As an example, two insurance organisations will focus on different segments based on their business objectives
Example 1: Example 2:

An insurance company with a business model centered around An insurance company striving to deliver innovative solutions to the
customer intimacy will focus its Talent Strategy on customer facing, marketplace will concentrate its Talent Strategy on the workforce
front-line staff, such as relationship managers, sales agents, and segments focused on product design, such as actuaries and
financial advisors. underwriters.
Insurance Banking Securities Insurance Banking Securities
 Relationship  Relationship  Relationship  Relationship  Relationship  Relationship
Managers Managers Managers Managers Managers Managers

 Insurance Sales  Financial Services  Financial Advisors  Insurance Sales  Financial Services  Financial Advisors
Agents Sales Agents Agents Sales Agents

 Underwriters  Commercial Loan  Portfolio Managers  Underwriters  Commercial Loan  Portfolio Managers
Underwriters Underwriters

 Actuaries  Financial Advisors  Asset Managers  Actuaries  Financial Advisors  Asset Managers

 Claims Adjusters  Portfolio Managers  Brokers  Claims Adjusters  Portfolio Managers  Brokers

 Examiners and  Financial Analysts  Compliance  Examiners and  Financial Analysts  Compliance
Investigators Officers Investigators Officers

 Customer and  Retail Bank Tellers  Financial  Customer and  Retail Bank Tellers  Financial
Field Support Staff Engineers Field Support Staff Engineers

 Claims Reps  Retail Branch  Technology and  Claims Reps  Retail Branch  Technology and
Managers Operations Staff Managers Operations Staff

 Market Research  Investment  Market Research  Investment
Analysts Bankers Analysts Bankers
 Customer Service  Customer Service
Reps Reps

Critical Workforce Segment

- 19 -

The 80% of employees planning to stay with their employers agree
80%
on one clear factor: Strong talent programmes

 Overall HR/talent efforts
 31% and 19% of the surveyed employees, believe their companies are doing a ―good‖ and ―very good‖ (respectively)
job in their overall HR/talent efforts

 Create clear career paths
 44% of the employees committed to their employers believe their companies are doing a ―good/very good‖ job of
creating clear and robust career paths for their employees

 Maintaining trust/confidence in leadership
 Almost half of the surveyed employees (47%) believe their employers are ―good/very good‖ at inspiring trust and
confidence in corporate leadership

 Employee engagement/morale
 Surveyed employees with ―world class‖ or ―very good‖ talent programmes are more likely to remain with their current
employer

 Quality of employee communications
• 36% of employees surveyed believe that their employers do a good job communicating with them in order to remain
transparent in times of economic uncertainty


- 20 -

The top three reasons for employees to remain with their companies over the
next 12 months are related to financial gains

Top 10 factors that would be most effective in keeping surveyed
employees with their current employer over the next 12 months

Additional bonuses or financial incentives 44 %

Promotion/Job advancement 42 %

Additional compensation 41 %

Flexible work arrangements 26 %
Support and recognition from supervisors or
25 %
managers

Leadership development opportunities 22 %
Non-financial
Additional benefits (i.e., health and pensions) 19 %
Financial
Individualized career planning 14 %

Opportunity to work abroad 9%

New training programs 6%


- 21 -

Survey results indicate turnover trends and motivations also vary across
global regions

26% of the surveyed 53% of the
employees in Europe/the surveyed employees
Middle East/Africa (EMEA) in Asia Pacific
thought that ―lack of challenge in (APAC) are
the job‖ would be the #1 reason currently seeking
for them to leave an employer new employment,

Top factors for surveyed with45% in
employees in Americas to America and
leave their current employers
are financial – Lack of 39% in EMEA
Compensation at 24%
and Lack of adequate bonus

at 22%
Only 26%
of employees in Americas and almost half (47%) of the
surveyed EMEA employees are anticipating layoffs in their organization in the next 6
months

- 22 -

The Generational Divide - ―One Size Does Not Fit All‖

Different generations have different goals, expectations, and desires—and
employers should tailor their retention plans to satisfy them all

Millennials Generation X Baby Boomers Veterans
(ages 16-31) (ages 32-47) (ages 48-65) (over age 65)

 Techno savvy &  Skeptical  Competitive  Disillusioned
connected 24/7  Pragmatic  Optimistic  Reactive
 Optimistic  Adaptable  Driven to achieve  Cynical about
 Confident  Self-reliant goals institutions
 Comfortably  Informal  Focused on their  Realistic
self-reliant  Techno literate children  Pragmatic
 Entrepreneurial  Diversity-minded  Judgmental of differing  Risk-taker
 Success-driven  Focused on today opinions  Critic
 Inclusive  Political
 Environmentally
minded

- 24 -

The top four reasons to cause Millennials to look for new employment are
non-financial factors

Top 10 factors that would cause surveyed Millennials to look for new


Dissatisfaction with supervisor or manager 28 %





Lack of adequate bonus or other financial
incentives
19 %

Non-financial
Inadequate or reduction in benefits (i.e., health
and pensions)
13 %
Financial


- 25 -

Promotion/Job Advancement with additional financial incentives are the top
three reasons to make Millennials stay with their current employer

Top 10 responses for most effective retention initiatives for
surveyed Millennials

Promotion/Job advancement 47 % 47%




Support and recognition from supervisors
24 %
or managers

Individualized career planning 17 %

Additional benefits (i.e., health and Non-financial
17 %
pensions)

Flexible work arrangements 16 % Financial

Opportunity to work abroad 14 %

Mentoring programs 10 %


- 26 -

Our research showed that along with financial incentives, surveyed
Millennials seek a corporate culture with progressive values
Surveyed Millennials have a sharply different idea
of what makes for a strong corporate culture than
other generations:

 When asked how important a company’s
commitment to ―sustainability‖ is, 36% of the
Millennials rated it ―very important‖ compared
to just 25% of Baby Boomers

 Almost 2:1 (41% to 25%), Millennials were more
likely to consider their employers’ commitment to
―corporate responsibility/volunteerism‖ to be
very important than were Baby Boomers

 29% of the surveyed Millennials called a ―fun
work environment‖ very important, as compared
to 0% of the Baby Boomers

Millennials typically share a desire to pull themselves up the corporate ladder
and want the financial rewards that come with that career progress. But when
considering employers, they also seek a corporate culture that aligns with a
different set of values than their more experienced colleagues

- 27 -

Surveyed Generation X employees place high importance on new career
choices and opportunities when choosing employers

Top 10 factors that would cause surveyed Gen Xers to look for new


24 %


21 %
manager


Non-financial
Financial


Inadequate or reduction in benefits
15 %
(i.e., health and pensions)


- 28 -

Promotion/Job Advancement is still the top reason for Gen Xers to stay at their
current jobs; although the margin has reduced considerably since last year
Top 10 responses for most effective retention initiatives for
surveyed Gen Xers

47%





Support and recognition from supervisors
21 %
or managers
Individualized career planning (within your
19 % Non-financial
company)
Additional benefits (i.e., health and
15 % Financial
pensions)

Opportunity to work abroad 12 %

Additional discretionary perks (i.e., per-
7%
diem allowances, transportation, etc.)


- 29 -

Our research showed that Generation X wants to move up or move out
 Nearly six in ten Gen Xers surveyed (58%) report they
are currently seeking a new job or have been actively
looking over the past year

 One of the biggest talent challenges many companies
face is opening up career paths for the next generation
of corporate leaders

 ―Lack of career progress‖ was the clear, number one
exit trigger for Generation X at 34%.―Lack of adequate
bonus or other financial incentives‖ and ―Lack of challenge
in the job‖ lagged well behind at 24% and 22%,
respectively

 Only 16% of the surveyed Gen Xers were ―very satisfied‖
with the bonuses they received this year

 ―Promotion/Career Advancement‖ was the number one
retention initiative for Generation X at 47%.―Mentoring
programs‖ and ―New training programs‖ were the least
effective retention initiatives at 4% and 6% respectively

Many Gen Xers surveyed appear frustrated that they are bumping up against
the ―gray ceiling‖—with career paths blocked by Baby Boomers who are not
moving out of the workforce

- 30 -

Assessing the narrow range (26% – 16%) of the top ten ‗exit factors‘ for Baby
Boomers, it appears that these might be based on individual opinions…

Top 10 factors that would cause surveyed Baby Boomers to look for
new employment over the next 12 months




21 %
manager


19 %

Non-financial
Financial

Inadequate or reduction in
16 %
benefits (i.e., health and pensions)


- 31 -

…In contrast, additional financial incentives, by far, are the top two retention
incentives for surveyed Baby Boomers

Top 10 responses for most effective retention incentives for
surveyed Baby Boomers





Support and recognition from supervisors or
29 %
managers

Additional benefits (i.e., health and pensions) 23 %


Individualized career planning (within your Non-financial
8%
company)

Opportunity to work abroad 6% Financial

Additional discretionary perks (i.e., per-diem
6%
allowances, transportation, etc.)


- 32 -

Our research showed that many surveyed Baby Boomers feel frustrated and
betrayed
Surveyed Baby Boomers expressed the strongest
discontent with their employers and the most frustration that
their loyalty and hard work has been neither recognised nor
rewarded:

 Almost a third of Baby Boomers surveyed (31%) report that
morale at their companies has dropped over the past
year. This might be because 84% of the Baby Boomers have
not been promoted in the last 12 months

 Nearly four in ten Baby Boomers (38%) are currently seeking
new employment, although 61% of the surveyed employees
have been with their current employer for 10 years or more as
compared to only 2% of the Millennials

 Nearly five in ten surveyed Baby Boomers (49%) labeled their
companies‘ ability to inspire trust and confidence in
leadership as ―fair/poor‖

Employers, by and large, have not been effective at creating career options
for employees working past 65, even though many employers want their
experience and will need their skills. Addressing the issue of how to engage
older employees should be considered a talent priority

- 33 -

Who is Accountable for Talent Retention?

 It must be borne in mind that neither mangers nor organisations can always
prevent a highly valued employee from leaving, or even delay the decision to
leave.
 Nevertheless, research confirms that an employee’s direct supervisor/manager
has the major share of control or influence over the factors identified as the root
causes of voluntary turnover.
 However, employees sometimes do leave companies too, and the senior leaders
who run those companies. In fact, it is the senior leaders who set the strategic
direction, shape the culture, approve the remuneration policy and pay ranges,
and the training budget, and whose demands often bring stress and overload.
 Ultimately, there is a collective accountability on the part of line managers,
senior leaders, human resources practitioners and the employees themselves to
collaboratively drive employee engagement and thereby reduce the incidence of
avoidable voluntary turnover.

- 34 -

Contact Information

David Conradie
Director
Deloitte Consulting (Pty) Ltd
Email: dconradie@deloitte.co.za
Office: +27 11 517 4207
Mobile: +27 82 469 1010

- 36 -

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment,
legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis
for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a
qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of
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subsidiaries.

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