Retention of talented staff is a top issue for HR leaders, The Institute of Managers and Leaders (IML) has revealed, with the average cost to replace staff coming in at $22,135 when factoring in recruitment, training and operational costs.
The IML 2018 National Salary Survey found that 71 per cent of surveyed organisations have listed the top reason for staff leaving is to take up a similar role at another business.
And the top three reasons for doing so are to “find a new challenge”, to “find better career advancement opportunities” and to “find better pay”.
As such, organisations with higher than average turnover (10 per cent being average according to the survey) should adopt new strategies to keep their employees from leaving, as it is typically high performing staff who go to competitors.
Charles Go, research product manager for the Institute of Managers and Leaders, said there are a number of important steps organisations can take in this process.
Firstly, paying staff correctly and offering the right benefits all starts with research, and solid benchmarking tools are critical at this stage.
Research into other (potentially competing) organisations, as well as internal research from within the organisation, can also assist in understanding what staff value.
“Some managers and high performing employees might have already come from organisations with these strategies and benefits in place,” said Go, who explained that a good place to start is by asking them what’s worked before, and what could be implemented within the company.
This also avoids implementing a solution that relies solely on external consultants and instead demonstrates that the company is listening to staff.
Flexible benefit options
There are a range of other benefits organisations should consider in the salary benchmarking process, according to Go, who explained that there are other options if budgets are tight for pay rises.
These can include working from home or flexible start and finish times, which can translate into savings for families or those who need greater work-life balance.
Flexibility may also be more highly valued than increments in pay by certain staff, depending on their circumstances.
“Have a set training budget, allocate an amount to each department and work with organisations heads to prepare a development plan”
There are many other benefits options companies can explore, including car packaging, extra super payments, and performance-based bonus schemes, which can be used to attract high performers, Go added.
“If an organisation can find ways to offer these benefits, then they will significantly help in retaining and attracting talented staff,” he said.
Why development strategies are needed
Go also explained that it is important for organisations and their HR departments to have a sound development strategy in place.
CEOs or senior leaders might be encouraging development and wanting their staff to develop and grow, but in some cases Go said their organisations don’t actually have a strategy in place to support this.
Some organisations might not have a set budget, unsure what will work for them, or there may be no internal owner of development initiatives.
“But you have to start somewhere, Go recommended: “Have a set training budget, allocate an amount to each department and work with organisations heads to prepare a development plan”.
You don’t want to run the risk of an employee who is willing to learn, grow and develop to be put off by the organisation having no clear strategy for them to grow and develop.
“So having a basic budget and a simple development plan is a powerful thing to have,” said Go.
Another important element of a development strategy was encouragement from the top down, and Go said that the CEO and senior managers should encourage staff to take time to develop and learn new skills that will add value to the organisation.
The dangers of overpaying staff
Overpaying staff is an issue that a lot of people don’t really talk about, Go observed.
The most obvious issue with overpaying staff is overspending on staff remuneration – which will then cut into profits.
“If they’re overpaid to start with, they might not want to reach for that next level”
Overpaying can also encourage mediocrity and discourage innovation and demotivate hard work by keeping staff who can become unchallenged in their role within their organisation, said Go.
A healthy amount of competition and challenge is always good within organisations, as this can encourage staff to perform at their best either within teams or across departments.
“Sales teams, for example, are constantly looking to surpass each other in terms of results and obtain bonuses, generating higher profits and return on investment for the organisation,” he said.
“But if they’re overpaid to start with, they might not want to reach for that next level.”
Go said another risk of overpaying staff is that high performers can become complacent in their roles.
Usually, high performing staff would want to perform highly for an organisation and then potentially move on.
“Whereas overpaid staff who are not really performing well, tend to know what they have so they’ll stay longer.
“They may lower morale with those around them because they’re complacent and only doing the bare minimum.”
Go concluded that it was important to strike a balance with pay for staff, and getting this equation right was a combination of factors from organisational, individual and market standpoints.
“Getting the National Salary Survey is important to review your investment and assess its effectiveness and impact on your bottom line,” said Go.
The Institute of Managers and Leaders’ 2018 National Salary Survey provides insights HR trends and salary benchmark data on 250 position titles (from an analysis of data from over 25,000 Australian employees). The NSS is now available for purchase at a discounted rate, saving you up to $500 (use promo code PP15). To order your copy or download a free sample of the report, please visit the National Salary Survey website.
Image source: iStock