Yes. Almost 1 in 5 companies see this pattern. So what can you do if you’re one of them?
Employee engagement is something that many organisations measure and track, often through surveys. There are good reasons for doing this. Monitoring engagement is seen as good governance. There’s also evidence that high-perfoming companies build a virtuous circle of engaged teams with strong business results.
“Engagement” has a variety of definitions, but there is broad agreement on what it’s trying to get at, i.e. things like:
- Sense of belonging and connection
- Pride and advocacy
- Willingness to invest discretionary effort
William Kahn is usually credited with providing the first formal definition of engagement. He talked about:
“The harnessing of organisation members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally.”
The degree to which employees find engagement is the result of both individual characteristics and factors that are related to their experience at work.
Employee experience (EX) factors include day-to-day elements, such as the job itself, and how you interact with your manager and your team. Some of these stand out as being especially important, such as feeling recognised by your manager and having a sense of psychological safety.
Engagement drivers also include broader organisational factors. For example, the ability to grow a career and your confidence in leadership. In my experience, there are systemic capabilities that can provide an engagement lift if you get them right, such as performance enablement and effective communications.
When the CIPD developed an umbrella approach to employee engagement a few years back, it identified the following useful framework:
The key point here is that engagement is typically seen as a condition in its own right. In the CIPD’s words, engagement relates to a “state of being”. It’s common to view engagement through the lens of self-determination theory. Another perspective on engagement is to consider it as something akin to “flow”. It’s one reason why engagement has been linked to improved performance outcomes (safety, productivity, sales, etc.)
Engagement is not retention
While you can expect that engagement is related to retention, it’s also different. Retention refers to employees’ intention to stay with their current employer. (Note that I’m using plain language here and avoiding more technical terms like retention rates.) The opposite of retention is turnover — and here I’m mainly thinking about people leaving voluntarily for another job in a different company.
When employees make a decision to leave in this way, it’s the result of a complicated equation that reflects a wide range of considerations.
Some of those are external to your experience at work.
One very obvious external factor is the economy. Is unemployment low? Is your sector growing? Are your skills in demand?
In the last 18 months, another factor has been people simply wanting to make a change after the slog of the pandemic and lockdowns.
In addition, there has been high inflation. If you look at the data behind the “Great Resignation” you see that lots of people have made sideways moves. This may be due to people looking for even a small pay increase during a cost-of-living crisis.
As well as these external factors, turnover is a result of individual characteristics (e.g. risk appetite) and, of course, employees’ experience at their current place of work. Do you have an idiot for a boss? Do you feel your pay is unfair? Is your team short staffed? Are you feeling overwhelmed and even burnt out?
There is lots of research into these EX retention drivers, some of which is summarised below (these data come from the WTW Global Attitudes Survey):
What’s noticeable is the prevalence of total rewards in retention drivers. That’s not the case for engagement. Engagement is driven by more relational factors. In fact, if you think about employee experience in terms of both “connection” and “contribution” (as I sometimes do — shown below) then engagement is more strongly related to connection (to the people you work with and the sense of purpose you get from work) and retention is more strongly related to contribution (the opportunity to have an impact through your work and the recognition you receive for your efforts).
Linking engagement, performance and retention
In summary then, engagement is different to retention, but both are impacted — to some degree — by your experience at work. In many scenarios, therefore, you can expect engagement and retention to track one another.
They segmented 350 organisations according to both the level of employee engagement and the level of retention, comparing each to their respective industry average.
They found four segments as shown here:
The good news is that 37% of companies have highly engaged employees who are looking to stay. Engagement and retention go hand-in-hand here.
These “value drive” companies also have a performance advantage, delivering the best profits and growth, as shown below:
At the other end of the spectrum are 30% of organisations that have disengaged employees who are looking to leave (“value drag”). Of course, engagement and retention (and performance) are linked here too.
There’s a rump of 15% of companies, which suffer from low engagement, but where employees are not looking for the exit (“value potential”). You can imagine reasons why people might be “stuck” like this. Perhaps these organisations are older corporates with relatively high numbers of long-tenured employees, for example.
What interests me most is the 18% of companies that have the pattern I described at the top of this piece — high engagement, but also high turnover (“value risk”).
It’s worth saying that some leaders I’ve worked with don’t think this pattern is a big problem. They feel it shows they’re doing a great job of developing ambitious people. They might even expect their most-engaged talent to be on the lookout for opportunities— it’s a sign of success.
Moreover, if folks are walking out of the door engaged, then you are building a fantastic pool of potential re-hires. There’s research that shows re-hires can be among the most productive of employees. In some industries, it’s not uncommon for people to move around a lot (and you can argue that this is going to become more common in the future of work).
There’s some truth in this. But there is a cost to turnover and it’s significant. The real total cost of losing someone includes the cost of hiring, onboarding and training a replacement. You also need to account for the loss in productivity and the impact on those who remain (in terms of morale and climate, for example). This can easily end up to a multiple of the leaver’s salary.
You can see from the above analysis that these “value risk” organisations are not as profitable or as fast-growing as their “value drive” peers. There is an overall performance disadvantage. It’s likely that these companies are facing too-high a retention risk; they’ve crossed what might be considered a healthy (or “optimal”) level of turnover.
Three key steps for taking action
To return to the second question I posed at the start of this article, what can you do if “value risk” is a pattern that you see at your company?
There are three key steps you can follow, which I will go on to summarise at a very high level: Understand — Prioritise — Spark Change.
According to the research, there are some areas where the employee experience differs for these “value risk” organisations. For example, employees:
- Are less likely to believe their voice matters
- Perceive less equity when it comes to advancement opportunities
- Feel their organisation doesn’t really match rewards to performance
This is the general case. You need to understand your own workforce dynamics by analysing people data to build your own picture.
Here is an outline of some of the ways you can do that:
i. What did people who left tell you before they departed?
This is a simple analysis, but powerful. Tag leavers in your prior engagement survey, and review the results for those who were engaged but left vs. those who stayed. Are there specific topics where there are big gaps?
You can segment engaged leavers and stayers by function, role, and critical talent group. You should also segment by length of service. When in the employee lifecycle do gaps emerge and on what topics?
You can model retention by treating the decision to leave as an outcome. Are there experiences and opinions that can be linked to the decision of engaged employees to exit? In this phase, it’s key to integrate and triangulate — to add-in demographic and other data. This might include individual variables such as time since last promotion and pay rate compared to co-workers, and so on. It might also include data on fitness for the job at the point of hire. You can also connect insights from exit surveys, such as reasons for leaving.
iv. Add colour and richness
One way to add colour is by looking at employees’ stated intention to stay or leave (for example, in an engagement survey) and their actual stay/leave decision. If you do that, you can identify people who intended to stay and did, and folks who intended to leave and did, but far more interestingly people who you might call “surprise leavers” and “surprise stayers”. Looking at these “surprise groups” in detail can provide a lot of insights.
If you have multiple surveys, the data becomes even more colourful. For example, you can identify people who have changed their mind (about whether to leave or stay) and isolate the factors that led them to reconsider.
You can also review qualitative data (e.g. survey comments), performance feedback, and exit interview data to add richness.
v. Engage and involve (and validate)
It’s important to validate your analysis with people. We sometimes use virtual focus groups (chat-based discussions at scale). You can engage with Employee Resource Groups and other communities. You can co-create solutions by using ideation/crowdsourcing tools and platforms.
Obviously, I’ve run through all of the above in super-quick fashion, but I hope you get a sense for some of the options available. (Feel free to ask me about them if you would like more detail. The screen shots shown above are from WTW’s Engage software.)
The second step is to translate insights into actions. Are there people priorities that need to be accelerated? Are there programme changes you should make? Are there particular EX moments you should focus on?
When we did research into “Transformative EX” organisations, for example, we identified a number of breakthrough moments:
- Making flexible work work
- Modernising total rewards and enabling performance
- Equipping managers to lead through change with empathy
- Investing in employee wellbeing
- Encouraging inclusion and psychological safety
When it comes to “value risk” organisations, we know from our research, that one key area relates to fair pay:
A second focus area relates to career experiences and career architecture. In all organisations, careers are evolving:
As a result, many organisations are shifting from traditional approaches to more of a career ecosystem:
These are example priority areas to focus on in order to optimise turnover, particularly if you have identified a pattern of “value risk” in your employee experience through the kind of analysis described in Step 1.
3. Spark behaviour change
The third step is to translate actions into impact. When it comes to activating career experiences, for example, most organisations combine tools for employees and managers with consumer-grade technology that personalises communication.
We recently worked with a global pharma company, for example, to develop a careers platform called “Navigator”. The platform integrates their existing development content with a new role framework — bringing career development to life for employees.
On Navigator employees can:
- Explore all role families and role profiles across the organisation
- Identify areas of interest and the skills required for different paths
- View their current role and suggested upward and lateral moves, making their Navigator experience personal to them
- Create a career development plan.
You can deploy similar technology to communicate total rewards and to tackle issues related to fair pay.
I’m skimming the surface here, but you can read lots about this on our website.
Recap — “Value risk” can be minimised
Employee engagement has been a leadership focus for more than a decade. Since the pandemic, and especially in areas where key skills are in short supply, retention has also become a top priority. In many cases, the two go hand-in-hand, but in around 20% of companies it’s possible to see a pattern of high engagement and high turnover risk.
If this is something you see in your organisation, you need to analyse the people data you have to really understand the drivers of retention for engaged leavers. Based on our research, these are likely to be related to “contribution” elements of EX (such as total rewards and careers).
Once you’ve done the kind of analyses shown here to really understand the key factors for your workforce, you can then prioritise programmes and changes that will help to optimise turnover.
In areas like total rewards and career experiences, organisations are increasingly using digital technologies to spark behaviour change and to create lasting impact. I’ve touched on that very lightly here, but for sure it’s something I will write a lot more about in the near future.
NOTE: This is a draft I’m working on. Ping me a message with your thoughts; I’d love to hear what you think — Nick