As the job market improves and applicants grow pickier, companies need to work extra hard to retain the workers they have, and pay and benefits won't do it alone. Several recent surveys indicate that employers looking for that extra special something to attract and retain top talent need to place greater emphasis on work-life fit.

According to Mercer's 2012 Attraction and Retention Survey, more than 40% of organizations are expanding their overall workforce in 2012, compared to just 27% in 2010. Moreover, fewer organizations today are making selected reductions to their workforce (16% versus 25%, respectively) than two years ago. Yet, despite this positive news, almost twice as many organizations today are reporting reduced levels of employee engagement, compared to two years ago (24% versus 13%, respectively).

"Employee loyalty has been eroding the past few years due to companies' responses to the economic downturn," says Mercer's Loree Griffith. "Actions like layoffs, pay freezes and limited training opportunities have created an evolving employment deal for employees due to uncertainty about what is expected and how employees will be rewarded. Meanwhile, firms are still aggressively managing people costs while finding ways to re-energize and remotivate engaged employees."

Turnover is another factor contributing to the attention employers are placing on employee engagement. Almost 60% of participating organizations are anticipating increases in voluntary turnover as the job market and economy continue to improve.

Meanwhile, employers are already feeling the pinch. A poll of 1,605 firms conducted by Towers Watson and WorldAtWork finds that, globally, 72% cite problems finding and hiring critical-skill workers. In the United States, it's 61%, comparable to pre-Great Recession levels. More than 50% of all respondents also reported trouble with critical-skill retention.

"The demand for the best talent is as strong as ever, especially given a challenging economy and heightened global competition," says Laura Sejen, global leader of rewards at Towers Watson. "But many employers are not taking advantage of opportunities to attract, retain and engage high-value employees by offering a work environment and the total rewards programs that are most important to them.

"In fact, there appears to be a mismatch between what employers are offering and what employees are looking for. Employees, including top talent, are more focused on competitive base pay and job security. Employers, on the other hand, are emphasizing other items, such as challenging work, and their mission, vision and values."

 

Engagement a two-way street

But what attracts people to a position and what keeps them in it can be very different things. Despite the uncertain job market, the top reasons Americans are staying with their current employment are work-life fit and enjoying what they do, according to a recent American Psychological Association survey. Notable differences exist across gender lines or age categories, and a majority does still cite pay and benefits as a factor, but having a job that meshes well with other life demands remains hugely important to U.S. workers.

Some 59% of those with jobs report staying because of salary, and 60% because of benefits, according to the APA, but 67% say they're sticking with their current employer because they enjoy the work, and the same percentage pointed to work-life fit. Even with unemployment high, only 39% of respondents said a lack of available jobs contributes to them staying where they are.

"Americans spend a majority of their waking hours at work and, as such, they want to have harmony between their job demands and the other parts of their lives," says David W. Ballard, head of the APA's psychologically healthy workplace program. To engage the workforce and remain competitive, it's no longer sufficient to focus solely on benefits.

"Today, top employers create an environment where employees feel connected to the organization and have a positive work experience that's part of a rich, fulfilling life," Ballard says.

"As U.S. employers seek to grow profitably during a period of economic volatility, their focus needs to be on crafting an employee value proposition that helps to attract and retain talented and critical-skill employees while also engaging the broader workforce," says Laurie Bienstock, North America rewards leader at Towers Watson. "Plus, organizations need to position themselves for future success over the next five to 10 years."

Ryan Johnson, vice president of research and publishing for WorldAtWork, agrees. He says plenty of U.S. firms aren't struggling with retention at all, and they're the ones with lessons to teach.

"There are many smart companies competing and winning in the talent market right now," says Johnson. "They realize that engagement is a two-way street - they actively listen to employees and then tailor total rewards packages that ensure the work is invigorating, satisfying and truly rewarding in more ways than just pay."

But, of course, pay remains crucial, as does proper communication of goals and opportunities. Just more than half of U.S. respondents think their performance management process links salary increases to individual performance effectively, compared to 62% worldwide. And significantly more global firms (52%) see their managers as effective at setting individual performance goals than do American ones (37%).

Leadership management programs in America get overwhelmingly positive results in the survey. Ninety-five percent of U.S. respondents say their leadership development system supports the organization's culture, compared with 84% globally.

"Effective leadership development, performance management and succession planning programs will be keys to getting it right," Bienstock says.

According to Mercer's survey, merit increases are back, with the large majority (95%) of organizations providing some form of increase for 2012. However, as in 2010, organizations today are continuing to enhance the use of noncash rewards to drive employee retention and engagement, particularly during times of limited merit budgets.

The most prevalent noncash reward programs implemented by organizations over the past 18 months include: communicating total reward value to employees (offered more by 25% of participating organizations), use of social media to boost the employee work experience (25%), formalized career paths (22%), internal/external training (22%) and special recognition (22%).

In the APA's survey, more women than men cited enjoying the work (72% versus 63%) and work-life fit (72% versus 62%), for why they stay with their current employment. Closer numbers are seen for benefits (61% and 59%), while fewer women than men point to pay (57% versus 62%) or their job affording them the opportunity to make a difference (49% versus 52%).

The survey was conducted this year among more than 1,200 Americans aged 18 and older with either full-time or part-time jobs. Those ages 18-to-34 were the most likely to endorse co-workers (57%) or managers (46%) as reasons to stay.

Those age 55 or more were by far the most likely to mention enjoying the work, at 80%, but they were also the most likely to say that feeling connected to the organization or having the chance to make an impact kept them at their jobs. Most significantly, those planning to stay with their current employers for more than two years said the biggest factors to keep them put were enjoying the work, work-life fit and feeling connected to the group.

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