How to Drive Employee Retention in a Competitive Labor Market

According to May 2022 data from the Bureau of Labor Statistics, job openings for the month ended at 11.3 million, while the total hires sat at just 6.5 million.

With a nearly 2-to-1 discrepancy, it’s no surprise that the job market is competitive right now—for employers, that is. While some sectors are hit harder than others, everyone is feeling the pain of trying to land and retain talent.

However, many hiring managers have misdiagnosed the problem. Employees aren’t quitting their jobs to take up knitting or travel the world. They’re quitting their jobs to go work for competitors.

That means that if you’re having trouble retaining employees, it’s because your competitors are offering something you aren’t. In this post, we’ll walk through some of the steps you can take to drive employee retention in today’s competitive market.

 

Why is the market so competitive right now?

There are a number of reasons why employees are not only open to new jobs, but are actively seeking them. According to survey data from Indeed, the following factors are the highest priority:

• Higher pay (59%)
• Schedule flexibility (58%)
• Work-life balance (56%)
• Remote work options (54%)
• Focus on personal and family responsibilities (50%)

Given the extra commitment employees expect of their employers currently, some companies may decide to throw in the towel and avoid making new hires while they “ride out the storm.”

That’s a mistake.

While COVID-19 concerns may abate soon, other economic factors may not. What if these dynamics continue for multiple years? Companies who will succeed over the long term adapt to challenges, not shirk away from them.

Another bad idea is to expect to achieve sizable growth without growing your team. While adopting automation and technology can help make this possible (more on that later), expecting one team member to do the jobs of two or three right now will just lead to burnout, and people will leave.

As a result, if you want your business to grow, bringing on more talent is a key part of the equation.

 

5 ways to drive employee retention

Here are a few of the actions that leading companies are taking to hedge against current labor shortages. Let’s look at a few of these tactics.

1. Raise salaries and offer better benefits

We’ve all seen the fast food restaurants offering $12-15 an hour (some even more) for new employees. That’s because the most obvious thing to do when you’re having trouble finding talent is to offer more compensation:

• Higher salaries
• Signing bonuses
• Education subsidies
• Free subscriptions (e.g. Spotify Premium)

However, this approach only works when you have the resources to offer these added perks. While it’s important to consider how you could “sweeten the pot” from a compensation standpoint, let’s look at other ways to set yourself apart from competitors.

2. Promote company culture

Simply put: culture matters now more than ever.

Employees want a culture that values their contribution, provides the necessary freedom for work-life balance, and provides opportunities to grow in their career development. Valuing employees as human beings goes a long way to both attracting and retaining top talent.

Be sure to put culture front and center in your hiring materials, social media posts, and online content. Let potential candidates know that you’re a company that people want to work for, not have to work for.

3. Build a talent funnel

In today’s candidate-driven market, most companies are rolling out the red carpet during the hiring process, hoping that it will entice top talent to work with them. If you want to build a reliable talent funnel, then you need to start doing some of these things:

• Be quick in your response times (automation can be a real help in this area!)
• Engage in remote hiring, both to expand your talent pool and improve accessibility
• Keep candidate information in a centralized database so you don’t re-ask the same questions
• Work with a reputable recruitment firm who can handle much of these details for you

Your best employee could turn in their two weeks’ notice tomorrow, leaving you in a tough spot. Having a reliable talent funnel, driven by an exceptional candidate experience, can help you replace them easier.

4. Upskill your current employees

Promoting from within is almost always more cost-effective than going out to hire a replacement. So if you have some excellent employees who are interested in taking their career to the next level, you can offer training opportunities for them to do so.

Of course, this has a two-fold effect: it creates an in-house talent ladder to hedge against potential resignations, and it also keeps these employees engaged so they don’t feel the need to go work somewhere else.

5. Invest in automation

We mentioned this earlier but it bears repeating. There are a variety of devices, software, and systems that can increase productivity and output without increasing the cost of labor.

An obvious example is the self-service kiosks or mobile apps for fast food restaurants, but there are other types of automation that can help engineering, IT, healthcare, automotive, and other companies:

• Chatbots that automate the front lines of customer support
• Email marketing automations to personalize and automate customer communications
• Productivity workflows and project management software
• Employee analytics tools to gauge the productivity of each team member, and identify opportunities for improvement

While technology is no replacement for the human team member, it can relieve stress and help everyone do their jobs better—and potentially provide a stopgap if a star employee moves on.

 

Final thoughts on employee retention

Let’s be clear: in a market as dynamic as the current one, it’s highly unlikely that you’ll be able to avoid resignations altogether. There are simply going to be people who aren’t the best fit for your business.

But when you take active steps to invest in your team, you’re sending a clear message: we value you, we want you to stick around, and we’re willing to put our money where our mouth is.

For that reason alone, it’s worth it to invest in employee retention. People are tired of being taken for granted. It’s time for employers to respond to that reality—or, frankly, wither away and die.