HR should help ensure firms are fit for upturn

It is inevitable that as the jobs market and the economy improve, staff
turnover rates will rapidly grow, as an increasing number of career
opportunities become available to employees.

Signs of an upturn are beginning to appear. The Report on Jobs by Deloitte
finds there has been a notable improvement in the UK job market since August.
Employers are returning to the market to take advantage of good staff
availability and subdued rates of salary growth. As a result, HR will face two
issues: how to ensure talent is retained, and how to attract the talent
becoming available on the job market.

Losing a worker on £15,000 a year can cost the business another £15,000 in
recruitment and induction costs, and loss of productivity. For a business
employing 5,000 workers, with a staff turnover of 15 per cent, costs can amount
to £11.25m a year. Some skills cost more to replace; a sales person earning
£39,000, could cost the company £300,000. And then there is also the less
quantifiable issue of disruption to the teams, loss of knowledge and lower
employee morale.

So why is turnover expected to rise so dramatically? During the past
two-and-a-half years, businesses have been forced to cut costs to stay
competitive in difficult conditions. Staff experienced cuts in bonuses,
training and development. Businesses that had over-staffed during strong market
conditions have found it necessary to make large cuts to their workforces.

Tough economic conditions mean employers had to achieve more with less,
creating a pressured work environment. Now, business must work to rebuild trust
by creating employee commitment to the company’s management and leadership
style. Staff do not necessarily understand why the job market dropped; they
only witnessed it in terms of what they lost during the cutbacks.

Commitment is created by communicating and delivering on company ideals,
values and objectives. Employees need to understand the strategy behind
apparently negative moves such as cost cuts, and the benefits that will arise
from them.

The Institute of Employment Studies’ survey of graduates establishes what
motivates them to stay with their organisations. Nearly all rank training and
development as the most important, followed by mentoring/coaching and
career/salary progression. For managers, the statistics are more or less similar:
job content, career development, company environment and remuneration have
almost equal weightings of importance. Learning and development was one of the
main areas that suffered during the downturn, and as businesses begin to
benefit from improving conditions, it is vital that it is reinvested in.

As the economy improves, HR can play a key role in ensuring that businesses
are fit to take advantage of new opportunities to move ahead of the
competition. New external career opportunities will inevitably arise and tempt
talented staff. But as long as HR recognises the skills that are crucial to
business performance, and how to attract and retain the right staff, it can
ensure the challenges in the war for talent are overcome.

By John Connolly, Chief executive and senior partner, Deloitte

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