More than a year of working under the shadow of Covid-19 has given employees a renewed voice – and employers would do well to listen to them.
Over the past year, many businesses have been in crisis mode, dealing with urgent new tasks and concerns. And for some the focus on firefighting has caused other areas, such as their people strategy, to fall to the wayside.
But negligence can come at a cost – and businesses that don’t prioritise their people strategy risk paying the price for their actions later, in the form of a costly talent exodus, damaged employer brand and a productivity drought.
In our latest research we surveyed 500 HR decision makers and 2,000 employees in the UK and Ireland. We set out to explore the cost of poor people strategy during the pandemic and assess the actions businesses can take to mitigate the risks of mass resignation in the near future. Here’s what we found.
A talent exodus is on the horizon
Our new research reveals that, having navigated a myriad of market and operational challenges over the past year, businesses could be sleepwalking towards a talent exodus – with nearly one in four employees looking to change roles in the near future.
Although some employers are aware this exodus is on the way – with nearly half of HR decision makers worried staff will leave once the job market improves – they might not be taking the necessary steps to prevent people leaving. Only a quarter of HR decision makers are reporting that talent retention is a priority for their organisation over the next 12 months.
Not only does this mean businesses risk losing their valuable talent at a time when they will depend upon it most – hampering productivity and performance, and tarnishing employer brand – but it could take a significant toll on profit margins too. Overall, the cost of additional staff turnover in the UK and Ireland over the next 12 months could cost the economy an estimated £16.958 billion – equating to £10,076 per business – and up to £5.807 billion for SMEs alone.
But what’s triggering this exodus? While there are various factors at play, the research uncovered a worrying disconnect between employers’ perception of what will encourage their staff to leave and employees’ reality, highlighting a lack of understanding of staff’s problems and priorities today.
Crucially, while HR decision makers are right to speculate that a pay freeze or cut and a worsening work-life balance could cause workers to look elsewhere, they underestimate the pushing power of a toxic workplace culture. Toxic workplace culture is a major push factor, with 21 per cent of employees saying this would encourage them to look for a new job if it were to happen in the next six months.
We also found that a lack of awareness among employers of how their company’s handling of the pandemic has been perceived could be contributing to a lack of loyalty among employees. HR decision makers are more than twice as likely as employees to rate their business’s support for career development as “good”, and around a quarter are more likely to see its support for work/life balance and mental/physical wellbeing in a positive light. Moreover, they are also significantly more likely to overestimate how successfully their organisation has managed company culture, resourcing and internal communications.
It’s clear that many employers are worryingly out of touch with their employees’ priorities and concerns. And, if businesses fail to identify this disconnect and address any issues at hand – such as burnout or a lack of appreciation – this could prompt people to leave and put their employer brand on the line.
A looming productivity drought
Employers aren’t just overestimating how well their organisation has handled the pandemic – they’re overestimating their team’s productivity too. While three in ten employees (31 per cent) say the pandemic has made them more productive at work, this is notably different to what HR professionals believe they have seen, with more than half (52 per cent) saying they have noticed an increase in employee productivity.
Unaware of the reality of how employees are feeling, this optimism could pose a risk: if employers don’t recognise that employees feel less productive, they’re less likely to take steps to address it – and this could cost them in the long run.
And it’s not just how employers and employees rate productivity where there’s a mismatch – they are also at odds over the reasons behind productivity losses. Indeed, HR decision makers are more likely to believe that external factors are driving poor productivity, such as distractions or managing childcare, whereas employees are most likely to attribute productivity loss to factors related to their work, such as low motivation and morale, or burnout.
It’s crucial that employers address these issues sooner rather than later if they’re to prevent a looming productivity drought. With 83 per cent of employees saying a good workplace culture helps people to be more productive, it’s clear that getting people strategy right is key to solving the productivity puzzle.
People strategy as a crucial priority
Behind every great business is a great team. And a great team requires a brilliant HR function – which is why an effective people strategy is so important.
But, shockingly, 39 per cent of HR decision makers don’t cite people strategy as a top priority at their business. This figure should be 0 per cent – especially when good people strategy goes hand in hand with productivity. The research found that, of those HR decision makers that reported an increase in productivity during the pandemic, 67 per cent said people strategy is a priority at their business – demonstrating that successful firms invest in their people.
Evidently people strategy is integral to productivity and performance, driving business success and, in turn, the economy, and this necessitates that HR becomes more strategic still. But in order to fulfil this strategic function, HR teams need more support. Half of HR decision makers still wish HR had a bigger reach and influence within the business, while 46 per cent say the HR function lacks the data and insights it needs to support the business in the best way possible.
Where do we go from here?
People are a business’s greatest asset. So when people strategy is not well planned or thought out – or its impact is overestimated – this comes at a cost to the people and the business too.
With the potential to provoke a cascade of negative outcomes, such as poor staff retention, damaged employer brand and poor productivity, this could ultimately cause a significant impact to a business’s bottom line. And for businesses that haven’t prioritised their people during the pandemic, any detrimental impact may not become apparent until it’s too late.
But there’s still a chance to turn the tide. By prioritising their people and taking a more strategic approach to people management, employers can drive their business performance as well as the wider economy. And as many employers prepare to open offices again, it’s critical they involve their employees in what the future of work in their company should look like, and listen to their concerns, to avoid yet more disconnection.
Personio is the all-in-one HR software for SMEs. It makes processes as transparent and efficient as possible so HR can focus on the most valuable assets in the company: people. For the complete survey results, visit www.personio.com/resources/hr-study-2021