HR Strategies and Organisational Performance Management

HR Strategies

A study by great{with}talent has shown that since the credit crunch HR strategies are moving away from recruitment. The focus is now on organisational performance management and primarily engaging employees.

HR Strategies and Organisational Performance Management

The economic downturn has created new priorities for HR, including a greater focus on organisational performance and less emphasis on recruitment. This paper outlines the results of a survey which claims that HR teams are being asked to do more with less and explains how organisations can increase the likelihood of engagement.

The Employee Engagement and Retention Survey 2009 research was conducted via a detailed questionnaire, completed online by HR practitioners working in a cross-section of 336 UK organisations. This paper offers insights and practical recommendations for HR practitioners.

The paper is based on original great{with}talent research. It translates the survey findings into practical implications for HR practitioners and organisations facing difficult economic times.

Human Resources Strategy

Organisations have traditionally allocated a massive, and arguably disproportionate, percentage of their HR budgets to the attraction and recruitment of staff. In so doing, HR has become enmeshed in a self-fulfilling, vicious circle.

They have too little time, resource and capability to drive more strategic issues, such as understanding how to enable and engage employees to be successful. This, however, would address the rocketing attrition rates that create the requirement for endless rounds of recruitment in the first place. This vicious circle is often further reinforced by recruitment becoming a comfort zone for many HR practitioners.

The good news, or perhaps the bad for some, is that the current recession is forcing organisations to redress this imbalance. The 2009 Employee Engagement and Retention Survey reveals the impact of the UK’s economic instability on HR strategies, budgets and employee turnover.

It also highlights what attracts and engages new starters to an organisation. This includes the differences between HR’s perceptions in this area and what new starters actually report.

According to the survey, almost a third of HR practitioners (30%) have changed their HR strategy. They have switched their focus from recruitment (56% are giving this a lower priority) to areas which more directly impact on organisational performance.

Similarly 72% of organisations are putting greater emphasis on performance management. Whereas 67% on organisational communication and 54% on employee engagement and retention.

This change of focus is often linked with the added challenge of a cut in the HR budget. The survey showed that 38% of organisations have reduced their HR budget by more than 5% and 13% have made cuts of over 25%.

Organisational Performance Management

The shift in focus, even where HR has had no reduction in budget, appears to be towards greater emphasis on organisational performance issues. These include performance management, the creation of a more clearly defined engagement and retention strategy and an increased emphasis on the need to demonstrate return on investment (ROI) in relation to all expenditure.

The increased importance of performance management is designed to ensure that the best people feel valued and the cost of under-performance is removed quickly from the business. The restrictions on the ability to buy in new talent mean that HR is being tasked with providing enhanced ways of identifying, developing and retaining high performers.

Likewise, where a healthy bottom-line can afford managers the luxury of avoiding the more difficult conversations with employees, under-performance can no longer be tolerated. It needs to be improved or managed out.

HR has the opportunity to change the rules of the game in the current climate. They can move away from the traditional ‘address the symptom’ approach towards creating a clearly joined up HR strategy that drives employee engagement and is aligned to organisational goals.

This is potentially reflected in the significant increase in the number of organisations reporting that they have a clearly defined engagement and retention strategy (32% vs. 20% in 2008), which is even higher within the private sector (39%) and larger organisations (40%).

Given that many HR teams are being asked to do more with less, an increased emphasis on demonstrating ROI becomes essential. The challenge for HR is that this requires reliable, easily accessible information on every aspect of their strategy.

All too often this isn’t available or the wrong things are being measured. Ensuring the right ‘key performance indicators’ are in place, i.e. those that really drive engagement and performance, is essential if true ROI is to be demonstrated.

Staff Turnover in a Downturn

Unemployment is currently at 2.49 million, it is hardly surprising that our survey showed that 27% of organisations are already experiencing less voluntary staff turnover. These organisations should not, however, confuse this with a having a more engaged workforce. It is more likely an early indicator of loss of confidence in the economy, with employees feeling safer and more protected in their current job and thus less willing to take the risk of moving to a new organisation.

One group where confidence remains high is top talent. The recession appears to be having little impact on their intention or capability to change jobs, with 7% of organisations seeing an increase in the turnover of their top talent. The fabled war for talent may be about to get a lot worse as organisations look for the silver bullet for their performance woes.

Overall, annual employee turnover rates remain high with 24% reporting staff turnover rates in excess of 20%. They also continue to be seen by most organisations as having a negative impact on their effectiveness. Even in the current climate, 56% of organisations say that they would like to reduce their rate of voluntary employee turnover.

In response to this ongoing challenge, a growing number of organisations are allocating greater strategic focus and budget to employee engagement. The survey showed 32% in 2009, compared with 20% in 2008.

Whilst 95% of organisations claim to have implemented some level of staff retention initiatives over the past year. This includes improving the induction process; enhancing employee communication and involvement; increasing learning and development opportunities and improving the skills of line managers.

Reducing Early Employee Turnover

Given the constraints on recruitment, there has never been a stronger organisational need to reduce early attrition rates. CIPD findings show that one in four new employees leave within their first six months and 50% within their first two years.

Whilst the results from the survey are at slight odds with the CIPD findings. It showed that just 12% reported attrition of more than 15% amongst new recruits and 57% reported having less than one in 20 new starters leave within the first six months. Though, even these figures will still significantly impact on an organisation’s budgets and performance.

However, there may be doubts about the accuracy of these particular responses given that many of the larger organisations, and a third of public sector respondents, reported that they were unsure about their early attrition rates. This highlights a key issue in relation to early staff turnover, namely that most organisations have very little insight into their current level of early attririon, and its causes, yet alone how to address it.

Find out about great{with}talent’s Exit Interviews.

The survey showed that 32% of organisations collect no feedback from their new starters. Of those that do, just 55% ask about the induction process, 37% about the recruitment process and as few as 33% ask new recruits whether their pre-joining expectations have been met.

Less than a quarter of organisations (24%) ask what actually attracted the new starter to join the organisation and only 19% ask what factors affect their level of engagement.

This lack of robust information makes it hardly surprising that HR’s perception of what attracts and disengages new starters sometimes conflicts significantly with what new starters actually say. great{with}talent compared the 2009 Employee Engagement and Retention Survey findings with data collected from 957 new starters across a range of occupations and industries.

There is generally alignment between the two groups in relation to some of the key attraction factors. Examples of this consist of: what the actual job entails, the potential for progression, training and development opportunities, the physical working environment and the pay and benefits package on offer.

However, HR tends to overestimate the importance of the brand and reputation of the organisation. Whilst they also underestimating the value placed by new starters on factors such as mentoring from line managers.

In terms of what leads to early staff turnover, HR teams and new starters agree that the nature of the actual job and a mismatch between expectations and reality are key. HR practitioners, however, incorrectly believe that another primary factor is ‘wrong vocational choice’.

New starters are far more likely to leave if they can’t see the potential to progress within the organisation, feel they have a poor work-life balance, are unhappy about their pay and benefits or lack training and development opportunities.

Read Be Honest with Potential Employees.

Increasing the Likelihood of Employee Engagement

There are more urban legends relating to employee engagement and attrition than possibly any other organisational issue. As such, the first step is for organisations to really understand what their employees value and what makes them engaged.

This requires more than the traditional approach of measuring employee satisfaction in relation to key engagement factors. It means being able to assess the relative importance of these factors too.

This approach, underpinning great{with}talent’s philosophy to employee engagement, enables organisations to prioritise their limited resources more accurately at the key issues.

The model highlights 12 key factors that underpin employee commitment in organisations. These are salary and rewards; career progression; personal growth; well-being and work-life balance; relationships with colleagues; relationship with their line manager; job satisfaction; confidence in the organisation and its leaders; working conditions; loyalty and trust; ethical standards and independence and autonomy of work.

Learn more about The Twelve Factors of Employee Commitment.

Improved insight, on the other hand, can often leave organisations with the headache of, “So now we know what the problem is, how do we fix it?” Whilst the answer is obviously dependent on what the issues are, there are some key steps all organisations can take to increase the likelihood of employee engagement. As a result voluntary staff turnover will be driven down and organisational performance increased.

As the survey has highlighted, a key factor in early employee turnover is a disconnect between a new starter’s expectations of their new job – and organisation – and the reality once they start. Though, the survey showed that only 48% of organisations have candid conversations with candidates during the interview stage. Yet, just 30% arrange for potential hires to discuss the realities of work with existing employees.

Organisations need to be more open with potential employees to enable them to self-select more accurately and earlier, i.e. during the recruitment process. This is rather than six months into the role when the organisation has invested considerable time and money for little return.

In addition to more realistic positioning and talking to current employees, steps can include more realistic job previews or opportunities to job shadow.

The current economic environment makes increasing levels of staff engagement within the existing workforce all the more of an organisational imperative. Given the number of high profile companies going into receivership or making redundancies, employees will be concerned about their future.

To address this, management needs to be more visible, spend more time talking to people to help them make sense of what is happening. This will show they trust employees by giving them regular updates. People will talk anyway, so make sure they are informed as gossip is always more negative than the reality.

Similarly, don’t simply stop looking to develop people simply because of budget constraints, be creative. This could include more secondments to bring fresh ideas and approaches to a department, given this can’t presently be done through recruitment. More delegation or ‘stretch’ assignments to top talent, introduce internal mentoring and coaching and use internal resources to deliver training.

great{with}talent’s 2009 Employee Engagement and Retention Survey has highlighted that the changing times require a different focus from HR and with this comes the opportunity for HR to truly demonstrate its value to organisational performance.

Those who seize this opportunity will enable their organisations to come out of the recession quicker, stronger and ahead of the competition.

Contact great{with}talent and find out more about their TalentEngage employee engagement surveys.


(Originally published in Strategic HR Review. Written by Gordon Barker of great{with}talent. Main image from MindMerge)

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