Today’s economic downturn, now called the Great Recession by the media, has contractors focusing on survival. Against this backdrop, many contractors have or are considering ways to reduce labor expense, including layoffs, wage freezes or cuts, and reduced or eliminated incentive payouts. The last thing most employers are concerned about right now is employee retention.  

However, employee retention, at least for key employees, is always important. Regardless of current sentiment, this recession will end, and when it does, contractors will rely on their key employees to power the recovery. Several recent surveys have focused on employer actions during the recession and the impact these actions have had on employee attitudes and behaviors. 

One such survey, conducted by Monster.com and Human Capital Institute (HCI) in May 2009, covered 700 companies and almost 5,000 active and passive job seekers. Employers have overestimated the percent to which employees are happy just having jobs and underestimated the likelihood of employees leaving to pursue other opportunities, either as employees, owners or independent contractors. Additionally, employers appear to underestimate the likelihood of employees joining a union. 

Another survey, the 2009/2010 U.S. Strategic Rewards Report conducted by Towers Watson in May 2009, highlights the pervasiveness of organizational changes, citing that 72% of the 235 organizations reporting faced restructures or layoffs since 2008. In tracking top-performing employee responses compared to 2008, the survey reflected a 30% decline in satisfaction with opportunities for advancement and culture, with a 14% decline in employees willing to stay with their present employer versus taking a comparable job elsewhere. This survey also reported that the number of high performers who would recommend their employers to others declined almost 20%, and that top performers are 22% less confident that senior management is doing the right things to return the company to growth.  

These survey results do not bode well for employers once the economy rebounds, because employers could find their key employees jumping ship unless they put retention measures in place now. As earlier stated, many companies have had to take drastic actions to remain competitive and survive the recession. What will set companies apart going forward depends upon how well they engage and support their workforces. To this end, it is never too late to take steps towards building employee engagement across the organization. Here are some suggestions on how to do this:   

• Increase overall communication

The most important step employers can take is to communicate with employees at all levels. Employees need to understand the economic conditions faced by the organization and why any layoffs, restructures, merit cuts, etc., are necessary. Two-way communication should be encouraged by soliciting feedback from employees and sharing the organization’s immediate goals and priorities. Open and honest communication demonstrates respect and value by the organization for its employees. 

• Increase communication around compensation

Employees want to know how companies make decisions regarding their pay. Frequently, contractors are reluctant to share how they determine merit adjustments and bonus amounts, which leaves employees guessing and feeling powerless to have an effect on their pay. Contractors who move to a pay-for performance system get more bang for their compensation buck by clearly communicating expected behaviors and performance levels and by tying merit and bonus payouts to that performance.   With pay freezes, cuts in bonuses, benefits and even pay reductions, it is important that contractors communicate the true value of each employee’s compensation. Workers know how much they earn in cash. What they typically do not know is the value of various non-cash programs, including benefits, 401(k) contributions, short- and long-term incentives, tuition reimbursement and other subsidies, as well as any training and development programs. The most effective method is to give employees a statement that reflects the true value of their total compensation package. Providing this information is especially important now as employers try to reduce benefits and other expenses. Many companies communicate this information on an annual basis, but communications that are more frequent help to keep the true value of compensation top-of-mind with employees. Giving generic total rewards statements to candidates when they are offered positions helps prospective employees compare offers and demonstrates the value of the company’s total rewards offerings. 

• Ensure that compensation is competitive

Participating in salary surveys and taking action to gain comparability will ensure that wages and bonuses are competitive to the market now as well as during recovery. Not only do surveys ensure that companies do not pay below the market (resulting in turnover and the inability to recruit high-performers), they help companies not to waste compensation dollars by overpaying the market.    

• Implement an effective performance management process

Performance management is more than an annual form; it is about open, honest, frequent and direct two-way communication between employees and their managers. It is about training managers to effectively coach, evaluate and lead employees. It is about having well-defined job descriptions and performance metrics specific to each position. Performance management goes a long way toward empowering employees and driving performance.   

• Recognize employee accomplishments

Acknowledge and celebrate success. This can be as simple as a note from the department head when an employee goes above and beyond expectations. Recognition programs do not have to be expensive.   

• Enable work/life balance

Take some simple and inexpensive steps to encourage a healthy work/life balance. It will go a long way at reducing employee stress. Examples include flexible schedules, telecommuting and alternate work weeks. 

• Provide training and development opportunities

Training and development programs are effective at increasing job satisfaction, employee motivation, working efficiencies and employee morale. Training can be offered in-house, off-site or via computer-based training. 

These are just a few of the steps that contractors can take improve employee retention. Whether a company adopts some or all of these is not important. What is important is that contractors are aware of and understand employee perceptions and beliefs, and have taken steps to ensure that workers feel valued and appreciated.

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