Staff turnover has recently become a major problem in many different industries and the investment industry is no exception. Research from Pitchbook suggested that around 27% of venture capital and private equity firms lost a key employee or partner in 2021 and, of these, 40% went to a competitor.
This is clearly a significant barrier to business success, both in terms of lost experience and knowledge and the cost and disruption of attracting, recruiting and training new employees.
As such, no one would dispute that staff retention is essential, but how do you achieve this in an increasingly competitive and aggressive recruitment market?
Review compensation packages
Gallop’s research has shown that it can cost around one-and-a-half to two times an employee’s annual salary to replace them and that it’s not always easy to find someone with the required skills, again. less convincing them to join you rather than other employers. Any sensible recruitment strategy should focus on retaining existing staff (assuming the employer is happy with their performance, which is another matter altogether).
The classic response when valued employees quit is to make a counter offer, but this can lead to awkward conversations about the value of the new package and what the company can offer to entice them to stay. Sometimes this turns into a bidding war between existing and potential employers. Not only can this have costly implications for the existing employer, but the outcome is rarely successful no matter which direction it takes.
By the time the employee has secured a genuine alternative job offer, they are, metaphorically at least, already halfway to the door. If they decide to stay, the relationship may be marred by the experience, and co-workers find themselves questioning the employee’s loyalty and commitment. There can also be friction within a team, if the wayward employee now receives a higher salary than his seemingly more loyal colleagues.
It is far better to prevent this from happening and it will come as no surprise to learn that the salary package will be important in attracting and retaining a satisfied workforce, especially given the rapid increase in Cost of life.
Employers would be wise to review benefits and incentive plans and compare salaries, to ensure their offer remains competitive; even small changes to things like payment date or installment payments can make a difference. It’s important to do this proactively and on a regular basis, before employees look elsewhere, because most of the damage is done then.
Modernize work practices
In the post-pandemic world, flexibility is key and the focus on technology has multiplied. While some employers have embraced the change by implementing remote or hybrid work arrangements, others have resisted, citing concerns about productivity and supervision that for the most part do not add up when one considers post-pandemic evidence. And a flexible working policy is not enough; it needs to be actively championed, with senior leaders providing examples of success in practice.
Part-time workers should be encouraged, not simply tolerated, with equal opportunities for career advancement. Employers must also identify and address unsustainable work cultures that require long working hours and high levels of stress. Other industries have been quick to consider the benefits of a “results” based work model rather than a “time spent” based model, which is worth considering if organizations want to remain first-choice employers for qualified employees.
Think about the big picture
Even flexibility and high salaries are not enough in the post-pandemic world. Many employees have reassessed their priorities and recruitment and retention is increasingly a matter of heart and mind. Modern employees seek a greater sense of purpose and values alignment with their employer and will leave organizations where they feel invisible and unappreciated; when they cannot identify with senior management; and where their values are not aligned with those of the company, particularly with regard to environmental and social issues.
To attract and retain staff in the current climate, employers must not only pay well and offer diverse and variable work models, but they must also make effective progress in creating a truly diverse and inclusive culture, rather than to simply point out virtue. The benefit to the employer is, of course, a greater pool of talent and different perspectives that can help drive the innovation needed to keep employees engaged and thrive in the modern marketplace.
As the war for talent escalates, the investment industry must take steps now to engage with its workforce and find out what motivates it and engenders loyalty and engagement. It must encourage open communication, invest in the development of its staff, embrace new technologies and foster a supportive, flexible, inclusive and diverse culture. This will be essential not only to win the battle to retain existing talent, but also to win the war for the new.
This article was first published in IFA Magazine and accessible here.