Why does employee attraction and retention matter? And what should we do?
In my previous article on people risks in the ASX 100, I stressed the point that people are one of the biggest risks that all companies need to consider. This means the attraction and retention of critical staff should be a key priority for all boards and executives.
Recap: Only 20% of the ASX 100 recognise that talent retention and attraction is a key business risk
In case you missed part 1, here’s the quick recap. Only 50% of ASX 100 companies declare any people related risks to investors in their annual report. This falls to just one in five companies declaring the importance of attracting and retaining top talent. You can see the quick summary on key people risks as declared by the ASX 100 below.
Today we’re looking at which industries (and companies) are best practice in understanding their talent attraction and retention risks
You can see the breakdown by sector above. What we found really interesting here is how the healthcare and science sector makes no mention of attraction and retention. It’s common knowledge we don’t have enough science and technology graduates, so why do none of the top health and science companies declare attraction and retention as a risk? It seems that everyone is proclaiming a STEM shortage (apart from the companies who actually work in the industry).
And what about best practice at a company level?
- ”People capability: Brambles is subject to the risk of not attracting, developing and retaining high-performing individuals. Furthermore, succession planning may not be managed effectively, so that talented individuals are able to be developed and promoted within the Group, rather than sourced externally. This could result in Brambles not having sufficient quality and quantity of people to meet its growth and business objectives.” – Brambles 2014 Annual Report
- “Myer supports the development of all our team through regular performance feedback, goal setting and career development sessions. Further skill and capability development opportunities are offered through on the job training, instructor-led training and online learning modules.” – Myer 2013 Annual Report
- “The attraction of high calibre employees, particularly for business critical roles is an ongoing challenge and despite a weakening resources sector, there continues to be a very competitive employment market for skilled professionals. Along with the focus on people-related productivity improvements, Monadelphous will continue to invest in the development and retention of its key talent to enable the Company to successfully achieve its vision and maintain its competitive advantage.” – Monadelphous 2013 Annual Report
- “Through the enhanced Performance and Talent process we have identified critical talent, including critical female talent, and have adopted a targeted retention approach for these employees. Our focus on retaining female employees has been supported in specific development programs including Career Conversations for Top Talent female managers, ATP, and provided industry networking opportunities such as Glass Elevator luncheons.” – Coca-Cola Amatil 2013 Annual Report
- “Retention – focus on retaining talent in APA –– Continue to offer flexible work arrangements through part time hours, job sharing, flexible start and finish times and purchase of additional annual leave. Over 90% of all flexible work arrangement requests have been approved during the Reporting Period. This includes a job share arrangement approved for two senior women in leadership roles. APA will continue to support such requests, where possible and appropriate.” – APA 2013 Annual report
Talent risk is only set to increase: So what should boards and executives do?
As I’ve written about previously, we’re going to have more positions than people very soon. Companies of all sizes need to be thinking about how to attract and retain top performers now, before the talent crunch hits. As our economy continues to grow faster than our population, we’ll have more jobs than we have people to fill them.
And as we touched on recently in our investigation into average employee value, companies have more invested in each individual employee than ever before. As that research showed, the future of work is likely to feature increasingly smaller companies with larger valuations. In this future, each individual employee is worth more to their organization than ever before. And as we all know, the smaller the organization, the larger the talent risk.
We know that the talent crunch is going to make quality employees harder to find and more expensive. For the majority of companies, there’s simply no excuse for not being upfront about the attraction and retention risk that they are facing. Here’s my two key recommendations for Australian boards and executives:
Recommendation 1: The risks around retention and attraction need to extend to more employees than executives and board members.
Most of the mentions of attraction and retention risks we found pertain to board members and executives. There’s no doubt that these people are key single point sensitivities. And they should be recognized as such in the annual report.
But there’s almost certainly other roles that are just as hard to recruit for (and are just as sensitive in terms of performance of the organization. There are sections in every annual report on the bonuses paid to board members as retention incentives. But there’s almost no mention of how to attract and retain top employees in any other part of the company. The recent underperformance of 2dayFM in Sydney following Kyle Sanderlands departure provides a very practical example of why key roles don’t always have to sit in the c-suite.
You need to have strategies in place to retain all your top performers regardless of what they do. Of course you want the best board members and executives, but talent risks and seniority aren’t always one and the same. Investors care about the risks to company performance, not the risks to the most senior staff. There’s a big difference here that is missed in just about all annual reports.
Recommendation 2: Organisations need a retention and attraction strategy (not just awareness)
A lot of annual reports mentioned the importance of attracting and retaining top talent, without explaining how. You can talk retention all you want, but it’s critical to have a strategy to back it up. In the same way, an annual report wouldn’t say the organization was planning to double business output without explaining how. Clear disclosure about the attraction and retention strategy is key information for investors in understanding how likely a business is to succeed in the near future.
In the examples above, Coke and APA do the best job of not just setting out the importance of talent to the business, but also clearly stating key strategies for retention and attraction. With Coca Cola, it’s about targeted networking and career conversations. At APA, it’s all about flexibility. It’s very easy to understand that they were written by a manager at the front line with actual experience in retaining staff. Whilst I love Brambles statement on the importance of their staff and talent – it’s very hard to understand what that actually means in terms of actions that managers are expected to take day-to-day.
Have you got another board level talent recommendation you’d like to see implemented across Australia’s largest companies?
If so, I’d love you to join me on Twitter @Cognology and let me know your thoughts. I’ll publish and retweet any great suggestions over the coming week.