Global Attraction and Retention Survey

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1 2008 Edition Global Attraction and Retention Survey Essential Data for Understanding One of the Biggest HR Challenges this Millenium

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3 With an acute talent shortage across the globe, companies are striving to retain their best employees while trying to find and recruit the best available talent in the market. This sharp focus on retention and attraction is common to all companies, irrespective of their size or scope of operation. Some of the reasons for this intense scarcity of talent are: Ageing population in many countries Companies desire to increase their offerings and services The concept of a global village increasing demand for talent The objective of companies to have their presence felt, either locally or internationally or both Increasing pace of development and its impact on society and individuals Higher cost of living in developed and progressive countries A previous instance of such a severe talent crunch can be traced back to the late 1990s, when employers spent huge amounts on rewards in the struggle to win the war for talent. Companies took to a bidding war to attract and retain top performers, by offering generous pay cheques, special bonuses and other highpriced inducements to lure people away from competitors. But, in today s hyper-competitive world, such an approach will not work as well. In the wake of an economic slowdown, HR faces a major challenge as companies are forced to offer huge pay packages to attract and retain the desired talent. The growing diversity of employees expectation has compelled companies to develop clear, multifaceted strategies to attract and retain key talent. Increasingly, companies have begun to turn to more creative methods to attract the talent they need while retaining the talent they have. Mercer recently conducted a survey of 106 companies across the globe to find out the latest processes, methods, tools and practices companies currently use in their quest to attract and retain the right workforce. Survey highlights Two-thirds of the companies surveyed indicated no change in turnover over the previous year for senior management-level employees, while 19% reported an increase in turnover in this employee group compared to the previous year. For management-level employees, only 61% reported no change in turnover, while 24% (5% more than senior management) reported an increase in turnover compared to the previous year. At the professional level, 43% of survey participants reported an increased turnover rate compared to the previous year, while 42% reported no change in turnover. Thirty-three percent of respondents stated that the turnover rate at the staff level increased compared to the previous year, while another 50% reported no change in turnover. The sales and accounting/finance departments tied for first, with 27% of respondents agreeing that turnover rates are very high in these two departments, followed by turnover rates from the engineering department (15%). For sales, apart from 27% of participants who ranked it as the department with the highest turnover, 16% of participants ranked it second and 12% ranked it third Mercer LLC. 3 Global Attraction and Retention Survey

4 Time required for recruiting The time required to fill a position increases with the employee s level. Fifty-one percent of respondents indicated that they need more than three months to fill a senior management position. Most companies need one to three months to fill a management and professional-level position. Forty-one percent of participants indicated that they could fill a staff position in days, while 32% reported that they need 1 3 months to fill a staff position. The time required to fill a position also indicates the shortage of skills in the market. In addition, an interesting observation is the relationship between the reported cost versus the true cost of replacing staff. Research and experience show that the more senior the role, the higher the replacement cost. Often the true cost of turnover is masked by a lack of accurately calculating the elements that contribute to the cost of turnover. These elements include head-hunters or temporary agency fees, recruiter s time, business managers interviewing time, loss of sales or revenue while the position remains unfilled, employee referral bonuses, advertising costs and relocation costs. Attraction practices Recruitment practices According to survey results, a lack of qualified candidates is the single largest barrier to attracting employees. Competing with high-profile companies, uncompetitive salaries and lack of career opportunities were also listed among the top barriers. In terms of practices, a successful employee referral programme was indicated as the most effective method for recruiting staff-level employees, while at higher levels search firms play an important role in recruiting employees. The five most effective recruitment methods identified are: Search firms Employee referrals Internet advertising Newspaper advertising Professional associations and networking Compensation and benefits practices Generally (and not surprisingly), our results indicate that competitive pay is still a primary factor that attracts employees. Survey data shows that companies try to benchmark their employees salaries against the market median to appear competitive in the market. Economic recession and slow-growing markets have forced companies to find ways to reduce cost, highlighting the importance of having well-defined performance management and measurement systems in place to better tie in performance. In fact, the survey indicates that companies are clearly factoring in pay for performance as a component to moderate cash compensation. Competency-based pay systems are also gaining popularity, whereby competencies are referenced in salary increment decisions together with market competitiveness analyses. Data suggests that special bonus schemes are commonly given at the management and professional levels and are not so attractive at the staff level Mercer LLC. 4 Global Attraction and Retention Survey

5 In addition, supplementary benefits can serve as a key differentiator. Currently, companies that provide supplementary benefits such as health insurance, work culture and flexible work practices believe that they are highly effective in retaining key employees. Retention practices Employee retention is affected by many factors such as compensation, benefits, career development, work culture/environment that build on employee engagement. Retention factors examined include compensation practices, benefit tools, career development factors (such as training and development) and supporting mechanisms. Competitive pay and pay growth understandably have a great impact when it comes to retaining employees. Pay for performance and level of pay as a retention factor have some impact in retaining managerial- and professional-level employees. Conclusion Our survey results reflect the volatility of the global labour market. Many employees continue to take advantage of the sellers market to achieve their career aspirations and maximise financial returns through frequent job shifts. Turnover rates across all employee levels have increased over the previous year, indicating the need for effective attraction and retention plans. Competition for highly sought-after technical and leadership skills continues unabated. Many companies continue to experiment with more creative methods to attract the talent they need while retaining the talent they have Mercer LLC. 5 Global Attraction and Retention Survey

6 Argentina Australia Austria Belgium Brazil Canada Chile China Colombia Czech Republic Denmark Finland France Germany Hong Kong Hungary India Indonesia Ireland Italy Japan Malaysia Mexico Netherlands New Zealand Norway Philippines Poland Portugal Singapore South Korea Spain Sweden Switzerland Taiwan Thailand Turkey United Arab Emirates United Kingdom United States Venezuela For further information, please contact your local Mercer office or visit our web site at: Mercer LLC. All rights reserved. 08-GARS-PU