No matter which way you slice it—whether you call it the great resignation, quiet quitting, or the white-collar recession—tens of thousands of jobs were lost at the end of 2022. The tech sector was particularly hit hard, with layoffs counting in the tens of thousands and leaving many searching for new jobs.
Ironically enough, many of these tech giants are hiring in droves simultaneously, showing that the work world is struggling to balance its talent scales. The underlying commonality amongst all of this worker reshuffling is that employers and employees can’t seem to see eye to eye when it comes to evaluating talent, and how much it is worth.
The fact is, however, turnover is expensive for companies, as studies show that every time a business replaces a salaried employee, on average it costs 6 to 9 months’ salary. This obviously varies by wage and role of employee, but reports of the average costs to replace an employee are $1,500 for hourly employees, 100% to 150% of an employee’s salary for technical positions, and up to 213% of an employee’s salary for C-suite positions.
Businesses are grasping at straws to understand how to maintain valuable talent, but it is clear that the current tactics for retention are not working. As organizations make major transformations across internal workforces, some truths are being revealed on what works, what doesn’t, and why. Let’s take a look at what companies should know if they want to glean an edge in this challenging era of workforce management.
Tenure Pays off
The value of human capital is something that the business world is placing on a higher shelf in recent years. Specifically defined, human capital is the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization. This “summation” of an employee can’t be quantified necessarily, as human capital is more of an intangible asset but an asset nonetheless.
The Harvard Business Review recently conducted a study of the business impact of general human capital in 23 organizations operating across of variety of industries, including financial services, healthcare, retail, manufacturing, distribution, hospitality, business services, and mining.
The study was based on the measurement of human capital in two broad categories. The first category was “generic human capital,” which included things like knowledge, skills, learning capacities, and behavioral patterns that people accumulate over their lifespan of employment. This form of human capital is transferable on the job market as it is usually the type of skill that might be listed on an employee’s resume.
“Firm-specific human capital”, on the other hand, is made up of the knowledge, skills, networks, expertise, and know-how gained through working internally at a company. This is the value gained from an employee building relationships with different partners, clients, and coworkers, and working with technology, proprietary processes, and intellectual capital in an organization. Firm-specific human capital is valuable to a single organization and is built over time in the years that an individual is employed.
The results were, no matter the sector, that managed tenure (both defined) can return greater-than-average value to the employer and that the tenure of leaders and managers also positively impacts the financial performance of organizations. Whether a company’s performance is gauged by financial, operational, or customer results, tenure had a sizable beneficial influence on both financial success and operational excellence.
How to Keep Quality
The reality is that the pandemic seriously shifted workers’ sense of worth as well as their expectations in the workplace, and it explains a lot of why this talent retention conundrum is occurring in 2023.
But according to the Microsoft Work Index, a study run across 31 countries and 31,000 people, over half of managers (54%) feel leadership at their company is out of touch with employee expectations. And 74% say they don’t have the influence or resources they need to make changes on behalf of their team.
This is where Almas Insight comes in, helping leaders get to know their employees in a way that can transform turnover into tenure. Through a digitally native approach, we help organizations build a database of their talent with a platform that provides a demonstration of how different human skills can fit into different roles. Generating effective people-centric analytics in real-time gives leaders across organizations the ability to understand their talent metrics.
Roadmapping workers into a display of human capabilities onto an easy-to-use dashboard provides opportunities for workforce development and management, but also more ways for employees to connect with managers, managers to connect to leaders, and so on and so forth up the flag pole. Ultimately, this data strengthens the relationship between the C-suite and HR—which might just be the key to closing the talent gap in 2023.