The market is firmly in employee’s favor, and sponsors have to now consider both how to entice new employees to join their organization, as well as fight to retain current workers.
First, a lesson in what not to do. One of the most striking pandemic-related examples of shockingly poor employee retention was the mass exodus of employees from the Bon Appétit Test Kitchen in mid-2020. When stay at home orders hit, Bon Appétit’s plan was to rely on their popular Test Kitchen YouTube series to finance them through the pandemic utilizing content filmed in the chefs’ homes. However, when allegations of racial discrimination and pay disparities by several employees of color, including Test Kitchen chefs, rather than quickly conducting an internal investigation and correcting the misstep, Bon Appétit and its parent company Condé Nast Entertainment spent weeks publicly denying the allegations. Meanwhile the chefs collectively decided to boycott filming and Bon Appetit was hemorrhaging money, yet they still took over a month to negotiate (and ultimately, lowball) their experienced and popular chefs of color, all of whom, along with the majority of their white colleagues, left the Test Kitchen. Condé Nast’s cash cow had been slaughtered by their own hand.
While sponsors are hopefully unlikely to encounter such shocking, inappropriate, and poorly-handled missteps, there are innumerable many lessons to learn from these events, even over a year later. First, the obvious: be fair, don’t discriminate. One would hope that this goes without saying, but equal opportunity without discrimination or harassment regardless of an individual’s race, sex, class, dis/ability, age, religion, and other characteristics should be a given both because it is what is right, and also because many of these axes of identity are protected classes. Additionally, increased salary transparency is one method to ensure equity and establish trust. Not only should HR departments ensure that their organizations are doing the bare minimum, but sponsors should examine the opportunities for growth offered to employees.
Secondly, Covid-19 was and is a dangerous, deadly virus, and while many have been out of work, the economy frankly has not recovered from having so many workers removed from the workforce due to Covid. Unsurprisingly, that means many companies and organizations are struggling to hire, and many employees are using this opportunity to leave their industries or find better benefits, hours, pay, or roles elsewhere. For example, this applies heavily to retail and food service workers, as many employees cite poor working conditions, low wages, and harassment as reasons they are eager to leave the industry for other opportunities. Despite having (we hope!) better working conditions, office work environments are also competing for the same, smaller pool of workers. The market is firmly in employee’s favor, and sponsors must more seriously consider both how to entice new employees to join their organization, as well as how to retain current workers.
Even before the pandemic, studies showed that internal promotions, especially for younger workers like Millennials, simply aren’t as reliable as once they were. In the modern era, it’s more profitable and easier to climb the corporate ladder by changing companies rather than spending a decade or more with one organization. While managers may bemoan those pesky Millennials and their lack of company loyalty, it’s important to remember that these habits didn’t manifest out of thin air, they were developed in response to wage stagnation, and lack of upward internal mobility. Now, however, in light of the widespread worker shortage caused by the Coronavirus pandemic, companies should be particularly concerned about not only recruiting new staff, but keeping the workers they already have.
Many of the qualities that make employees appreciate their jobs and want to stay are outside of sponsors’ hands; feeling appreciated, like they’re being listened to and respected, and creating clear paths upward full of opportunities for growth are better managed by, well, managers. However, ensuring that employees have the chance to take advantage of continuing-education opportunities and building a supportive company culture are responsibilities edging closer into sponsor territory.
When it comes to hiring vs. retention, it’s significantly more detrimental to a company to lose a good worker than to be unable to find a new recruit. From a financial perspective, it can take 50%-200% of an individual’s salary to retrain a replacement (if and when they are found, of course), and the loss of subject matter expertise is even more damaging and will continue to cost the business over time. Ensuring employees are supported, well-compensated, and have access to personal development tools will go a long way in creating a company culture that is inclusive and appreciative. And developing programs and protocol for employees interested in making lateral or vertical moves can ensure there is structural consistency within an organization and provide a framework for managers and individual employees off of which they can build individualized career path plans.
Many employers including Starbucks, Walmart, Target, and Amazon now offer tuition assistance programs to employees, with Amazon going so far as to cover 100% of tuition, books, and fees. Whirlpool took this a step further to included not only undergraduate degrees, but executive MBA programs for employees who had been with the company for at least a year.[1] Such programs not only provide opportunity for employees, but also benefit the sponsor, as they help to create and train the appropriately-trained employees they need to hire. However, be careful—up to $5,250 of educational assistance for graduate and undergraduate degrees can be excluded from taxable income per annum, but tuition reimbursement still can be taxable in some situations.
Lastly, sponsors leaning toward more rigid return-to-work policies should take a minute to reconsider; as the majority of the workforce became accustomed to the convenience of working from home, most are loathe to give that up and return to the office five days a week…to the point that it’s become a dealbreaker. Hybrid schedules are becoming popular, and as long as employees are performing, we’ve proven over the last 19 months that in most cases there’s no desperate need to shove everyone into a cubicle for 40 hours every week. However, another word of warning: hybrid and remote work opportunities should also have mechanisms built in to ensure that remote and hybrid employees are included in major decisions, not overlooked for promotions or significant projects, and most of all, are not expected to work longer hours than their in-person colleagues; otherwise sponsors will find themselves back at square one, having failed to retain motivated but frustrated employees, and desperately attempting to fill their role.
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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