By Helena Rosenstein, Senior Associate at Stevens & Bolton LLP
Staff turnover has recently become a major issue in many different industries and the investment industry is no exception. Research by Pitchbook has suggested that some 27% of venture capital and private equity firms lost a key hire or partner in 2021 and, of those, 40% went to a competitor.
Clearly this is a significant hinderance to business success, both because of the experience and knowledge that is lost and the costs and disruption involved in attracting, recruiting and training new staff.
As such, no one would disagree that staff retention is critical but how can this be achieved in an ever more competitive and aggressive recruitment market?
Review remuneration packages
Gallop research has shown that it can cost around one and a half to two times an employee’s annual salary to replace them and it is not always easy to find someone with the requisite skill set, much less to convince them to join you over other employers. Any sensible recruitment strategy should focus on keeping existing staff (assuming that the employer is happy with their performance, which is another issue entirely).
The classic response when valued employees resign is to make a counter-offer but this can give rise to awkward conversations about the value of the new package and what the company can offer to get them to stay. Occasionally, this turns into a bidding war between the existing and prospective employers. Not only can this have costly implications for the existing employer, but the outcome is rarely successful, whichever way it turns.
By the time the employee has secured a genuine alternate offer of employment, they are, metaphorically at least, already half-way out of the door. If they do decide to stay, the relationship may well be soured by the experience and colleagues are left questioning the employee’s loyalty and commitment. There can also be resulting friction within a team, if the wayward employee now receives a higher salary than their apparently more loyal colleagues.
It is far better to prevent this situation from arising and it won’t be a surprise to hear that the remuneration package will be important to attracting and maintaining a satisfied workforce, especially given the rapidly rising cost of living.
Employers would be wise to review benefits packages and incentive schemes and to benchmark salaries, to ensure that their offering remains competitive; even small changes to elements such as the payment date or payments in instalments can make a difference. It is important to do this proactively and regularly, before employees get to the point of looking elsewhere, as the damage is largely done at that point.
Modernise working practices
In the post-pandemic world, flexibility is key and the emphasis on technology has mushroomed. While some employers have embraced change by implementing remote or
hybrid working arrangements, others have been resistant, citing concerns about productivity and supervision which, for the most part, don’t stack up when considering the post pandemic evidence. And a flexible working policy isn’t enough; it needs to be actively championed, with senior leadership providing successful examples in practice.
Part-time workers need to be encouraged, not simply tolerated, with equal opportunities for career advancement. Employers also need to identify and address unsustainable working cultures which exact long working hours and high levels of stress. Other industries have been quick to consider the benefits of a ‘results’ model of working rather than a ‘time spent’ model, which is well worth considering if organisations want to remain first choice employers for skilled employees.
Think about the bigger picture
Even flexibility and high salaries are not sufficient in the post-pandemic world. Many employees have reassessed their priorities and recruitment and retention are increasingly about hearts and minds. Modern employees seek a bigger sense of purpose and value alignment with their employer and will leave organisations where they feel invisible and unappreciated; where they cannot relate to senior management; and where their values are not aligned with those of the business, especially in relation to environmental and social issues.
To attract and retain staff in the current climate, employers not only need to pay well and provide varied and variable patterns of working but they need to make effective inroads into creating a genuinely diverse and inclusive culture, rather than simply virtue signalling. The advantage to the employer is, of course, a greater pool of talent and different perspectives which can help drive the innovation that is needed to keep employees engaged and to thrive in the modern marketplace.
As the war for talent intensifies, the investment industry needs to take steps now to engage with its workforce and find out what motivates them and engenders their loyalty and commitment. It needs to encourage open communication, invest in the development of its staff, embrace new technology and foster a supportive, flexible, inclusive and diverse culture. This will be critical not only to winning the battle to keep existing talent but also in winning the war for the new.