Economic downturn drives change of focus for HR, claims new survey

The Employee Engagement and Retention Survey 2009 - by TalentDrain, an employee engagement specialist - examines the impact of the fragile UK economy on HR strategies, HR budgets and employee turnover. It also highlights why 'new starters' join and leave organisations and it reveals the factors that HR teams overrate and underrate in relation to employee attraction and attrition.

Developed from a survey of HR practitioners in 336 organisations, the survey finds that almost a third of the respondents (30%) have changed their HR strategy, switching their focus from recruitment (56% are giving this a lower priority) to areas which more directly impact on organisational performance. 72% of organisations are putting greater emphasis on performance management, 67% on organisational communication and 54% on employee engagement and retention. This change of focus is often linked with the added challenge of a cut in the HR budget. 38% of organisations have reduced their HR budget by more than 5% and 13% have made cuts of over 25%.

The research authors - Ron Eldridge and Anthony Miles - claim that the key challenge for HR teams now is to enable organisational performance.

"HR teams are having to rethink their priorities and many are trying to redirect their resources away from recruitment," said the authors. "The new strategic focus, even for organisations that have not cut their HR budget, seems to be around identifying, engaging and retaining those employees who are high performers, whilst more proactively managing any areas of underperformance."

According to the survey, 27% of organisations are experiencing less employee turnover. Annual staff turnover rates, however, remain high. 24% of organisations have a turnover rate in excess of 20%. Three quarters of organisations claim that staff turnover has a negative impact on their effectiveness. Despite the economic downturn, 56% of organisations say they would like to reduce their rate of voluntary turnover.

"The fact that figures for voluntary staff turnover are coming down in some organisations suggests that employees are becoming nervous about quitting their jobs in the current economic climate," said the authors. "Without natural attrition, there is a danger that motivation and productivity can plummet because disengaged people don't actually want to be there but they have nowhere else to go."

7% of organisations have seen an increase in the turnover of their top talent.

"Even in a downturn, high performers are in demand," said the authors. "Despite organisations reporting a decrease in general turnover, talent groups are maintaining more of their normal rate of movement. The increased emphasis on performance management shows that retaining talent is even more critical in the current climate."

The survey highlights that a growing number of organisations are now allocating a budget and articulating a specific strategy for employee retention (32% this year, compared with 20% in 2008). 95% claim to have implemented retention initiatives over the past year, including improving the induction process; enhancing employee communication and involvement; increasing learning & development opportunities and improving the skills of line managers.

The survey underlines the problem of staff turnover for anyone who is still recruiting. It finds that 12% of organisations lose over 15% of new recruits in the first six months.

The authors argue that resolving this issue of early attrition will be a key HR priority<