The Great Resignation (Image Source: FlexJobs.com)
Europe Fintech

Nick Henley: The Great Resignation? Time for The Great Retention

Larger companies are experiencing a loss of their top talent. This presents a great opportunity for Scaleups. But Scaleups also need to adapt in one crucial way…

global talent development professional Nick Henley
Nick Henley

In today’s Editorial, Global Talent Professional Nick Henley explains why larger companies are failing to keep their top talent and what Fintechs and smaller companies can do to take advantage of this trend, while not falling foul of it themselves. Nick is currently writing a book, Leading Engagement, due for publication in December 2022.

ANOTHER YEAR, ANOTHER WORKPLACE TREND to set the hares running. This year, ladies and gentlemen, we present you with The Great Resignation.

What is it? Apparently, employees will be resigning in droves (or mentally checking out of their work while trying to do so) before running for the hills.

Whether or not mass resignations will transpire, many companies have on the whole seen an uptick in voluntary attrition rates among their employees. How much of this is down to a delayed reaction to Covid and how much due to a structural shift in employee attitudes is still unclear.

Still, it has been enough to make companies think hard (again!) about what they are offering their employees in everything from career development, wellbeing, remote working, pay and culture. The Great Resignation has led to some companies embarking on The Great Listening. Another roll of the drums, please.

Fast-growing tech companies in the UK, especially in boom areas like fintech, have good cause to share these concerns, even if they are not experiencing the same level of bloodletting felt by their larger peers. But for many scaleups and SMEs, the Great Resignation could be a blessing in disguise. Bear with me…

Why do employees leave, anyway?

To understand why this might be so, first we need to get a handle on why employees leave companies in the first place. Research into the causes of employee attrition has found that the adage – that people join companies and leave their managers – is mostly true, with managers being estimated by Gallup to represent 70 per cent of the variance of Employee Engagement (which is basically a barometer of employee’s willingness to stay at a company), or my own estimates of an influence nearer 80 per cent via exit interview analysis within Tech companies.

But this stat can be deceptive. It’s not that employees leave their managers so much as their managers’ behaviours. When I analyse exit engagement surveys, it’s clear that managers might be really good in four or five of the Engagement factors (things like bringing role clarity, giving recognition and praise and so on) but if they fail badly on just one or two factors then their Direct Report may well up sticks.

This is well-supported among Scaleups, too. In its annual survey of CEOs in 2019, The Scaleup Institute found that the most desired skills in companies were not tech or programming-related (these did not even make it into the top 3). Instead, the lack of social skills and leadership skills were seen as being the two biggest gaps as well as the greatest barriers to achieving their growth plans (including categories such as access to finance and customers). So the people side might well be the biggest priority for scaleups as they grow.

This might be surprising, but makes sense when we consider research in the talent space, where a recent study by MIT/Sloan Management Review found that toxic company culture was by a long way the number one reason employees were quitting their employers. What are the main drivers of a crappy corporate culture? You guessed it – poor manager and leadership skills.

A company’s culture, at the end of the day, is a sum of every employee’s behaviour. But what can companies do to facilitate the kind of behaviours that create a vibrant culture and help it achieve its growth plans?

First, don’t do this

Typically, when scaleups reach a certain number of employees, they start to implement management systems. What kind of systems do they go for? Looking at their larger peers, they may be tempted to opt for same or similar Performance Management and Talent Management systems big companies use, safe in the knowledge that this must be the best thing.

But this is a mistake, and a costly one too.

Studies into the effectiveness of Performance Management within companies have for years found they are more than a hindrance than a help, with it being seen as the cause of a negative spiral of cynicism and toxicity. Recent meta-analyses of huge datasets demonstrate that traditional PM and TM systems, far from helping companies create value and deliver the cultures they want actually do the opposite. A 2019 paper by Elaine Pulakos is especially worth a read. Her conclusion is damning. ‘Formal Performance Management processes,’ she found, ‘disengage employees, cost millions, and have no impact on performance’. This is all the more remarkable given that Ms Pulakos is a highly-regarded expert in the field with a number of books on the subject to her name. If anyone would make a case for these systems, you would think, it would be her. So Scaleups need to be clear on what is helpful and what is harmful before leaping headlong into building their management systems.

Here’s the opportunity….

What should go-fast Scaleups do to drive The Great Retention, then? Simple: build their entire people growth plan around Engagement and nothing else. When operationalised, Engagement is the only system and methodology that has been found to reliably correlate with lower attrition, higher levels of productivity and more vibrant cultures as well as – wait for it – enhanced business outputs supporting a business’s growth goals. It’s also lean and human – quids in all round. The financial benefits are also scarily large. Massive studies by the LSE and Stanford speak of ‘Management as a technology’ which when done well adds value of between 30 and 50 per cent of an entire company’s output – more than a company’s entire investment into R&D can. When rated objectively, the study found that most companies’ management doesn’t even make three out of five on the scale. So plenty of gains to be had, too.

As top talent checks out of larger companies, scaleups who seize the opportunity will find themselves in a unique position where they can benefit from the trap larger businesses are currently stuck in (it’s very difficult for them to remove these clunky systems for a number of reasons) as well as fulfilling their ambitious vision and growth plans.

For those who seize this opportunity then, perhaps it’s time to speak less about the Great Resignation, and say hello to the Great Retention!

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