Retention, Internal Hiring, and Your Talent Acquisition Strategy

Retention, Internal Hiring, and Your Talent Acquisition Strategy

Emily Smykal

Hiring quality employees isn’t the end of the line for many recruiters–retaining that top talent is also important. The success of your business may even depend on high retention rates when you consider the costs of employee turnover. Failure to retain employees increases your expenses, has a negative effect on employee morale and leads to lower productivity as vacancies arise.

Encouraging employees to stay through a variety of methods benefits your staff, your customers, and your business as a whole. So what are talent acquisition leaders doing to improve retention? Data from LinkedIn Talent Solutions’ Global Recruiting Trends 2016 report suggests retention is a top issue for many HR leaders. Their survey included nearly 4,000 talent acquisition decision-makers in corporate HR.

When asked about the most important priorities for their organizations, retention was high on the list.

But a concerningly low number of those respondents listed internal hiring as an equally important issue. Internal hiring is a way to develop and promote your existing employees. It demonstrates your commitment to your staff’s careers, encourages loyalty, and can boost productivity. So why aren’t more talent acquisition leaders looking to internal hiring to boost retention? In this post we’ll discuss the relationship between the retention and internal mobility of your employees.

What Impacts Retention?

Why are some businesses better at retaining employees than others? Working conditions, salaries and benefits, advancement opportunities, work/life balance, better job offers–there are a number of factors that can compel your employees to leave. According to the BLS, there were 2.7 million voluntary separations (or quits) across the U.S. in September 2015, a figure that has been relatively consistent in the last 13 months.

PayScale gathered employee retention data from Fortune 500 companies and found lengths of stay ranging from nine and a half months (lowest) to 20 years (highest). The highest turnover mostly came from retail and IT businesses, notably Amazon (one year), Google (1.1 years) and Ross Stores (1.2 years). The data isn’t surprising, as turnover rates easily reach 30-40% in customer-facing industries such as retail and hospitality.

So what leads to higher retention rates? Traditional incentives and rewards such as salaries and bonuses, extensive healthcare plans, and fancy offices are often assumed to be the key to keeping quality employees. But these tools create transactional relationships rather than commitments to the company. And some research suggests they reduce trust, lead to self-interest, and even lower commitment to the company.

Instead, the less tangible benefits from a good job often lead to higher retention rates. Employees who feel a sense of purpose or connection to the business, who are given responsibilities, and are treated fairly by managers and peers all demonstrate greater commitments to their role. We have already seen evidence of these preferences in our discussions of Millennial workers. So to attract candidates and improve retention, it would make sense to develop the commitment and responsibilities of your workers.

Aligning Retention and Internal Mobility

The LinkedIn Global Recruiting Trends 2016 report asked respondents, “Over the next 12 months, which would you consider to be the most important priorities for your organization?” One third listed employee retention, but just 12% said internal hiring and transfers. This attitude is unfortunate when you review the numerous studies demonstrating the greater success of internal promotions over external hires.

The LinkedIn report also asked, “To what extent does your company recruit the internal candidates?” Nearly half–47%–said they did so to some extent and 29% said very much so. Another 22% admitted they did not recruit internally very much or at all. But just how effective are the internal mobility programs of the companies that say they do promote from within?

And an additional study from LinkedIn Talent Solutions paints a rather negative picture of these efforts. In 2014 they found that, among workers who recently changed jobs across 26 countries, their number one reason for leaving was greater opportunities for advancement elsewhere. Among HR leaders in the U.S., 69% felt that their internal hiring program was clearly communicated to their staff. Yet just 25% of employees who were surveyed during exit interviews said they had heard of these programs.

Clearly there is a disparity between how well talent acquisition leaders think they’re leveraging existing employees as a talent pipeline, and just how many employees think they have an opportunity to advance with their current employer. This isn’t surprising when you see the responses to the next question in the Global Recruiting Trends 2016 report, “Which of the following statements best describes your company’s internal hiring / internal transfer efforts?” One third described them as ad-hoc, and 12% had no program at all. Only 24% of respondents considered their advancement programs as well-defined.

How Should Recruiters Approach Retention?

Your existing employees should be seen as part of the talent pipeline–workers who may be developing new skills as we speak, who could fill future vacancies. Demonstrating a commitment to their growth and development will keep them engaged, boost their job performance and provide you with qualified workers for roles higher up in your organization. Promoting from within allows recruiters to spend time sourcing entry-level workers, which tend to be easier to find.

Talent acquisition leaders who are serious about improving their retention rates should focus on two things: understanding (and fixing) the reasons why employees leave, and fostering internal mobility. The loss of a low performing worker is not the same as the loss of a high performing one. Bad hires can lead to poor performance and turnover, and identifying the steps that led to the bad hire can help improve retention by focusing on qualified candidates in the first place.

But internal hiring is also important, as we know that formal development programs for your employees help retain your top talent and encourage other qualified candidates to work for you. Building and advertising your culture of advancement should be a key part of your employer branding techniques, and your talent acquisition strategy overall. LinkedIn estimates that total annual voluntary turnover in the U.S. was 10.3% in 2014, and the average annual cost of this lack of retention for companies with 10,000+ employees as $75 million.

But the real cost to recruiters is the missed opportunity to promote an employee who is already a part of your company and who would probably relish the opportunity to take on new challenges.

Candidates are consumers, and providing them with a consumer-quality experience will go a long way when few others are. Read our new eBook, “The Talent Acquisition Leader’s Guide to the New Candidate Journey” to learn more about this topic and what to do about it.

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