It’s official – as the Bureau of Labor Statistics just reported, unemployment is at record lows across the economy. That’s the good news. The bad news – and it’s no news to employers – is that companies are finding it harder than ever before to fill vacant positions and keep the staff they have.
Nowhere is the market for skilled labor tighter than in the financial services sector, where official unemployment is now a tiny 1.7%. Economists usually say that a 4% unemployment rate (at a minimum; it may be higher) is really full employment, because that rate comprises ‘frictional unemployment’ – people who are genuinely ‘between jobs’ because they are switching, so they have a job to go to, and the ‘discouraged’, meaning those who are unemployed but not looking for work. So an ‘official’ unemployment rate of 1.7% is really negative unemployment of at least 2.3%.
At Valent Communications, our conversations with enterprises in the Financial Services sector – and several other sectors – suggest that unfilled positions are now typically running much higher than 2.3%. In many cases the rate is into double figures. Retention and recruiting efforts have become ineffective. Businesses are turning away customers because they don’t have enough staff to do the work. Catastrophic failure looms. There has never been a time when employee engagement has been more urgent – but what is employee engagement really, and how can it be done effectively?
What is Employee Engagement?
It is two closely related things:
- A positive state of mind in employees towards their work and their employer, such that they identify with the organization and its goals and so naturally try to do their work well (put in ‘discretionary effort’).
- The process and routines by which employers bring about that positive state of mind.
Is there such a thing as a perfectly engaging workplace or employer?
No. There is no such thing as the perfect job. If there were, we wouldn’t call it work.
If there’s no perfect job, what then?
It’s human nature that most employees, most of the time, want to do their work well – because that’s intrinsically more satisfying than doing it badly. Employees do not expect the perfect job. They will try hard, giving effort and showing initiative, so long as five conditions are met.
What are the five elements of employee engagement?
In decreasing order of immediacy, and increasing order of difficulty to provide, the hierarchy is:
- A positive work environment: beyond being provided physically safe, reasonable space to do their work etc., employees need to feel that their co-workers and particularly their immediate boss have an appropriate concern for their wellbeing.
- Adequate, not exceptional, compensation: employees must feel that they are receiving adequate pay and benefits in exchange for their work. What is perceived as “adequate” varies.
- Appreciation: employees must feel that they are achieving something in their work. That “something” is as varied as work itself, but employees need to know that they are contributing and that their contribution is valuable: they need regular feedback and appreciation for their efforts.
- Development opportunities: employees should feel that they have scope to grow in their careers and develop new skills. A lack of opportunity for development is a key cause of losing high-performing talent.
- A coherent, positive organization: employees want confidence in the company’s leadership and direction, and to understand how their own work contributes to the whole. Ideally, they want to believe that the organization’s purpose is worthwhile. Once they do, they become effective brand ambassadors for the company not just in its service of customers, but also in its capacity as an employer.
If it’s that easy, what goes wrong?
Most employers understand the importance of the five elements, but instituting them all is easier said than done. The higher the number of an element in the hierarchy listed above, the more difficult it is to achieve in the everyday running of a business. The higher-numbered elements, 3, 4 and 5 need a proactive, dedicated effort to become reality.
Why is Employee Engagement suddenly such a big deal?
Historically, most employers did a reasonable job of elements 1 and 2 and for many, element 3 took care of itself. That was enough. Then, in the last two years, everything changed.
First, the U.S. economy, recovering from the 2008 financial crisis, effectively hit full employment in the spring of 2016. In some sectors it was slightly earlier, in some later.
Second, scores of online employment sites, from Monster to Indeed to ZipRecruiter and beyond, have made it much easier for employers to poach each others’ employees. We now operate in a LinkedIn environment. In economics terms, labor markets have become more transparent, efficient and liquid.
Consequently, retention and recruitment have become a major problem – some would say, the major problem facing US businesses today. Understaffing has eroded operational effectiveness – and at higher levels, led to catastrophic failure. Employers realize, though, that compensating above market, or offering cushier benefits, is ineffective in all but the very short term. It just raises labor costs and does little to encourage retention.
Enter employee engagement – but in the modern economy, the engagement bar has risen. Elements 1, 2 and some of 3 are no longer enough to compete in today’s job markets.
What can be done?
When Valent works with our employee engagement clients, our work follows this sequence:
- We cross-check the engagement issues identified by the leadership with sensitive, discreet, permission-based ‘sense-making’ in the organization.
- Sometimes, we discover a ‘substantive issue’. If it is related to pay or benefits, that’s usually straightforward to measure and correct. Also, sometimes, basic training in people management (‘being a better boss’) works wonders, and we can provide it quickly and at low cost.
- Most often though, what we discover is communication vacuums. So we help leadership craft a series of messages, topics and stories, often including: strategic direction of the organization; how the parts fit the whole; the organization’s mission, values and ways of working; issues in the organization and in the environment in which the organization operates, and changes both expected and underway, so that employees feel included.
- We then create the communications architecture, comprising both digital and up-close-and-personal methods, to communicate on those topics. We are usually able to build on elements that already exist in the organization’s management, human resources and communications structures.
- Then we’re able to facilitate an enterprise-wide conversation that engages employees by connecting them and their work directly with their organization’s goals and direction. The organization begins communicating with itself much more effectively, on the important issues that bind it together.
The end result – the strong, coherent employer brand
Companies like our clients, who realize that engagement is not about pay and perks, but about involving their employees in the organization’s strategy, opportunities and challenges, are much more likely to succeed. By tackling workplace engagement with collaborative, continuing communication, our clients are able to create something special: a strong, coherent employer brand, one that makes clear to employees the ‘why’ of their work, what their employer stands for, why its culture is special, and how their own work contributes to the whole. Engaged that way, employees stick with their companies and attract recruits.