Sunday, June 25, 2006

Employee Churn is here to stay

"Today employees are always on the move. Constant churn in the labor market creates a new employee-employer relationships. For top employees this churn generates opportunity and increased pay scales while for employers are able to hire the talent they need"

Today’s knowledge workers are constantly on the move, especially those with advanced degrees. Employees who already have a good job are always on lookout for something better. Money alone is not enough to attract and retain talented employees. This is forcing employers to compete for skilled workers and to improve working conditions to retain key employees.

Companies have introduced flex time, relaxed the dress code, work-from-home and improved amenities at the work place - Gyms, day care facilities, work-life balance, recreation facilities to make the work environment more attractive in order to retain good workers."

Globalization and ease of movement of labor between countries has created a "loyal but mobile" workforce. Companies are willing to allow employees to change their work locations - especially for well-educated or skilled workers in high-demand fields such as technology, software and health care.

Employee turnover is expensive and cuts into productivity, giving employers an incentive to retain workers. Creating a workplace that attracts and retains a higher percentage of key employees gives a company "unmatched advantages" in the market. The current shortage of highly skilled knowledge workers has changed the balance of power from employers to employees. In many cases, employees are able to set the terms of employment.

The stigma of "job hopping," or moving quickly from one job to another, has diminished as competition for top employees intensifies. Most companies show no reluctance to hire people who have worked for just few months at other firms. A recent study showed that people with engineering degree from IIT have worked for an average of six months at a single firm. And yet companies are willing to hire these talented engineers. My company recently hired an engineer from IIT who had worked for only four months at another firm. We also hired an employee with MBA from IIM who worked for six months in the previous firm.

This rapid job hopping has redefined a "truly loyal" employees as those who are committed to the company and plan to stay for at least two years. A survey conducted by a Mckinsey found that more than 55% of employees say that their company treats employees well.

Employees today are more mobile. The younger generation are eager to climb rapidly in their career. As a result they want to be sure they have a job, and in the other, they're always looking for a better opportunity. This is one of the reasons why the open labor market is so extremely dynamic and relatively efficient.

Today employees are always on the move. The strong economy gives employers the opportunity to move on to a better job. Combine this with coveted technical skills, and the smart employee will always be in demand, especially at leading companies, such as Intel, Microsoft, Biocon, etc. But more than that, prized employees will be able to pick and choose among competing offers to find the company that's the right fit for them.

Closing thoughts

It's almost "push-me, pull-you" relationship between employee-employer. The definition of employee loyalty towards the employer is changing towards employee’s loyalty to their career and employer’s loyalty towards their bottom line. This new dynamic employee-employer relationship is the accepted new middle ground - which acknowledges high employee churn in return the employer gets the much needed talent.

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