Focusing on Workforce Engagement Won’t Retain Top Talent

To keep your best people during The Great Resignation, shift focus from engagement drivers to effective employee retention strategies.

Over the past two decades, a vast body of research consistently shows that the more engaged the workforce, the more likely the organization is to enjoy business and operational success. However, that tide is turning. Gallagher defines workforce engagement as a pronounced state of enthusiasm characterized by effort, pride and passion, which fosters a mutually committed relationship between employees and organizations. Since early 2020, a steady mix of medical, economic, social and political events has reshaped workforce structures and attitudes. During this period, employee engagement has dampened within the U.S. workforce.

Across the set of questions used to quantify engagement in Gallagher's survey of client organizations, we see the greatest erosion by far in the question focused on "not seriously considering leaving a current employer to pursue other opportunities." Drops in positive responses to this statement indicate that there has been — and continues to be — a buildup of attrition risk and turnover within the labor force.

As organizations began to regain strength post-pandemic, competition for talent reignited almost exponentially. As a result, we see spiking curiosity among people to explore career opportunities within a remarkably fertile job market.

Focusing on Workforce Engagement Won’t Retain Talent

Find out why it’s more important now to focus more on workforce retention than engagement.

Why it's more important now to focus more on workforce retention than engagement

Researchers have written a great deal about the recently escalating quit rates among employees. In fact, observers have labeled the trend "The Great Resignation." Relying on an overall engagement metric to gauge the health and stability of a workforce during The Great Resignation poses particular risk. At best, the usefulness and reliability of employee engagement metrics has become highly questionable. In the case of Gallagher's methodology, our team combines seven items to produce an engagement metric.

Using seven items means that an overall engagement score can come about through many different combinations. For example, a mediocre engagement score would result when employees rate half of the engagement items excessively high and the other half excessively low. Employers would see a nearly identical engagement score if all seven items received mediocre ratings. Therefore, it is critical that we always unpack an engagement score to understand how it came about.

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Evidence supports the idea of developing a deeper and better understanding of how to establish a work environment that convinces your most valuable employees to stay, rather than focusing on broad-based strategies to address engagement.

The most highly engaged employees may be the most likely to leave

A category of highly engaged employees we call "seekers" responds very positively across all seven engagement survey items, except one: they are actively seeking to leave their current organizations to pursue other opportunities.

Seekers tend to be higher-performing employees who make notable contributions. And yet they pose an extremely elevated risk for turnover — and actually do leave at rates far exceeding the average rate of turnover among other employees.

The seeker group illustrates the importance of unpacking engagement scores to fully appreciate how the scores have come about. For example, an overall engagement score for seekers — that is, the average of all seven engagement items — is much higher than a typical engagement score. If your workforce were comprised exclusively of seekers, your overall engagement score likely would place your organization in the top third or top quartile of engagement scores nationally. Such a rating would give you a false perception that your workforce is very stable.

Losing seekers is a major leadership concern

In the 2021 Gallagher Workforce Trends collection of survey reports*, more than 3,500 leaders spanning many different industries, geographies and company sizes identified their top human resources priorities. Seventy-three percent of these leaders selected "attracting and retaining talent" as a top-most priority, underscoring the grave concerns around achieving a stable workforce.

Before 2021, the U.S. Bureau of Labor Statistics data showed that 2019 exhibited elevated levels of U.S. worker resignations. Once the pandemic struck the United States and dampened job opportunities, quit rates plummeted. However since 2021, quit rates have hit record highs, eclipsing previous highs documented in 2019.

Not surprising, the proportion of seekers corresponds to these data trends beautifully. For example, Gallagher data shows the percentage of seekers among the U.S. workforce reached 19% in 2019. That is, one in five workers fit a seeker profile. The proportion of seekers dropped by more than 40% in 2020 to a national proportion of only 11%, the lowest rate since Gallagher has monitored this group. In late 2021, seekers burgeoned to a national proportion of 23%. This rate continues to increase into 2022. Organizations now face a record-breaking risk of hemorrhaging their most talented employees.

To reduce the number of seekers, shift focus from workforce engagement to retention

Leaders of any organization must understand and manage key drivers of engagement. When those drivers improve, leaders can expect higher levels of enthusiasm, satisfaction and job effort. While we strongly advocate focusing resources into improving key drivers of engagement, these efforts are unlikely to prevent seekers from leaving.

Why is this?

During periods of great challenge and turmoil such as the global pandemic, drivers of engagement and retention shift rapidly and diverge sharply. Such findings suggest that during "bad times," factors that broadly build engagement will not necessarily lead to employee retention. Keep in mind also that drivers of engagement and retention differ by workforce composition, industry and global geography.

Four key workforce engagement drivers in 2022

Confidence in the organization and its products/services
Trust in senior leadership
Relationship health and overall connectivity with managers/supervisors
Sound career development pathways

Seven most important employee retention drivers in 2022

However, drivers of workforce retention focus more on a mixture of resiliency and wellbeing factors:

The ability to manage and control work pressure, such as work volume
Equitable distribution of work
Ability to balance work and personal obligations
Appropriate staffing to handle work
Feeling supported by others and knowing where to turn for support
Benefits aimed at work flexibility
Access to effective tools and resources to manage work efficiently

Identify and target the dual drivers of workforce engagement and retention

Because drivers of engagement and drivers of retention change constantly, smart leaders will evaluate engagement and retention measures regularly. Gallagher offers the dual approach of studying engagement and retention as separate analyses. Our research in this area equips our consultants to recommend scientifically-based adjustments to people strategies that will optimize workforce engagement and retention.

In many companies we work with, a small handful of items tend to directly impact both engagement and retention. By focusing on these items, leaders can stimulate the enthusiasm of the workforce, while also rebuilding stability among seekers.

Given the present market conditions, the prevailing Great Resignation, and the increasing percentage of seekers comprising the workforce, engagement has lost its rank as the most important metric to monitor. Instead, savvy leaders will pivot their focus to deeper explorations on the drivers of workforce retention and, for now, prioritize them above engagement-building strategies.

Gallagher is ready to assist you in determining the presence and weight of seekers in your workforce. Our team can reveal your retention drivers, determine how they differ from your engagement drivers and develop a strategy to respond to your retention and engagement drivers to enhance overall organizational wellbeing.

Sources:

*Gallagher 2021 Benefits Strategy and Benchmarking Survey; https://www.ajg.com/us/workforce-trends-organizational-wellbeing-strategy-2021/

Disclaimer

Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services" and in Massachusetts as "Gallagher Benefit Insurance Services." Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.