While Australia may have emerged from the global financial crisis in much better shape than many other countries, the economic slowdown has still forced many businesses to take a good hard look at themselves – how they operate, their business models, and how their employees perform.
Depending on the industry, a business’ workforce is often its major cost – as well as its main asset. The contribution of people is the largest driver of organisational performance, but when times are tight, cutting staff seems like an obvious way to cut costs. However, companies are learning that it can pay to think about the long-term consequences of such measures.
Research shows that companies that downsize by more than 10 per cent typically experience subsequent voluntary turnover rates of 50 per cent or greater of surviving employees in the following year, compared to companies that don't downsize, according to the Australian Psychological Society’s College of Organisational Psychologists (COP).
The cost of staff turnover can be substantial – as much as 2.5 to 10 times the salary of the job in question. Many of these costs are indirect and not immediately measurable, but they nonetheless cut into a business’ bottom line.
Retention therefore represents one of the highest returns on investment for any company, and developing a workforce strategy and associated strategic plan to help retain your most valuable asset – your employees – can be a worthwhile exercise.
According to the COP, these are the key steps to ensure you maintain – and retain – an effective workforce:
1. Identify the critical and core capabilities of your organisation.
2. Assess the importance of various roles to business outcomes, including the possible outsourcing of some roles.
3. Determine HR policies and practices according to role importance, including employment value propositions and levels of investment in those roles.
4. Link these HR policies to the three key ways that organisations can enhance human capital: acquisition (recruitment and selection), utilisation/engagement and retention (including remuneration and benefits, performance management, etc), and development.