Compensation can be the single biggest cost to an employer, representing up to 70% of annual operating costs. Obviously, getting it right on the hiring front is vital to a businesses' success. But how (or when) does a business know when it has done a good job in making a hire?
According to LinkedIn's Global Recruiting Trends 2016 survey, talent leaders continue to value 'quality of hire' as the most important metric to track performance, and most organizations are measuring it with employee turnover. For its Global Recruiting Trends report, LinkedIn surveyed 3,894 talent acquisition decision makers who work in a corporate HR department and have some authority in their company’s recruitment solutions budget. 39% of respondents agreed that quality of hire is the most valuable metric for performance; 49% measure this by turnover and retention stats.
It seems pretty self-evident that if an employee is still with a company several years after being hired then HR did it's job well. Factor in the high cost associated with employee turnover -- interviewing, hiring, training, reduced productivity, lost opportunity costs, etc. -- and the importance of HR hiring correctly becomes crystal clear.
According to a recent article published by a leading HR industry publication, ERE Media, it costs between 30-50% of an annual salary to replace an entry-level employee, upwards of 150% for a mid-level employee, and up to 400% for a senior or highly specialized employee.
Even by the most conservative estimates, the cost of employee turnover is too high for your business to ignore.
Should I stay or should I go?
According to a recent study by the International Consortium for Executive Development Research (ICEDR), insufficient compensation, lack of development opportunities, and lack of meaningful work are key factors in why men and women around age 30 decide to leave their jobs.
As reported by Forbes, employees need only consider the math to find compelling monetary incentive for pulling up stakes and testing the market for new employment. The average raise an employee can expect is 3%, but factoring in the cost of inflation, this amounts to a mere 1% in additional spending power, according to Forbes. If an employee leaves a company, Forbes reports, they can expect a 10-20% increase in salary. In extreme cases, they may see as much as a 50% bump in pay.
According to Fidelity Investments’ Evaluate a Job Offer Study, millennials are always on the lookout for a new opportunity, with 41% expecting to start a new job in the next two years. Even with 86% of millennial professionals currently happy at work, nearly half (49%) are either actively looking, or open to a new opportunity.
When asked which is more important when evaluating an employment offer – financial benefits or improved quality of work life – 58% of millennials choose the latter, according to Fidelity’s survey.
CEOs and HR pros feeling the talent crunch
- According to the annual CEO Challenge 2016 survey conducted by the Conference Board, as reported in AssociacionsNow, the failure to attract and retain top talent is the leading concern among corporate CEOs, presidents, and chairs in 2016.
- According to PwC’s 17th Annual Global CEO Survey:
- 63% of CEOs are concerned about the availability of key skills
- 93% of CEOs recognize the need to change their strategies for talent
- 61% of CEOs haven't yet taken the first step
- Only 34% of CEOs feel that HR is well prepared for the challenges ahead
- According to the 2016 Mercer Global Talent Trends study, nine out of 10 of the 1,730 HR leaders and 4,500 employees across 15 countries surveyed for this report anticipate that the competition for talent will further increase in 2016 -- and more than a third expect that increase to be significant.
Keep top talent with continuous performance management
Talent scarcity, rising competition from emerging markets, an increasingly diverse, multi-generational, global workforce, and meeting the demands of digital-savvy millennials are all top challenges HR must grapple with in attracting and retaining the top talent their organizations need to survive and thrive.
Increasingly, businesses are weaning themselves off of the dreaded annual review. Once-a-year evaluations alone no longer suffice in today’s rapidly evolving, fast-paced business climate. Rather, a shift toward continuous development, engagement, and empowerment is gathering steam.
A world leader in human-resources (HR) software, SAP offers a wide variety of HCM applications that can be deployed on-premise, hosted, or in the cloud. SAP stepped up its HR presence considerably with the acquisition of SuccessFactors in 2012. While the company continues to support its original ERP-based solution for core HR, workforce management, and talent management, it provides a full suite of HCM applications in the cloud consisting of core HR and payroll, HR analytics, workforce planning, recruiting, on-boarding, learning, performance and goals, compensation, and succession and development.
In keeping with its commitment to help companies meet ever-evolving HR challenges, SAP recently announced it has extended the capabilities of SAP SuccessFactors Performance & Goals with the introduction of continuous performance management.
Designed to provide regular feedback that both recognizes outstanding performance and identifies areas of improvement, continuous performance management within SAP SuccessFactors Performance & Goals tightens the bond between employees, managers and HR by giving each the tools needed to ensure mutual success:
- Employees can take more ownership for their performance — document progress, capture achievements and stay aligned to business goals — to get the feedback and coaching required to perform and improve.
- Managers can get a complete view into what their teams are working on and provide regular and effective guidance to employees.
- HR can track the frequency of one-on-one conversations taking place within an organization, remind employees and managers to have performance conversations, and provide guidance on effective coaching.
Always ready to drink its own champagne, SAP recently announced that it is ditching its own annual performance reviews and adopting continuous performance practices. As reported by Reuters, SAP is testing a new continuous performance management process that includes more regular check-in talks on about 8,000 of its workers and aims to implement the new process for all of its almost 80,000 workforce next year.
NTT DATA - practicing the HCM we preach with SuccessFactors
In addition to being a leading provider of SAP SuccessFactors implementation services, NTT DATA is also an SAP SuccessFactors customer – helping SuccessFactors to reach its recently announced 1,000-customers on Employee Central milestone.
With several major acquisitions pushing NTT DATA’s global workforce to more than 75,000 employees worldwide, the company needed to unify operations across multiple locations with disparate systems. The goal was to create a unified workforce that was integrated operationally and culturally.
As a professional services company, NTT DATA is focused on its employees and their continued growth. Accordingly, NTT DATA wanted a solution that would serve as a core system of record to manage all employee data, as well as bring together goals, objectives, and performance management.
NTT DATA selected SuccessFactors and choreographed the rollout of the SuccessFactors Performance & Goals, SuccessFactors Compensation, including variable pay, and SuccessFactors Employee Central solutions.
The average deployment time for each module was 3 - 5 months and, today, the system, re-labeled ‘Navigator’ by NTT DATA, reaches 20,000+ users worldwide and continues to see growth in self-assessment participation by employees.
As a leading SAP SuccessFactors implementation partner, NTT DATA invests heavily in pre-configured templates with built-in best practices, project accelerators, data migration tools, bundled offerings and HCM specialists that allow our clients to significantly decrease HCM implementation timelines and costs.
As a SuccessFactors customer, we look forward to test driving the extended continuous performance management capabilities of SAP SuccessFactors Performance & Goals.
For more NTT DATA perspective on HR challenges and opportunities, check out the following SAP Advisor articles: Achieving Success with Digital HR, Growth Need Not Be an HCM Nightmare, Hybrid HCM: The SAP Way, Top Ten Reasons to Implement SuccessFactors Now.
Contact NTT DATA today to learn more about our expertise and hands-on experience with SAP SuccessFactors or to schedule a meeting with our HCM specialists at SAP Connect in Las Vegas, August 29 – 31.