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Why a Resilient Workforce Is Key in Volatile Times

In a macro-economic environment that is dominated by uncertainty, organizations need to refocus on the fundamental pillars of managing a people organization and acknowledge that many of these pillars are interconnected. While this increases the complexity of the job, a company that is effective at attracting the right talent, retaining that talent, and fostering a sustainable working life for employees will develop the resilience to survive and thrive.

Companies with resilience have the ability to bounce back during volatility, the agility to bounce forward and seize opportunities for growth, and the engagement and belonging with employees to repeat this process.

Businesses and their people are facing multiple pressures today.

The business environment has been particularly volatile. We jumped from an economy that was languishing to one that was overheated with a shortage of labor and high inflation. Global interest rate hikes are now stoking fears of an imminent recession.

Here are the biggest pressures we hear from organizations:

1. Rising employee costs and attrition require broader thinking than just increasing pay

By the summer of 2022, voluntary turnover globally reached 15.4 percent, according to Aon’s Salary Increase and Turnover Study. This is even more acute in high-demand sectors such as technology companies, where voluntary turnover has increased by 40 percent, with two-thirds of employees admitting they are “looking” for alternative opportunities.

The root causes of increasing turnover include:

77%
want better pay

78%
want better career opportunities

43%
lack of viable career opportunities

31%
experience burnout

The initial response to high attrition was to counter offers, causing a spike in salary increases (and worsening inflation). In the same study, respondents said average salary increases were as high as 39 percent in the same in-demand sectors and roles.

The Great Resignation resulted in unsustainable increases in the cost base, causing 71 percent of companies to consider total rewards as an alternative approach to increasing pay to mitigate attrition.

Consider a more holistic total rewards program that goes beyond pay?
Jump to section “Measuring workforce resilience provides clarity and confidence to take the right actions” to learn more.

2. Inflation and recession fears require a more holistic approach to people spend

While increases in salaries and incentives may have been in response to demand for certain skills, benefitting these roles and individuals, inflation also diminished the impact of compensation as a lever to retain talent. Increased fears of recession are causing companies to consider cost optimization activities more broadly.

On an individual level, people are feeling the squeeze too. The downturn is jeopardizing financial wellbeing where some older workers are pausing their retirement plans. A quarter of Americans plan to delay their retirement due to inflation1, while others are taking out retirement savings to keep up with rising costs.

Learn how companies are helping employees address inflation in our new whitepaper, “The Impact of Inflation on Employee Benefits and Considerations for Businesses.”

Consider a more holistic total rewards program that goes beyond pay. Jump to section “Measuring workforce resilience provides clarity and confidence to take the right actions” to learn more.

3. Skills shortages continue to threaten business growth

Finding talent with the right skills for the future can be challenging. Everyone is searching for candidates who have technical skills in addition to critical transferable skills like curiosity, agility, and the desire and capability to learn quickly. Finding people that have these skills will continue to be a challenge in today’s competitive market, regardless of the macro-economic environment.

Rising demand for similar skills across multiple industries has put future-fit talent at a potentially unaffordable premium — particularly as organizations focus on cost optimization.

Consider building an upskilling and reskilling program?
Jump to section “Measuring workforce resilience provides clarity and confidence to take the right actions” to learn more.

4. Employee burnout is at an all-time high but, if improved, can drive productivity

Employee burnout has become one of the top reasons for attrition across firms. This is even more acute in those sectors hardest hit during the COVID-19 pandemic. When adding the fact that only 30 percent of employees identify as resilient, there is a massive gap of untapped potential to drive more resilient workforces. Embedding wellbeing into the firm’s overall strategy rather than a one-off perk will improve retention.

93 percent of resilient employees want to stay with their employer for the foreseeable future compared to 51 percent of non-resilient employees

Source: Aon's Rising Resilient report

Consider building a sense of belonging among your workforce?
Jump to section “Measuring workforce resilience provides clarity and confidence to take the right actions” to learn more.

5. The unequal impact on diverse talent is more than just a pay issue

Diversity and inclusivity remain an ongoing concern that cuts across the above issues. Statistically, women have less earning power in the workforce (resulting in lower retirement savings) and saw greater financial stress during the pandemic than men. We’re seeing the same situation play out with inflation.

While many companies now conduct regular pay equity audits to ensure there are no unexplained pay gaps, we also need to be mindful that women may continue to suffer setbacks in the workplace. One rising issue is that, based on average statistics, women are more likely to possess skills that will be redundant in the future. As a result, women’s pay may fall behind and their jobs could be eliminated, resulting in fewer women in the workforce overall and certainly at senior levels.

Consider how to embrace flexibility and build diversity.
Jump to section “Measuring workforce resilience provides clarity and confidence to take the right actions” to learn more.

£5.3 B
Annual lost income from pensioners in the UK due to caps on payment increases for two years

Source: XPS Pensions Group

Measure resilience to determine areas for improvement.

Companies should focus on building efficiency and resiliency when investing for the future, taking lessons from other volatile periods and recognizing the changing landscape of work.

As businesses refine their approach to managing talent amid today’s pressures, they will ultimately build a more resilient workforce that can thrive in volatile times. But how does a company know if they have an optimal level of resilience and where there are opportunities for improvement?

Know where to start: Measure and improve upon your workforce resilience.

Often, the challenge for many workforce-based initiatives is quantifying the return on investment. In tight markets, where efficiency becomes a priority, using such metrics also allows companies to combine financial metrics to value-based initiatives.

32%
Organizations globally that struggle to measure the ROI of their wellbeing initiatives

Source: 2021 Aon Global Wellbeing Survey

Our diagnostics showcase how building workforce resilience can drive positive return on investment while also driving return on value.

The impact of intangible factors — such as employer brand, employee wellbeing and engagement — is difficult to quantify, but there are several measurable levers that can help leaders build a resilient workforce.

Aon has two approaches to measuring resilience:

Inside-Out:

Resilience can be measured through the assessment of individual employees. Aon’s Human Sustainability Index (HSI) measures wellbeing, resilience and sustainability, providing data-driven insight across the organization, which can be used to curate and inform meaningful improvements.

Outside-In:

Through our research and data, we find there are 12 primary levers that feed into workforce resilience and these levers can be measured using existing metrics available across the workforce. By using these metrics, we can help identify specific areas to improve and aligned actions to take. What’s more, improving one factor of workforce resilience can have knock-on effects, such as improving financial wellbeing, healthy behaviors, optimization of people spend, and so on — all of which help build overall measures of workforce resilience.

Measuring workforce resilience provides clarity and confidence to take the right actions.

A company’s strategy around total rewards, upskilling, diversity, flexibility and wellbeing are interconnected and influence one another — as we stated in the introduction. Therefore, these workstreams need to be approached holistically as part of a firm’s new employee value proposition.

Here are some suggested actions:

1. Think of total rewards instead of only pay:

Recent studies show pay is no longer the only, or even the primary, lever for attracting talent. People want to be compensated fairly and are expecting competitive pay in a tight labor market. But they also want (particularly younger workers) flexibility, generous benefits, a culture of wellness, programs to develop their skills and career opportunities, and to work for a mission-driven organization.

Develop a compelling total rewards package aligned to business outcomes, mission, purpose and values, and talent and total reward strategies. Understand what’s important to your employees and customize total rewards to meet the various needs of your workforce.

 

2. Embrace flexibility and build diversity:

Nearly half of workers are willing to accept a lower salary to work remotely, and 30 percent said their ideal workplace setup is fully remote, according to Employ’s 2022 Job Seeker Nation Report.

Broaden the scope of your talent pool by focusing on diverse talent. This includes racial/ethnic minorities and women, but it should also consider finding neurodiverse job candidates and those with unconventional educational and work experience. One survey2 found that 76 percent of job seekers and employees believe a diverse workforce is an important factor when evaluating current and potential employers. To learn more, download our white paper: Diversity, Equity and Inclusion in the Workplace.

 

3. Invest in upskilling and reskilling:

Build your early careers program using talent assessments and strong internship and apprenticeship programs. These programs are a stable and highly effective source of diverse talent and allow employers to build a future talent pipeline.

Because hiring new workers is so costly and time consuming, keeping the workers you have on staff already is critical — and it’s also essential for deploying a reskilling and upskilling program. Such efforts can also help with employee wellbeing and belonging because increased attrition can lead to stress, anxiety and burnout among remaining staff.

An upskilling and reskilling program should be complemented with professional development more broadly across the organization. Give employees frequent opportunities, time and resources to develop new skills. Consider using shorter and more focused training sessions to eliminate common worries over loss of productivity.

 

4. Build a sense of belonging:

Creating and fostering a sustainable working life involves programs that invest in employee wellbeing and build workforce resilience over time. While only 30 percent of employees are resilient, according to the Rising Resilient report, that number is not consistent or immutable. Companies with more robust wellbeing programs (e.g., mental health resources, financial planning services) report 45 percent of employees are resilient; companies with no wellbeing programs report only 15 percent of employees are resilient.

Create a sense of belonging, which must include an inclusive culture. A workforce with a shared belief that people are accepted and appreciated for themselves results in an attractive and inviting work environment. For that to happen, employees need to feel they work in a psychologically safe environment with leaders that are inclusive and deliver clarity, purpose and compassion. Research has found that inclusive teams improve performance by up to 30 percent.

Review your wellbeing strategy holistically; it will pay off. A study from 20193 that reviewed 339 independent research studies, including observations on the wellbeing of 1,882,131 employees, found higher wellbeing is substantially correlated to higher customer loyalty scores and lower employee turnover.

 

Amid volatility, businesses must take a long term, balanced approach to their cost-saving initiatives, maintaining the ability to grow when the markets bounce back. The question isn’t just: “Where do we cut?” It’s also: “Where do we invest and protect?”

1 BMO Harris Bank
2 Glassdoor’s Diversity and Inclusion Workplace Survey
3 Employee wellbeing, productivity, and firm performance (repec.org)

Make Better Decisions: Colleagues and Clients Discuss Wellbeing Initiatives

Wellbeing and employee experience were a focal point for lively discussion at the Aon Insights Series – Asia, held in-person and virtually in Singapore on September 5-6, 2022.

The discussion focused on how workplace wellbeing is evolving (the focus needs to be on our whole life, not just our working life), what different terms mean (wellness vs. human sustainability), and how multinational organizations can approach health, benefits and retirement to uphold the firm’s values but customize plans for local norms. For example, businesses need to understand what employees want from health plans and ensure offerings are inclusive for different employee needs across regions. Employers should also stay current on factors driving medical cost increases across geographies to plan their budgets for premium renewal costs.

Click on the posts below to read about trends in wellbeing discussed at the event.

Wellbeing is Evolving, but Many Companies Still Lack a Strategy

Click here to read

Addressing Wellbeing at a Global and Local Level

Click here to read

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