Engaging the millennials and managing your staff turnover rate

Artificial intelligence is making some tech roles, such as machine-learning experts and data scientists, even more sought after. Losing your IT staff to rivals and having to recruit is a headache for any CTO. We look at ways to reduce your staff turnover

Managing your IT staff turnover is the biggest headache for any CTO or tech leader in an organisation.

Post-pandemic, we have become accustomed to concepts such as “quiet quitting” and “the Great Resignation”, even though these can wreak havoc with an IT department.

True, the swathe of job losses in Big Tech has spooked people but despite the widely trumpeted mammoth job losses coming with the rise of AI, tech jobs are the still the least at risk.

Indeed, according to the World Economic Forum, tech jobs such as AI and machine-learning specialists, fintech engineers and data analysts will still be the most in-demand jobs in the world.

Which means added pressure on IT leaders and heads of tech teams to hang on to fought-over staff in what is becoming a seller’s market.

IT staff turnover rate

Happily, UK technology companies have the lowest staff turnover rate of any business sector at just 16.5 per cent, according to the Hive State of Employee Retention report. Expert HR puts the turnover rate for US tech companies slightly higher at 18.3 per cent.

This compares to an average UK staff turnover rate of anything between 28 per cent (according to the most-recent Office of National Statistics figures) and 35.6 per cent, according to Remote.

However, the IT & tech sector reported the highest decrease in motivation in the last year at 59 per cent, with 28 per cent of tech businesses reporting a decline in motivation inh the last six months, according to the Ayming UK HR Barometer 2023.

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Why high staff turnover is a headache

Research by Oxford Economics estimates that, for firms with 10-49 employees, the average cost of losing and rehiring a general staff member earning just £25,000 a year is £26,000. This £26,000 figure includes onboarding and training costs, recruitment fees, and an overall loss of productivity while the organisation searches for a replacement.

Extrapolated out, this means that even a business with 40 employees and a low staff turnover rate of one-in-five a year is having to spend over £200,000 annually on just finding new employees.

Employees also take a lot of resources with them when they leave that are difficult to find, including knowledge of the company and a unique skillset. Businesses with high staff turnover incur plenty of added costs to recruit, onboard, and develop new hires. Company culture will also suffer as the staff members who do stay question whether they should also start looking around elsewhere.

Reasons for high staff turnover

Lack of motivation

Andy Skipper, founder of CTO coaching academy CTO Craft, points to Hertzberg two-factor theory of motivation-hygiene, which has different continua for job motivation and dissatisfaction and are not interdependent. So, paying somebody more may not actually do anything to motivate them, while paying someone less than the market rate will certainly demotivate them.

Lack of job progression opportunities

No clear career path inside a company which forces staff to look around.

Switching jobs to increase pay

The most common reason for staff to jump ship is because they can get a bigger pay bump at a rival company. Common reasons for high staff turnover within an IT department include what Andy Skipper calls “compensation mismatches” – salary expectations from staff who know they could be earning more in another company.

Poor management

How long a member of staff stays is primarily determined by the relationship they have with their direct manager, according to a 25-year study by Gallup; about 50-70 per cent of an employee’s perception of their work environment linked to the actions and behaviour of management.

For Skipper, the tech world and the startup world have matured, and IT workers today expect more professionalism from their management.

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Feeling disconnected

A sense of connection with others is a mid-level requirement in Abraham Maslow’s five-tier model of human needs. The problem of a lack of connection with the rest of the IT team has been exacerbated by the pandemic and remote working, leaving people feeling disconnected.

Managing your IT staff turnover rate

Key to managing your IT staff turnover rate are the following six areas:

  • Culture – younger staff want to see a progressive company culture, whether that means diversity & inclusion (D&I) in action in the workplace or Environmental, Social and Governance (ESG) policies at the heart of a business. IT bosses also need to be aware that a company culture that encourages diversity and inclusion is increasingly important, especially to younger employees. Conducting exit interviews with staff who have decided to leave are a good way to gauge company culture
  • Benefits – in addition to the mandatory contributory pension scheme, this can include season-ticket loans and life insurance as part of an employment package
  • Career progression – a clear career ladder as to how to progress inside a company. Have a clear promotion structure in place. After all, the ideal member of staff is the one who’s going to take your job
  • Learning & development – Provide a path for your staff to increase their skills, adding to their value both as an engineer and as a team member. According to LinkedIn research, employees who spend time at work learning are 47 per cent less likely to be stressed, 39 per cent more likely to feel productive and successful, 23 per cent more ready to take on additional responsibilities, and 21 per cent more likely to feel confident and happy. In short, the more you learn, the more content you become
  • Conduct market pay analysis –regularly check what the market rate out there is for your IT staff and make sure you are paying the going rate. Ensure that you have annual salary reviews, giving your reports a chance to justify a pay rise
  • Employee wellbeing – not only private health insurance but subsidised gym membership and dental cover
  • Engagement – Strong, collaborative leadership with clear sense of direction. Nobody likes to feel they are just robotically following orders. Encourage feedback from staff and creative engagement. As an IT leader, you must put your ego aside – after all, best idea wins.

Says Skipper: “It all boils down to motivation and understanding what people are motivated by. Some people are motivated by continual learning and others by working on interesting projects or things they that fulfil some personal mission they have.”

For Skipper, a lot of the hard work in retaining staff can actually be done at the hiring stage: making sure you take on people who understand and are committed to the company mission, and who will be motivated to share in the success of the work they are doing.

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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