Employee experience still matters: Talent retention at GCCs

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Global capability centers (GCCs)1 face an enduring and worrisome challenge: how to keep good talent from walking out the door. In our conversations with GCCs, executives report that attrition rates are high. The combination of departures and the current volatility in the talent market have disrupted and destabilized company culture; increased recruitment costs; and resulted in lost institutional knowledge, additional time spent on training new employees, and lower productivity and work quality.

While some of the worker retention pressures are abating in the current economic climate, the underlying issues persist. Forward-thinking businesses now have a golden opportunity to address them.

Most leaders understand the importance of solving the retention issue. The problem is that they tend to have a limited understanding of what their employees actually value. And they too often opt for quick fixes rather than addressing the underlying issues. This approach leads to reliance on a set of blunt tools, such as increasing compensation and benefits or providing basic work-from-home flexibility, with predictably little change in retention rates.

There is a better way. Our research has been clear that the best way to resolve the issue is by improving employee experience (EX),2 which strengthens employee loyalty and, as a result, resilience and continuity.3This time it’s personal: Shaping the ‘new possible’ through employee experience,” McKinsey, September 30, 2021. Executives should treat EX as seriously as CX (customer experience) by being more scientific and more tailored in their approach.

Our research and analysis reveal that while compensation and benefits are important, they have essentially become table stakes. Top talent are looking for additional benefits, such as a positive and supportive culture and the flexibility to stay in the current organization or look for a new job. By taking five focused actions, companies can not only keep their people but also help them to be more productive.

Five actions to improve EX

To understand what employees want from their organizations, we researched the EX practices of organizations around the world.4 These insights highlighted five actions that executives could take to create a work environment that better supports employees.

1. Use personas and journeys to customize EX

Our analysis defined nine primary employee journeys and found that six have an outsize influence on whether employees join or stay in an organization (Exhibit 1). Four of these journeys—role change, feedback and coaching, performance review, and training and skill building—can have a particularly detrimental effect when poorly executed. For instance, our survey found that employee satisfaction with these four “broken journeys” drops with increased tenure, with women experiencing the sharpest decrease.

Employees see six out of nine journeys as critical to their experience. Of these, four journeys have relatively lower satisfaction.

A one-size-fits-all approach to EX won’t be effective. Instead, companies should create employee personas and then tailor solutions along selected dimensions to ensure offerings are hitting the mark. For example, because a global bank’s GCC identified “support on major life events” as a journey that mattered to most employees, it redesigned its employee-benefit policies and programs to include reimbursement for home office setup and well-being support.

2. Reimagine the role of manager to emphasize coaching and mentorship

When the workforce was going into the office on a regular basis, managers typically spent most of their time monitoring employee performance and handling administrative tasks. At a global insurance GCC, for example, one manager spent 20 percent of their time managing transport and attendance-related issues. In an era of hybrid work, managers need to be prepared to provide one-on-one coaching and feedback to employees—both in person and virtually.

This insight was reflected in our analysis, which found that when a manager shows care for workers, EX improves. While this result might not be surprising, companies tend to undervalue its impact and fail to adjust what they want their managers to do. Companies instead need to fundamentally reshape the role (Exhibit 2).5Stop wasting your most precious resource: Middle managers,” McKinsey, March 10, 2023.

Given that there is more autonomy in hybrid working, employees say the manager’s role should include more coaching and mentorship.

To address the evolving needs of the workforce, managers must be prepared to play four primary roles:

Problem solver. Provide support on high-complexity operational and administrative activities (such as aiding internal processes and escalating customer issues).

Coach. Offer direction to help employees build capabilities and functional expertise.

Counselor. Understand employee career aspirations, care for physical and mental well-being, and act as a trusted adviser.

Cultural ambassador. Promote employee connectivity in a hybrid work environment and model desired behavior and values, such as being accessible to employees and engaging in proactive communication.

This shift will require companies to invest in additional training and design new incentives. Training programs can help managers focus on developing new essential skills (such as remote coaching, mentoring, fostering interpersonal relationships, building trust, helping manage stress, and promoting well-being) and using new technologies. Providing mentors from different departments and giving managers dedicated time for building these skills can help them master their new roles.

3. Find new ways to embed culture and values for a hybrid work environment

A positive, supportive culture, characterized by inclusion and respect, is strongly connected to the overall well-being and experience of employees (Exhibit 3). Often, these attributes can have a significant influence on an employee’s connection to the organization’s purpose and brand. This pattern is especially true for female employees: as women move up the corporate ladder, their well-being unfortunately tends to fall significantly.

Well-being is affected by multiple factors (such as tenure, location, and societal support) and can differ depending on gender and family cohorts.

The lack of in-person interaction means companies must devise new ways to communicate, promote, and live their culture and values.6Workplace rituals: Recapturing the power of what we’ve lost,” McKinsey, January 25, 2023. Useful approaches include recognition programs, virtual team-building activities, and a handbook that outlines the organization’s mission, vision, and culture. Companies will also have to invest in tech capabilities to find new ways to engage remote employees effectively. At a GCC for one global bank, senior leadership became cultural role models and also trained “cultural champions and ambassadors” to help promote best practices on new ways of working.

4. Redesign the office for collaboration and connection

Employees are looking for flexibility in where they work. Our survey found that more than 90 percent favor a hybrid model, with an average of one and a half days a week in the office. Three-quarters of employees report that working from home is a very important factor in staying with their current organization. More than 70 percent of employees want their work commute to be less than 30 minutes (Exhibit 4). Therefore, it’s crucial for companies to design and implement an effective hybrid working model.7The State of Organizations 2023: Ten shifts transforming organizations, McKinsey, April 26, 2023.

Employees want convenience, with more than 70 percent looking for a work commute of less than 30 minutes.

Workers increasingly see the office as a space for collaboration and connection. This sentiment hints at the office of the future: smaller offices with flexible workspaces and at least 50 percent of the area designated for multiple uses. To encourage people to come into the office, companies should also explore having satellite offices in select locations near employees to enable smaller gatherings, with the main office used for development, collaboration, and hosting social activities.

At one global bank’s GCC, leaders have undertaken a radical redesign of its office. So far, the new approach has reduced the amount of space allocated to doing traditional work by more than half while adding communal areas for activities such as training, coaching, games, and events. This fit-for-purpose office not only addressed new employee needs more effectively but is also expected to reduce the overall footprint by 40 percent.

5. Rethink the traditional workday

Work–life balance became a priority during the pandemic, especially among Gen Z employees and working parents. Having the flexibility to attend to personal and family obligations and still work a full day appeals to a wide swath of the workforce.8Returning to the office can be a choice, not a challenge,” blog entry by Phil Kirschner, Natasha Ouslis, and Julia Sperling-Magro, McKinsey, July 11, 2022.

A global bank’s shared-service center responded to this need by enabling increased flexibility around scheduling (such as giving employees the option to swap shifts with coworkers and split shifts) to align with persona-based preferences and life events. One employee remarked on the changes as follows: “I love being able to spend more time with my kids at home, and I don’t need to sacrifice my performance at work.” These adjustments have decreased monthly attrition by 80 percent.

Companies have several options at their disposal, including allowing tech workers to adopt flexible day shifts (such as split days or flexible work hours). For example, half of employees would be open to working longer hours over fewer days (Exhibit 5). One survey respondent remarked, “I hope the four [days a week] for ten [hours a day] schedule is open so I can spend more time with family.” This approach requires companies to adapt their approach to hiring and staffing to ensure sufficient levels of coverage.

For greater work–life balance, employees are looking for flexibility related to when they work.

Because EX is fundamentally personal, organizations need to become more adept at listening to ensure they are addressing employee priorities. By gaining a better understanding of what employees value and reimagining every element of work—from roles, to the office, to scheduling—GCCs can position themselves as an employer of choice for years to come.

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