How Spotify Reduced Employee Turnover Through its Work Policy

How Spotify Reduced Employee Turnover Through its Work Policy

Unless you're living under a rock, you've heard about the "Great Resignation" or the "Great Reset". The pandemic is largely responsible for one of the major shifts in how employees see "work places". In the midst of the pandemic, Spotify took a bold step, announcing a  new work model called “Work From Anywhere. (WFA)”, albeit ring-fenced with certain criteria's. The policy lets employees determine:

1. How often they work from the office

2. Where they work, as long as the company has an operation there.

3. Recalibrated salary bands adjusted based on country instead of region.

With these minor but significant tweaks, Spotify has now expanded beyond New York and California and is now registered in 42 U.S. states. In Europe, the platform has increased its presence outside its Stockholm headquarters to Germany, Spain, and the Netherlands.

Beyond the geographical expansion, Spotify has seen very quantifiable benefits.

1. Around 6% of employees moved after the policy’s instatement.

2. Attrition at the company was 15% lower in the second quarter of 2022 compared to the same quarter in 2019.

3. Increased and Diverse representation in its employee base.

According to a Spotify blog titled "The Reality of Working from Anywhere", published on March 29th 2022, Spotify shares the intended ambitions of policy and shared a few outcomes (excerpt below):

Other firms, who are in talent bind, can take some of the learning from Spotify and see how small, yet meaningful changes, can help them both retain and onboard new talent.

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Hospitals And Retailers Are Battling For Same Resources, As The Labor Shortage Continues

 

Even before the pandemic, doctors and nurses have always been in high demand. The new variant (Omicron), coupled with The Great Resignation, has only made that shortage worse. As a result some health-care workers, overwhelmed by two years fighting the virus and the system, opt for different options. Some have decided to retire, whilst others are trading positions for lucrative short-term assignments, at premium pay, driving up labor costs. 

According to a December survey by staffing company AMN Healthcare, three out of four health-care facilities were looking for temporary allied health professionals, a category that includes clinical workers who aren’t doctors, nurses or advanced practitioner.

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A view from Nebraska:

Nebraska had the lowest unemployment of 1.8% in November of 2021. Troy Bruntz, who runs a 25-bed critical access facility in McCook, Nebraska, had been trying to recruit a third ultrasound technician for at least six months, without getting a single application. For lower-level positions, the hospital competes with the local Walmart store, where wages are rising.

“What used to be an $8 job now is $15,” said Bruntz, a 52-year-old who once worked as an accountant for KPMG. “That’s the only way we get people to come to work.”

He believes this trend will persist in the long-term, particularly in rural areas with aging populations. “We’re going to have so many more people retiring than entering the workforce that this is just going to get worse,” Bruntz said.

Mike Hansen, chief executive of Columbus Community Hospital, said hourly entry-level wages are now in the $15-$18 range. Nursing wages start at $35-$40/hours and keep rising with experience.

Hansen, 61, calls the pandemic labor squeeze the worst he has encountered through out his own career. “People need to realize, health-care people have been at this for almost two years now,” he said. “It’s been highly stressful.”

A view from Indiana:

“This is the most significant labor shortage that we have ever seen,” said Sally Zuel, VP of Human Resources at Union Health in Terre Haute, Indiana. The health system, with about 3,000 employees, had to scramble and decided to move nurses from support positions into direct patient care. 

The current COVID surge in the area isn’t expected to subside in the near term. The volume of patients means staffing will remain tight. “​​We need every person every day,” Zuel said.

What trends healthcare industry need to address?

Mercer’s “2021 External Healthcare Labor Market Analysis”, has identified four key trends impacting the US healthcare labor market over the next 5-10 year horizon, and reveals how the healthcare industry needs to adapt to address future labor shortages. These trends are:

1. There will be a shortage of healthcare workers at the low-end of the wage spectrum, which will directly impact access to home care
2. Primary care will increasingly be provided by non-physicians
3. There will be significant shortages of nurses in over half of US states, but surplus in some areas of the South and Southwest
4. A hiring rush for mental health providers will emerge by 2026

John Derse, Healthcare Industry Leader at Mercer, in the report suggests that: 

“While hospitals and healthcare systems cannot control what’s happening in the external labor market, effective workforce planning and managing internal workforces can help mitigate their exposure to these risks. Workforce strategies that will position an employer for long-term success should focus on transforming care models, rethink compensation and benefits, and introduce more flexibility into staffing, development and rewards,” added Derse. “Prior to the pandemic, the shortages were driven by a healthcare population that was trending older, sicker and more sedentary. Employers should not wait to transform their retention models to accommodate for all demographics in their workforce impacted by the pandemic, particularly ageing skilled professionals considering early retirement.”

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The next trillion dollar opportunity for startup capture; Instant Pay

 What’s the first, real-world, lesson taught in any business centric class - fix a problem (opportunity) that someone is willing to pay for. Now, identifying the problem or equally important finding a solution that has differentiated value, is usually not easily surmountable. The reason for this quick level set is to talk about a potentially Trillion dollar opportunity.

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Problem statement: 

In the US, there are more payday loan providers than McDonalds. Good for payday loan providers, but bad for people. A survey report has reported that 42% of full-time workers are unable to meet their monthly obligations of household expenses. This state of affairs is tied to antiquated ways how employees get paid at a pre-defined cadence, say bi-weekly. According to EY estimates, almost a trillion dollars is tied up in payroll systems and 70% of global workers are paid either bi-weekly or paid monthly.

An opportunity on the horizon? 

EY estimates an employee turnover of 20%, related to financial stress. A study by Harris poll has found that 80% of the workers in the US would like to get money in their accounts as earned. Furthermore, it was also identified that with Gen-Z becoming the largest group by 2026, immediate access to capital, as part of earned wages, will become a key differentiator to stay with a firm. 

Whilst most large firms may or may not be aware of this, several On-Demand pay apps are starting to address this gap.

On-Demand Pay in Motion:

Even, FlexWage, PayActiv, Instant Financial are some of the on-demand pay apps available that are addressing the need for On-Demand. 

Walmart’s 20% workforce is leveraging the Even app, to avoid payday loans. Walmart covers the cost of using the app for both hourly and salaried workers. Employees can access wages early, up to eight times per year for free. After that, they pay $3 per pay period to cover transaction fees and for features that help to set savings goals and create a budget. Whilst this is not On-Demand pay, it’s a step in the right direction.

Sprinkle Cupcakes is partnering with ADP, who in turn is leveraging the DailyPay app to pay employees as they complete a shift. Employees gain access to their pay as early as 3 a.m. the next day.

For budding entrepreneurs, the pandemic, coupled with the great resignation, Instant or On-Demand pay provides a great avenue to launch your next startup.

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Why do employees quit? Top 3 reason from over 11 million comments

Peakon, an employee engagement platform, performed a study from over 11 million survey comments and published a report that highlighted why employees may seek employment elsewhere. Below are the top-3 highlights from this report.

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3- Workplace environment:

Peakon’s study found that the one of the top ranked response to the question, “If you had a magic wand, what's the one thing you would change about [your organization]?”, was that employees would most like to change the office environment in which they work.

This insight was reinforced from other two other industry surveys:

1. FelxJobs survey of over 3000 employees identified that less than 10% employees prefer the office.

2. Upwork Future workforce report from 2018 identified that 75% of employees reported higher productivity levels when working from home.

The research is indicative of a preference that is generational agnostic. Employees are more engaged and productive in an environment that offers flexibility, both in terms of location and work arrangements. 

2- Management's role in employee retention:

To understand the employee feedback to management responses, Peakon dissected the data across different industries, to identify the common red thread. 

The results showed that even in most responsive sectors like Government, management responses were received only 33% of the time, while in low touch industries like transportation, the feedback responses were less than 10%.

A Udemy report in 2018 found that 50% of employees quit due to bad managers and 75% suggested that their managers lacked proper people management training. 

Management’s key role is to provide clarity to the employees, which is based on a trust driven relationship. 

1- Impact of communication on employee performance:

Peakon found that the top ranked lever in employee retention is communication. Whilst this may seem as the easiest of all fixes, it may also turn out to be the most difficult. 

A study by Dynamic Signal of over a 1,000 U.S. employees found that nearly 75% considered quitting due to lack of workplace communication.

Communication is key to ensuring transparency and sense of belonging, which in turn can lead to higher levels of engagement, productivity and therefore, profitability. 

Key Takeaways for management to retain top talent:

1. Actively listen to your employees and make sure they feel heard.

2. Engage them to become part of the conversation and collectively own the outcome.

3. Create an environment built on trust, to increase the level the belonging.

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