With employee turnover expected to increase over the coming year, HR executives should be concerned.
With the economy improving and new employment opportunities on the horizon for the first time in more than two years, the apartment industry is recognizing the importance of employee retention now more than ever.
Top employees will begin to explore alternative positions once the economy recovers and the demand for rental housing increases, says Chris Lee, President and CEO of Los Angeles-based CEL & Associates, a real estate consulting firm. “The combination of a shortage of talent, increasingly sophisticated requirements for onsite managers, a likely rise in demand for rental housing and a growing number of employees seeking to recapture perceived ‘lost compensation’ over the past 24 months will likely result in an increase in turnover rates by 2011-2012,” Lee says. “HR directors should be concerned.”
In a January survey of 459 human-resources executives by Towers Watson, 51 percent of respondents said they expect it will be harder to retain key talent by January 2011. Apartment industry executives are identifying top performers and focusing on employee engagement in anticipation of future turnovers, but the majority say that keeping their critical staff members happy will come down to treating employees with respect.
“During an economic depression, you hear executives at some companies say, ‘My employees are lucky they have jobs,’ ” says Dan Stravinski, Senior Vice President of Human Resources for Berkshire Property Advisors. “But people know when they’re being taken advantage of and they’ll leave once the economy improves.”
Some Avoided Downsizing
Lisa Critchley, Senior Vice President of Human Resources for Home Properties, is under no illusions when it comes to employee retention. While her company, an East Coast REIT, has avoided the downsizing that affected many companies during the downturn, helping to minimize employee burnout, she knows executives must pay attention to employee retention.
“People are with us at the privilege of their desires, not ours,” she says.
While Critchley doesn’t anticipate a significant increase in turnover at her company once the economy improves, she does acknowledge that recent statistics are somewhat skewed. “In a turnover survey I did four months ago with peer companies, everyone remarked how low the 2009 turnover rate was, but that was artificially depressed by the economy,” she says.
Southern Management Recruitment Manager Olivia Hunter is confident in the stability of her company’s employment base. The Mid-Atlantic property management company reduced its employee turnover rate from 20 percent in 2007 to 9 percent in 2009. Hunter says HR focused on employee retention strategies before the recession, and will continue to do so, regardless of the economy. “We haven’t put any recent measures in place to address a potential increase in turnover because our initiatives have been ongoing,” she says. “Our turnover rate could come back up to 16 percent or 17 percent, but we don’t anticipate that and we’re not concerned. Maybe we should be.”
While current turnover rates appear promising, Lee says they are not the best measure of future retention. “Low employee turnover during the past 24 months is probably 60 percent to 65 percent due to the lack of opportunities elsewhere and a need to keep one’s job, and 35 percent to 40 percent due to the talent-centric initiatives that have created, in several companies, employee loyalty and increased retention,” he says. “However, the lower turnover rates are a symptom of ‘individual-based’ financial survival, and that will dramatically change as the market for rental housing recovers.”
Some executives say increased turnover is not a question of if, but when. Stravinski says it will take some time before employees feel comfortable enough to seek other employment opportunities, but the time will come.
“I think it will be six months to a year as the job market opens up and people start job-hunting,” he says. “But people will move if they feel they haven’t been treated well.”
Employee Engagement
In an effort to retain top employees in the coming years, apartment companies are drawing on a variety of strategies. Sue Ansel, Chief Operating Officer of Gables Residential, knows that in the absence of financial incentives, employee communication can go a long way.
“In a down cycle, it becomes harder to give financial rewards, so the key when you have a limited set of arrows in your quiver is to treat people like people,” she says. The Atlanta-based REIT has done just that, emphasizing the importance of communication from the top down. “In times of uncertainty, people will draw the worst possible sort of conclusions and they just want to be in the know in what direction the company is going,” Ansel says.
Gables Residential recently restructured its Human Resources department by placing HR generalists in each major market to provide daily support. Previously located in one central office, HR employees are now more accessible to answer field-level questions and encourage continual dialogue between management and staff.
Ansel says Gables Residential instituted new health and wellness initiatives and continues to match employees’ 401(k) contributions. Ninety percent of staff also earned an average pay increase of 2 percent last year. “All of this is being done to really try and keep our associates engaged,” Ansel says. “You spend more time with your co-workers than your family, and if people aren’t being treated well, they’ll leave.”
Boston-based Berkshire Property Advisors administers an annual employee engagement survey as part of its effort to fight future turnover. Stravinski says the feedback has given him an opportunity to nip employee dissatisfaction in the bud.
“We had a group of employees who expressed concern because there was no defined career path for them, so we defined that and made sure their supervisor met with them periodically to check in,” he says. By clearly defining performance goals and characteristics of a ‘top performer’, Stravinski says employees are more driven and are less likely to leave the company, regardless of new employment opportunities.
In addition to a clear set of objectives, Stravinski says employees need a supervisor who will enable them to do their job.
“The number one reason people leave is because of their supervisor and it’s up to management to hold the supervisor accountable,” he says. “When employees see you’re willing to address performance evaluations head-on at every level, they’re impressed.”
For the third consecutive year, Home Properties has provided an individualized annual report to each employee that details the total value of their benefits and includes a message of appreciation from CEO Ed Pettinella. The purpose, says Critchley, is to remind employees that their benefits go beyond a base salary. “We spell out all of our contributions, from our 401(k) program to the training hours we provide,” she says. “The reports have had a huge impact on people.”
Although employee engagement has always been a top priority, Critchley says the company adopted a pay-for-performance philosophy a few years ago to reward its top talent and specifically address future turnover. Managers are asked to select their top performers at merit time and recognize their achievements at an annual awards banquet. Pettinella also calls top performers regularly to congratulate them. Critchley says the new program is a departure from previous years, when raises were commonly given across the board.
“If you don’t differentiate performance properly, you will lose key talent to employers that do,” she says. “And if you don’t pay attention to an employee, there’s going to be someone else out there dangling another opportunity.”
Lee estimates that today 20 percent to 30 percent of multifamily HR executives are addressing the ‘talent challenge,’ but says it will take some time for priorities to shift. “When the market recovers and focus can be redirected from saving money to creating value,” he says, “we will likely see a wave of employee retention initiatives.”
Lauren Boston is NAA’s Staff Writer. She can be reached at lauren@naahq.org or 703/797-0678.
Apartment Jobs: Where Are the Hot Spots?
Human resources executives are preparing for a potential exodus of talent, but as the economy improves, are they ready to do some hiring of their own?
Chris Lee, President and CEO of CEL & Associates, believes Houston, Austin, Salt Lake City, Northern Virginia, Philadelphia, Bethesda, Md., Raleigh-Durham, Oklahoma City and capital cities in the South likely will be among the first markets to recover. “They tend to be those areas that have lower taxes, a pro-business focus and are considered to be knowledge-centric,” Lee says.
Berkshire Property Advisors anticipates a number of acquisitions over the next several years and is staffing to meet this demand. Should the company return to the redevelopment sector, Dan Stravinski says there may be potential for even more additional hiring. “We used to buy apartments that lacked capital and fix them up, but as the economy went down, people were looking for the lowest rent period, not granite countertops,” says the Senior Vice President of Human Resources. “We laid off employees on our redevelopment team, but if we return to that model, we may bring some people back.”
Sue Ansel of Gables Residential says her company has hired employees throughout the recession, and will continue to as its management operations grow. “When the market turns around and the time is right for new development, we’ll size appropriately for the amount of development activity going on,” Ansel says.
Olivia Hunter says Southern Management will rely on its existing team for future projects. The economic downturn has forced Home Properties to do more with less and operate as a leaner company, says Lisa Critchley, Senior Vice President of Human Resources. “There will be some limited future hiring, particularly in the development department, but for the most part, we plan on keeping the same numbers,” she says. “Thanks to automation, we’ve become more efficient and need fewer people to do the job.” –L.B.