Retaining Employees Will Get Harder

On April 23, 2024, the U.S. Federal Trade Commission (FTC) made a momentous change when its commissioners voted 3-to-2 for near-total ban on non-compete agreements starting this fall. Non-compete agreements are contract stipulations that prevent an estimated 18% of the U.S. workforce, or about 30 million people, from working for other companies or starting businesses in their field after leaving their jobs.

The final rule would prohibit new non-compete agreements for all workers except for senior executives. Companies must inform current and former employees that they will not enforce existing non-compete agreements and must void them for most employees. This is important for advisor firms and their business-owner clients.

The Upside for Employees

According to data from the Atlanta Federal Reserve, employees who switch jobs tend to receive higher pay raises within a year compared to those who stay in their current positions.

Because this rule change will make it easier for workers to move between jobs, FTC Chair Lina Khan argues that prohibiting non-compete agreements will lead to higher wages, create a more dynamic economy, and foster increased competition among businesses. The FTC estimates that workers’ earnings will increase by nearly $300 billion.

With the ban on non-compete agreements, employees across industries can explore new opportunities without fear of legal repercussions. They’ll have more flexibility to look for positions that align better with their professional goals, preferences and values. They’re also more likely to receive better compensation and better benefits that companies will have to offer to attract and retain top talent.

An Urgent Message for Companies

Companies must start reviewing and energizing their retention strategies now to prevent a potential mass exodus of talent when the non-compete agreements coming into effect this fall. Losing a valuable staff member can be more costly than gaining a new client. Disengaged, unmotivated or uninvested employees can also be a significant expense in terms of lost productivity and potential growth.

Investing in employee satisfaction, fostering a positive work culture, and providing opportunities for professional development are vital steps companies should take to retain top talent and maintain a thriving workforce. These efforts can help employees remain committed, motivated and dedicated to contributing to the organization’s success.

Strategies and Exercises

Treating your team members as investments rather than instruments creates an environment where individuals feel valued and supported. To attract and retain top talent, focus on strategies that nurture employees’ career growth and development. For example, acknowledge their achievements and contributions, foster open communication and promote productive collaboration.

Here are three specific exercises that can boost retention:

1. Develop a Life Career Mission Statement™: Once-a-year performance reviews will not cut it and only blindside your employees. Develop this statement with each staff member to encourage open communication about their goals, aspirations and areas for improvement. Review it quarterly with a mentor or manager to see how things are going, where they could use support, and to ensure ongoing continuous feedback.

2. Chart responsibilities: This chart will create a segmentation of responsibilities based on role within your organization. Gather the team for a collaborative exercise using a whiteboard and sticky notes to identify and refine each member’s responsibilities. Encourage staff to take credit for their contributions and voice their wishes for future tasks. This can foster a sense of ownership and empowerment.
3. Customize benefits: Recognize that a one-size-fits-all benefit approach may only be ideal for some. Offer a mix of benefits tailored to individual preferences such as charitable sabbatical, vacation time, and continuing education support. Discuss during the quarterly Life Career Mission Statement review and use tools like BambooHR and 15Five to track and manage these personalized options.

Rewards of a Thriving Workplace Culture

Prioritizing and investing in talent development and fostering a supportive work environment can help propel growth and success for your organization. Creating a culture in which team members feel heard, valued, and supported can result in:

• Better understanding of roles and how they fit into the business vision.
• Increased staff retention.
• Easier collaboration.
• Attraction of qualified candidates to the firm.
• Higher engagement and contributions from team members
• A healthy pace of evolution and change within the organization
• Identification of future leaders

Embracing the Shift for Long-Term Success

The upcoming ban on non-compete agreements benefits both employees seeking better opportunities and companies committed to fostering a dynamic and engaged workforce. Investing in talent development and cultivating a positive work culture is essential to take advantage of this shift. It will drive higher engagement, better performance and faster learning, and also make a more significant impact.

To achieve these goals, consider seeking assistance from managing partners, strategic HR professionals or coaching firms. They can help with staff management, mentoring, defining roles and responsibilities, and developing compensation guidance. Demonstrating to your team members that they are critical to your company’s future will motivate them to contribute to its success.

Lastly, investing in employee satisfaction and retention is crucial, regardless of regulations or restrictions. Neglecting employees can lead to higher turnover rates, increased recruitment costs, and a loss of valuable institutional knowledge. All of this can potentially damage a company’s reputation.

Jen Goldman is the founder of My Virtual COO™, which helps businesses transform operations and C-Suite skills to boost people, productivity, profitability and growth.