Retaining talent is a tough proposition for even the best organizations. In an era of online job searches and global recruiting it’s no easy task to retain the brightest and the best. And the current economic downturn has created even greater challenges for companies that now have to deal with layoffs, a heavier workload for remaining employees, reduced benefits and perks, and a resulting drop in morale that can crumple productivity and undermine profits.

“We are dealing with difficult times because organizations must retain talent but also manage costs,” observes Cindy M. Keaveney, executive vice president at Aon Consulting. “Organizations that develop a clear-cut strategy for retaining talent are likely to achieve far greater success now but also when the economy turns around. The right combination of rewards, benefits and learning opportunities can build a competitive advantage.”

“The perception within the executive suite that employees aren’t going anywhere and they are lucky to have a job is deeply flawed,” says Brian Kropp, managing director for the Human Resources Practice at the Corporate Executive Board, an organization that conducts research and tracks best practices. “Many organizations will face significant problems when the economy improves. Employees have a long memory and how organizations act now affects retention when the business environment improves.”

Ultimately, organizations must develop an approach that takes into account the realities of today’s labor environment, but they must fashion a human resources strategy that fits the specific needs and requirements of workers. The upshot? Savvy organizations are tweaking and refining benefits packages, introducing new opportunities and challenges, providing mentoring and niche training, creating specialized perks, and allowing alternative work schedules that suit employees.

Employee Engagement Labor Pains

The right mix of total rewards combined with favorable working conditions goes a long way toward building employee engagement. But amid the current downturn—one that has forced many organizations to downsize and restructure—a “new normal” is being created. Employees are working longer hours, doing more work, facing perpetual change and witnessing a cut in rewards, including salaries, 401(k) matching, pensions and various other programs. “People are feeling increasingly tired, disenfranchised and disengaged,” Keaveney says.

Although it’s possible to lose valuable talent at any time, the problem is festering, according to Kropp. When the Corporate Executive Board surveyed workers about whether they are considering a job change, only one in 10 indicated that they are actively looking. That’s the good news. The bad news is that 38 percent are seriously considering making a change when the economy improves. “There is a great deal of pent-up turnover. It’s extremely dangerous to think that there’s no major need to engage employees and provide excellent benefits,” he says.

Consequently, developing a proactive talent workforce retention strategy is paramount. According to Keaveney, three major factors play a role: An organization must optimize total rewards, ratchet up communications, and use new and creative methods to improve morale. “There’s a need to create an effective framework but also ensure that employees are kept in the loop and know what’s going on,” she explains.

The first part of the equation, optimizing rewards, centers on gaining a comprehensive view of employee compensation and rewards. It’s vital to know how much an organization is spending on total rewards, but it’s also important to measure how important and effective each reward is to the organization as a whole—and to various employee segments.

Understanding groups within a workforce requires surveys, analysis and feedback. “Once you know how different rewards affect workers and shape thinking and actions, it’s possible to make trade-offs based on how different factors impact employee engagement and retention,” Keaveney explains. “The goal is to make sure rewards investments are best aligned with employee engagement and retention.”