With hiring and turnover levels on the rise, employers are now experiencing challenges with both attracting and retaining employees, especially top performers and high-potential employees. Adding to the challenge is that many employers don’t understand the important reasons that employees join and stay with a company, according to two major surveys conducted by global professional services company Towers Watson (NYSE, NASDAQ: TW).

The Towers Watson Global Talent Management and Rewards Survey, a study of 1,637 companies globally, including 337 from the United States, shows there has been an uptick in labor market activity. Globally, nearly half of employers (48%) said hiring activity has increased compared with last year. For 15%, hiring has jumped significantly. Additionally, more than one-third (35%) indicated that turnover was rising. Nearly two in three respondents are experiencing problems attracting top performers (65%) and high-potential employees (64%), an increase from two years ago. Further, more than half reported difficulty retaining high-potential employees (56%) and top performers (54%).

“With talent mobility on the rise, employers need to understand what employees value if they are to succeed in attracting and retaining employees. Unfortunately, our surveys reveal a significant disconnect between employers and employees,” said Laura Sejen, managing director at Towers Watson, who led both surveys. “While employers recognize the importance of pay and career advancement as key reasons employees choose to join and stay with a company, they don’t place the same importance on another top attraction and retention driver: job security, or a key retention driver: trust and confidence in senior leadership.”

Indeed, the Towers Watson Global Workforce Study, a survey of 32,000 employees worldwide, including 6,014 from the United States, revealed that job security is the second most important reason they join a company and the fourth most important reason they stay. Employees also ranked trust and confidence in senior leadership as the third most important reason they stick with a company. However, employers did not rank any of these factors as key attraction and retention drivers. Not surprisingly, less than half of employees think their company does a good job when it comes to attracting and retaining the right workers. Only 46% said their organization hires highly qualified employees, while 42% said their employer does a good job of retaining talented employees.

The Global Workforce Study also revealed that many employees feel blocked in their current position. Four in 10 employees (41%) said they would need to leave their organization in order to advance their careers. Even worse, the same percentage (41%) of employees who have been formally identified as high potentials by their organization said they would need to leave their organization to advance their careers. From the employer perspective, less than half of respondents (49%) believe they are effective at providing traditional career advancement opportunities, while 35% said that compared with last year, career advancement opportunities are improving.

“Organizations continue to miss the mark when it comes to career development. Given how important career advancement opportunities are to employees, the fact that so many employees, and especially high potentials, feel stuck should serve as a wake-up call to employers to review their career development programs. Employees will have more opportunities to seek employment elsewhere as hiring activity continues to increase, and employers will be on the lookout for high-potential and top-performing employees,” said Sejen.

The Global Workforce Study found that leadership is the top driver of sustainable engagement (i.e., the intensity of employees’ connection to their organization). However, less than half of employees (48%) agree that senior leadership is effective.

“The importance of leadership can’t be overstated. Employees are more likely to remain at their companies if they have trust and confidence in their senior management and leaders,” said Sejen. “And importantly, senior leaders, managers and supervisors each play a critical role in fully engaging employees.”

About the Surveys

The Towers Watson Global Talent Management and Rewards Survey was conducted from April to June 2014 and includes responses from 1,637 companies worldwide, including 337 companies from the United States. The participants represent a wide range of industries and geographic regions.

The Towers Watson Global Workforce Study covers more than 32,000 employees selected from research panels that represent the populations of full-time employees working in large and midsize organizations across a range of industries in 26 markets around the world. It was fielded online during April and May 2014. The U.S. sample includes 6,014 employees and has a margin of error of ±1%.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has more than 14,000 associates around the world and is located on the web at towerswatson.com.