Debunking the Compensation Myth Surrounding Retention
A driving need for obtaining talent is retention. It is a huge issue when you take into account that, according to a September 2018 article from CNBC, “workers are quitting at the highest rate since 2001.” When retention rates are low due to high undesirable attrition, many business leaders look to recruitment to fill that gap and solve the problem. However, the reasons that candidates wield so much power in today’s market is because of a growing skills gap and talent shortage. The need is high and the supply is low, so it is unreasonable to believe that workforce headcount issues can be solved by recruiting alone.
Most business leaders understand the laws of supply and demand as it relates to the products and services that they produce and sell. When demand is high and supply is low, prices rise. Conversely, when supply is high and demand is low, prices fall. The challenge is finding the equilibrium where the right price stimulates movement of the product or service rather than warehousing or letting it sit idle and unproductive. People, however, are not the same as a product and that is a hard pill for many business owners to accept. In other words, retention is not exclusively about price.
Recently, Forbes published an article entitled, Why American Workers Quit Their Jobs, and provided an infographic to summarize and showcase the results. Unfortunately, the article and corresponding infographic can be misleading.
The results are based on a survey conducted by PayScale; whose core business revolves around compensation metrics. Thus, is it any wonder that “I want higher pay” is identified as the highest percentage motivator for quitting? While informative, the article did not provide the complete picture leading most business leaders whose time is short and consume data and information in quick, easy bites to come to a quick conclusion. “Well, according to Forbes, a very well respected and trusted source of news and business information, retention IS about paying my people more.”
With all due respect to Forbes and the article’s author, it’s just not that simple and everyone who deals with recruitment and retention as a core function of their role and responsibilities knows it. Even PayScale knows it. The very same report cited in the Forbes article reflects that compensation is not the key to retention. A deeper look into the numbers reveals the following:
Top Reasons for Quitting:
- I want higher pay (25%)
- I am unhappy at my current organization (16%)
- I want to work at an organization more aligned with my values (14%)
Top Attraction to a New Organization:
- The opportunity to do more meaningful work (27%)
- Increased responsibilities in this role (17%)
- Increased pay for this position (16%).
If compensation was the single most important retention tool, it would be at the top of the reasons for quitting and the attraction to the new organization. What this study reflects is that what exiting employees tell us, and what their real motivations are, are two different things.
Additionally, one has to look even deeper to understand that retention differs across different levels of the organization. What motivates retention for front line workers is different than what motivates top executives, which is even different from what motivates managers or directors.
As in any sales interaction, price is the most common objection encountered. “That product/service is just too expensive.” Every salesperson worth their weight is prepared and knows that such objections are often just chicken poop, and this is when the real sales work begins. What the client/customer does not see is the VALUE for the price but rather they see the PRICE for the value. When it comes to employee retention, it’s the same thing. Exiting employees use the price objection all the time as an avoidance, but if the business is to really solve its problems then they have to perform true root cause analysis, dig deeper and understand the actual underlying reasons for employee attrition.
Let’s not fool ourselves either. Compensation IS a legitimate factor that DOES impact and factor into why people leave. For example, when an employee perceives: discrimination in the workplace or mistreatment; being skipped over for a promotion when deserving of it; not receiving the training and development they need; a lack of recognition or reward for a job well done; or even something as severe as harassment or workplace bullying. The overriding perception in these scenarios often becomes, “I don’t get paid enough to put up with this.”
Therein lies the reason pay is provided as the chief motivator for leaving. The last thing they want to do, especially once they have made up their minds and they are ready to leave, is to burn bridges, make waves, or fight their way out the door. Mentally, it is best to make a smooth and conflict free exit. As such, they often hide their real objection to remaining for fear of offending someone, getting into an argument, or painting themselves into a corner where they cannot leave an environment they no longer want and are unable to go to where they believe they will be happy and prosper. Incidentally, compensation is also the easiest excuse for a company or manager to accept.
So, what are business leaders to do about this? How are they going to retain top talent? First and foremost, don’t immediately jump to the conclusion that compensation is the silver bullet, or the magic wand that will solve all problems. That’s a surefire way to price yourself right out of business. Rather, work collaboratively with your HR department and managers. Engage in the same root cause analysis with your team’s motivations that you do when solving production or operational problems. LISTEN to the employees and what truly motivates them. Conduct engagement surveys to confirm it. But most importantly when you listen, be prepared to ACT on what you hear. Demonstrate to your people that they are valued, and you are willing to invest in them through training and development. Layout the career path before them. Let them see the value of their contributions to the company, their peers, management, investors, customers/clients, and the community around them.
Solving retention issues is not a cookie cutter approach and will be different at every company, even similar types of companies within the same industry. What works at Coke may not work at PepsiCo. What motivates employees at Home Depot may not be the same as what motivates those at Lowe’s. Recruitment cannot be looked to as the solution for all retention problems either. They may bring talent to the company, but they do not make the hiring decisions and they do not supervise employees or manage operations. Retention must be a part of the culture and relies on conscious collaboration at all levels of the organization.
At BEST, we are happy to help.
If your company is need of assistance in deepening your candidate pool and identifying the Best Behaviors for your company in a candidate’s market, we can help — contact us today!