The Never-Ending Puzzle of Compensation & Benefits in Horticulture
For all the wonderful attributes our Green Industry brings to our world and the careers of its employees, we continue to be highly challenged in attracting and retaining qualified talent. There are many Human Resource solutions to improving and retaining talent flow. Unfortunately, no one magic answer will fit all companies or their employees. Additionally, one topic in the equation is often uncomfortable or sensitive to discuss: compensation. In developing an attractive compensation and benefits program, it is important to understand the current economics involved, where to keep educated on compensation and benefits trends, set your specific company total rewards plan, and execute in an engaged manner with your valued team. The Economics We recently hired several positions across the country that were quite challenging due to the compensation set being below market. It is notable that compensation was not below market five to seven years ago, but more importantly, the compensation for these roles has not increased since then. Why does this matter in attracting talent? Understanding the economics of The CPI inflation calculator, which uses the Consumer Price Index for All Urban Consumers, sheds light on why. This data represents changes in the prices of all goods and services purchased for consumption by urban households. A $65,000 Head Grower salary in January 2017 has the same buying power as $84,395.69 in September 2024. A salesperson’s salary of $80,000 in January 2019 has the same buying power as $100,210.80 in September 2024. These CPI numbers do not consider the additional increase effect of our country’s high cost of living areas. As compensation relates to retention, turnover costs companies six to nine months of an employee’s salary on average to replace them. Recent research by Harvard University revealed that increasing pay among warehouse workers by just one dollar per hour resulted in a 2.8% retention boost. Results also showed that every dollar-per-hour pay loss caused a 28% increase in turnover. While lower inflation may ease some pressure, many organizations are still catching up from the past couple of years of cost-of-living adjustments. Balancing real earnings growth with competitive compensation will be vital to moving forward, especially in industries still feeling the pinch. Employees continue to struggle to get ahead from the high inflation years, and employers must keep that in mind. When merit increases exceed inflation/cost of living, employees gain. Then, when inflation/cost of living exceeds merit increases, employees lose. While many employers have provided higher increases in the past couple of years, more is needed to keep up with inflation. As a result, it takes employees a few years to recover from higher inflation times. However, employees seem to forget that they make up ground when increases are higher than inflation; eventually, it all balances out. Many companies focus on adjusting pay based on market competitiveness and talent retention rather than on inflation alone. Every organization needs to look at their own situation and not just what everyone else is doing. The hope is that lower inflation facilitates more substantial salary increases. Typically, most employers see it as an opportunity to lower salary increases. If they do, they might struggle to attract and retain talent. We know we have been in a talent shortage for many more years simply because of the lack of people to fill the jobs continuously becoming more available due to massive baby boomer retirements. Where to Remain Educated One of the best ways to keep up with compensation and benefits trends is to read industry reports from reputable sources such as SHRM, WorldatWork, Mercer, or Willis Towers Watson. These reports provide insights into the current and future state of rewards, including salary surveys, benefits benchmarks, best practices, and emerging issues. Gather market data for your jobs that is specific to the demographics of where your company is located. (HR associations, staffing firms, and the U.S. Bureau of Labor Statistics are excellent resources for this information.) Review the going rates for similar positions within comparable industries, companies, and geographies to establish your pay scale. Conduct a study like this at least annually to ensure you can maintain competitive compensation for all employees. Develop a Total Rewards Strategy If you don’t have the salary budget to stay ultra-competitive, rest assured that there is more to the employee experience than compensation. Gone are the days when compensation or hiring decisions were made based on salary history; 22 states plus 23 localities and counting have passed legislation banning employers from asking candidates for this information or basing hiring or promotion on the candidate’s current compensation. Hiring managers: please do not ask this question any longer! Should the unemployment rate remain low for the next five to 10 years, labor shortages will persist, especially in industries such as horticulture that have a vast number of retirements occurring. That said, bumping salary budgets alone won’t be enough to address recruitment and retention challenges. As a result, employers need to be creative and comprehensive with their total rewards strategy, which comprises compensation, benefits, developmental opportunities, recognition, and other rewards that motivate staff and enable a top-notch employee experience. The best approach to identify which benefits will attract and retain your employees, especially with so many earlier generations joining the horticulture industry, is to simply ask them which benefits they would value! In a smaller company, this can be done with one-on-one conversation, and with a larger employee base, there are many effective survey resources to gather this feedback. Per SHRM, there are 216 benefits companies serving employees up from 175 just 2 years ago. Consider offering benefits that better match what your employees want today, such as health benefits, well-being and family caregiving support, pet insurance, and financial planning services in your total rewards strategy. Invest in workers’ professional development with the idea that you can enable brighter futures through upskilling, internal career paths, or debt-free education. To set employee pay, first, determine your pay philosophy. Do you want to lead, match, or lag the market? The most common
How LEAN is Too LEAN?
Business strategies today drive profitability using many continuous improvement methodologies, including LEAN and Six Sigma, Kaizen, 5S, and several others. Profitability is critical for business sustainability and viability as a going concern. But how LEAN is too LEAN? Some may scoff at the perceived absurdity of the question. Still, according to the Wall Street Journal Article, “Threat of Rail Strike Reveals Persistent Supply-Chain Risks to US Economy” (Harrison, 12/3/2022), “The strike threat highlighted a distribution network in which businesses have sought to reduce delivery costs by becoming as lean as possible… While the approach has improved profits, it also has made it more difficult to respond to shocks such as a global pandemic.” In the December 2022 issue of the Turnaround Management Association’s “Journal of Corporate Renewal” (vol. 35, No. 10), the article “Tough Row to Hoe Ahead for the Agriculture Industry” (Zwick et al., 2022) sheds light on the consolidation of food processing companies Tyson Foods, Cargill, National Beef Packing Company, and JBS which collectively consolidated their market share in the period of the 1980s through today “… from 36% to 85%.” This consolidation, driven by LEAN principles, reduced significant overhead costs but at the expense of a system that is so lean that the current economic shocks are forcing the consumer to bear the burden of price hikes in food that far outpace the hikes in many other products and services throughout this inflationary time. Even the labor market’s tightness today is partially driven by the treatment of employees and reductions in force, stemming all the way back to the Great Recession and the Housing Market Crisis. Past decisions on the treatment of people, driving LEAN today for immediate profitability, are coming home to roost as the labor market remains extremely tight despite the Fed’s actions which have historically had the desired impact of slowing the economy at a faster rate than we are seeing today. As an outcome of the financial crisis of 2007, the Dodd-Frank act was passed. Among the many provisions, it imposed cash reserve levels by banks at much higher than pre-crisis levels. The intent of this additional liquidity was to ensure the sustainability of the financial institutions should another disruption of a similar magnitude occur. Additionally, stress tests were frequently conducted – hypothetical scenarios intended to simulate such shocks and to see how the institution(s) would be able to handle the situation and if the cash reserves were sufficient. As a result, most banks today are in a very secure place, more able to manage and weather such economic shocks than ever before. So, how LEAN is too LEAN? We see the economic impacts of inflation, supply chain struggles, and the tight labor market, all of which have created a harmful national and even global economic situation that is driving us closer and closer to another recession. We also see the slack built into the banking industry through increased financial reserves intended to weather shocks to their business models and the high confidence that such institutions will survive, and quite well. By lowering cash reserves, there would be more profitability, shareholder value, and even higher dividends. So, how LEAN is too LEAN? As 2023 unfolds, there will be more economic pain. That is sometimes a good thing. Economic activity cannot go up forever. Markets are never a straight line with an endless upward trajectory. But what comes down also goes back up. Preparing for the coming economic downturn, whether it achieves the definition of a recession or not, and whether it is a severe or light recession if it does happen, is the right business move. History shows us that many business leaders respond to recessions by reductions in staff, pullbacks in production, and other protectionary stances. As you look at what may be right for your business, look at the pending economic downturn as an opportunity to stabilize your business for the future. Build in a “certain” level of redundancy in labor by not reducing your headcount as much. Plan for the curve to shift back upward. As you would on a slick road where your car fishtails, turn into the curve to right size, level set, and propel your company and all the employees who depend on you towards future growth.
Successful Retention Strategies (Part 4 of 4): Organizational Design
It’s finally here – the end of 2022. What a wild and crazy ride it has been. As business leaders, we have had a lot to contend with and still do. Our work is far from over. More layoffs have been announced beyond the FAANG companies and broader tech sector, inflation persists at uncomfortably high levels, and the labor market remains the tightest in recorded history. Finding top talent is still more challenging than ever. Quit rates remain high, and ghosting by candidates continues. November’s labor statistics reflected continued increases in employee compensation over the 5% mark on average squeezing company budgets and frustrating employer hiring decisions. What is the secret to reducing the harmful impact of all of these challenges, you ask? RETENTION STRATEGIES. The previous articles in this series addressed the role that Onboarding, Recruitment, and Total Rewards play in retention. This article will explore Organizational Design and Development strategies, specifically internal mobility, that will help reflect the vision of the future and the career path for the long-term success of your people. With concerns of a potential recession in 2023 looming large, we will also touch on retention when restructuring your company includes a reduction in force (RIF). Defining the job Not every business can build robust tiered structures for all roles, functions, and departments. For example, many small companies often have departments of just one person. For the medium and larger business, it may seem easier for them to structure tiers for employees and chart a career path. Still, they often run into pay compression and bottlenecks leading to too much bulk in the middle, a reverse hourglass that is thin at the top and bottom but nice and plump in the center. It is easy to see that this is a complicated issue with different challenges facing companies of various sizes. But there are still commonalities that businesses of all sizes can implement, which will aid in retaining top talent. The best place to start, regardless of the company size, is defining the job. What do you want them to do? I know some leaders are disappointed in the obviousness of this but bear with me. This is about more than building an effective and compliant job description. That is part of it, but defining a job begins with understanding your company’s strategic plan. It starts with asking, “how does this role fit?” and “how will it help achieve my business strategy?” These questions get right to the heart of necessity. Sometimes, a role is created not because it advances the business strategy but because it is convenient for someone, a way to shift responsibility onto someone else. While that could be helpful to business strategy, it may not be. However, defining the role in terms of business strategy rather than convenience is critical to ensuring strategic alignment. It’s also important to remember that you are hiring human beings. People. Again, some may roll their eyes and think, “um… yeah…” but keep in mind that as business leaders at organizations of many different sizes, it is easy to get caught up in the daily grind, the strategic struggle, and even the business viability worry and forget that we employ people. They have hopes, dreams, and desires. Employees support their families, contribute to their communities, and most genuinely care about the company’s success. When hiring people, some may be very content doing the same job the same way and producing the same result. Many more are happy to do this job now but want to know what comes next. This is a KEY driver for the great resignation. The old saying, “people don’t quit businesses, they quit managers,” is typically a true statement. But people with internal mobility will often find ways to leave the managers they want to quit and remain with the company. So, you have to have options internally to retain top talent. Here is where we inevitably receive pushback from many small business leaders. Addressing the elephant in the room, yes, only some small businesses will be able to create the same level of mobility as medium and large companies. Every small business, however, will be able to generate SOME mobility. And for mid-sized and larger companies, internal mobility is KING at retaining top talent. Many books have been written demonstrating that investment in the training and development of people, creating lateral and vertical growth as well as realigning responsibilities to expand a role’s sphere of influence and strategic importance leads to employee retention and outperformance of competition no matter the industry or market in which they exist. This could only be accomplished if you first define the role in terms of your business strategy. Up, Left-Right, Hold, Down When talking with leaders about career advancement, nearly 100% latch onto the word “advancement” and take only two of the Webster’s Dictionary definitions of the word literally— “promotion or elevation to a higher rank or position” and “progression to a higher stage of development.” In addition, nearly all forget there is a third definition -“an improved feature: IMPROVEMENT.” Improving someone in your organization is perhaps the greatest advancement any business leader can aspire to achieve with their employees. And this is something that can be done at organizations of every size. Some people want vertical advancement. Ask them, and they will speak in terms of moving up from an individual contributor to a supervisor, manager, director, VP, and into the C-suite of a company. Small family-owned businesses may have the greatest challenge here, with limited structure and family owners filling the highest positions. Larger companies may have more layers, but every business has bottlenecks at the top. While there are limits, there is still opportunity. Evaluating your business growth and regularly reviewing your strategic plan may reveal the point where a new level/layer of management is appropriate or necessary. Even in small businesses, upward mobility happens. However, if employees are frustrated by a lack of upward mobility, share with them alternative mobility
Successful Retention Strategies (Part 3 of 4): Total Rewards
With 3/4 of 2022 behind us, and despite record inflation and fears of recession, we are still seeing the most robust labor market in recorded history. Despite news of layoffs at FAANG companies, the broader tech sector, and retail giants such as Walmart and Target, candidates still have more choices and power in the labor market than ever. Even with historic wage growth of over 5% YoY, wages still significantly lag inflation leading to net wage growth of below -3%. Technology improvements and the continued failure of businesses to appropriately demonstrate caring and support for their people are still significant drivers of the current Great Resignation, which is rapidly becoming “Quiet Quitting” and “Ghosting” as employees – well, they stop showing up for their jobs rather than provide appropriate notice. We are still seeing that resignations are not impacting all businesses, industries, and sectors nor all career levels equally, yet all segments are impacted, nonetheless. Even the Executive level (Vice President through C-Suite) continues to cash in on this wave, driving up base salaries, signing bonuses, and restructuring bonus packages to be more favorable to them and less so to the companies they serve. This is the third of a 4-part series addressing Onboarding, Recruiting, Total Rewards, and Organizational Design strategies that collectively affect and reflect the retention strategies of an organization. As shared in the previous two articles in this series, there continues to be an absence of a single silver bullet to stop the resignation trend. There is still too little attention placed on the one focus area with the highest probability of making the most positive and significant impact on stabilizing the challenging labor and employment market. That focus – RETENTION STRATEGIES. In this article, we will shift our focus toward the role that Total Rewards play in employee retention. Total Rewards is a combination of both compensation and benefits. The term benefit is not intended to be applied exclusively to medical, dental, and vision benefits. Any benefits – vacation, sick pay, parental leave, tuition reimbursement, continuing education, Flexible Spending Accounts for Child Care, and more all fall into this category. When we open our minds and eyes to the breadth of options in the benefits category of Total Rewards, it is easy to see that there is an entire untapped arsenal of options available to retain top talent. That is not to say that compensation is not important. Still, we want to call out that many companies have relied too heavily on direct compensation as a retention tool and too little on other forms of compensation. Without getting too deep into the weeds, let’s look at some amazing ways Total Rewards can be leveraged to drive up retention and reduce unwanted attrition or turnover. Compensation In the years 2000 through 2019, the average annual wage increase in the US was 2.92% (Average Wage Index (AWI) (ssa.gov)), and the average inflation rate was 2.10% ($160,000,000 in 2000 → 2019 | Inflation Calculator (officialdata.org)). This does not mean that wage increases were evenly distributed. CEO pay alone from 1978 – 2018 grew 1,007.5% vs. 11.9% for the average worker over the same period (CEOs see pay grow 1,000% and now make 278 times the average worker (cnbc.com)). However, overall average wage growth was close to where inflation existed, justifying in the eyes of employers the 2-3% annual wage increases most employees who performed well in their jobs were used to seeing. But the pandemic upended all of this. There are many levers that compensation specialists have at their disposal beyond base compensation. Cassandra Faurote, Owner, and CEO of Total Reward Solutions in Indianapolis, shared some revealing trends in total rewards. Some of these have a minimal impact on the bottom line, and it was very eye-opening to see just how little it could take to obtain and retain top talent. According to Cassandra, “A new and very hot back-to-office perk is a Pet Stipend. This is a monthly sum that can be used on dog walking, pet sitting, or some other form of daycare for pets.” Many of us have pets and love them as much as any family member. After working from home with these pets for so long, it is important to make sure they are cared for. Cassandra’s research revealed that “1,300 job listings [in 2022] describe offices where workers can bring their pets.” And yes, the BEST Human Capital & Advisory Group is one of those. See our precious ”steakholder” Tyson’s profile on our website. The four-day workweek is another key trend. While not appropriate for every role in the green industry, judicious use of this schedule for office-based roles, leadership, or any role not mission-critical for onsite during typical operating hours can lead to impressive results. A Maru Public Opinion Poll conducted for The Business Journal in February 2022 revealed the following: 82% of workers would trade 8-hour days to 4 ten-hour days for the same pay. 88% of earners at $100,000+ per year wanted this. 76% of those making less than $25,000 per year also wanted this. The Midwest was 84% higher than all other regions in the country in their desire for the 4-day work week. 74% said they would leave their current jobs for a 4-day work week. 97% said they would be more productive. Cassandra also shared other key compensation drivers of retention that are too often overlooked by businesses, including free lunch (after all, who wouldn’t want a free lunch?), variable pay, performance management, and merit pay. Employees respond very well to variable pay. This helps them connect the importance of what they do to the company’s results. It provides them with greater control over their own earning potential. Through variable pay, employees can see what the company values most and put their best efforts into those activities that are most impactful to the company and their own financial goals. Cassandra shared that, according to World at Work, a global association for human resources management professionals and
Successful Retention Strategies (Part 2 of 4): Recruiting
As the year continues to see upheaval and tremendous instability with rising inflation, tight supply chains, and persistent pandemic fears, the labor market also remains the tightest in recorded history. The Great Resignation has left many businesses scrambling to fill open roles and struggling to figure out how to continue growth or achieve strategic plans with a seemingly revolving door of employees. There is no silver bullet to stop the trend, but there is one critical focus that has received too little attention leading up to and throughout this pandemic and the new challenges that stem from it. This focus has the highest probability of making the most positive and significant impact on stabilizing this challenging labor and employment market. What is it, you might ask? RETENTION STRATEGIES. This is the second of a 4-part series addressing Onboarding, Recruiting, Total Rewards, and Organizational Design strategies that collectively affect and reflect the retention strategies of an organization. The previous article focused on the Onboarding piece. This was important to address because of the egregious errors we saw many companies make in their rush to bring in talent. This article will focus on recruitment’s role in employee retention. While the apparent function of Recruitment is to add headcount to an organization or backfill open positions, little has been shared about Recruitment’s role in employee retention. In fact, employee retention starts with Recruitment. We all know that it is rare, if ever, when we get a second chance to make a first impression. The Recruitment function of an organization is the first impression candidates, and prospective candidates may receive. Thus, it is critical to make it a positive one. Following are several steps that Talent Acquisition partners can and should take to lay the foundation for long-term employee retention, whether internal or external to an organization. Be Real Often, recruiters approach talent acquisition as a transaction, “selling” the company by focusing on all of the exciting and wonderful features, perceived or real, about a company. It comes naturally for many recruiters because they are often selected to be a Talent Acquisition professional based on prior or exhibited sales experience. And while salesmanship is not necessarily a bad trait, it boils down to “how” not “that” you use the skill set. Whether in retail, B2B relationships, or even in the most complex business interactions in the M&A arena, no one wants to be “sold” to today. What people want are solutions to problems. A big challenge is that people don’t want to bluntly disclose the very problems they need to solve. Uncovering these concerns requires a consultative approach. A true consultant will reflect care and compassion, listening to understand first before being understood. A high Emotional Quotient (EQ) combined with an analytical approach will allow the Talent Acquisition professional to best consult with the candidate and help them understand the alignment between them and the role to be filled. This soft approach opens the hearts and minds of candidates to what they can expect when joining a company and often is the first trigger towards high engagement— a key we will address in other articles in this series and a critical link to employee retention. Part of consulting is ensuring prospects and candidates understand the good and the bad about a company. No company is perfect, just like there are no perfect candidates. The exclusive pursuit of only the perfect will always disappoint, leading to disaster and an impossibly long recruitment cycle. Every company has challenges. The right candidate must understand these challenges and be excited to tackle them. They should not be daunted by the challenges but willing to embrace them. Of course, there must certainly be something in it for them, and the advantages should be presented to balance the discussion. In the end, there should be a win-win scenario where the advantages and disadvantages are shared, where both see that the right candidate will enhance the company’s advantages while solving their challenges. The right candidate’s advantages should be the right fit to solve these challenges, while a company’s advantages should be able to support the candidate’s growth and development. Like a jigsaw puzzle piece with curves on various sides with high and low points, the highs of one should fit the lows of others and vice versa. This is being real. Be Engaged Automation permeates so much of our lives, and the intent is to make things easier and faster, to do more with less. Unfortunately, there are times and interactions where technology is just a poor substitute. How many of us receive blind outreaches on LinkedIn, email, or even spam calls about products or services that have no alignment to us, what we do, want, or need? Someone is throwing mud on a wall and hoping something will stick. But how do you feel about such an approach when you receive one? Do you think a candidate will feel something different just because you are the one deploying such an approach? Everyone, to one degree or another, wants to be noticed and be recognized for their accomplishments. They want to be wanted and sometimes pursued. When reaching out to the passive job market, craft personal messages that tell the prospective candidate you read their profile or resume. Connect the dots to show them what made you believe a conversation may be worth their time, and importantly— do your homework. When Talent Acquisition professionals are disengaged, they fail to pay attention to the little details that make the most significant differences. They fail to catch experience, education, and geography. There is a lack of analysis and understanding of career trajectory or directionality. But the most critical miss of the disengaged Talent Acquisition professional is a failure to follow up. They make promises they do not or cannot keep. Candidates and prospective candidates view this as disingenuous. The perception is that the Talent Acquisition professional— to put it lightly— is not very professional. If by some miraculous chance the candidate is
