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
Successful Retention Strategies (Part 1 of 4): Onboarding
The current labor and employment market is the most volatile in recorded history. Never have employee candidates had more choices and power in the market than they do today. Add to this the pandemic, continued low wage growth for most people below the executive level, technological improvements, and failure of many businesses to appropriately demonstrate caring and support of their people. The result is the current crisis known as The Great Resignation. While the Great Resignation does not impact all businesses, industries, sectors, and career levels equally, all of these segments are nonetheless affected. Even at the executive level (Vice President through C-Suite), where people are arguably treated better than many front-line, entry-level people, and who are recipients of already higher pay and higher pay growth over the last 20 years and more, are cashing in on this wave driving up base salaries, signing bonuses, and restructuring of bonus packages more favorable to them. There is no silver bullet to stop the trend, but one critical focus has received too little attention leading up to and throughout this pandemic. 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? EMPLOYEE RETENTION STRATEGIES. This is the first of a 4-part series that will address Onboarding, Recruiting, Total Rewards, and Organizational Design strategies that collectively affect and reflect the retention strategies of an organization. Employee Relations and Communication strategies overlap and lend support to these (4) categories, making them more successful at retaining key talent. Interesting to note that each of these areas (outside of Onboarding and Communication) is a dedicated Human Resources discipline. Each discipline is far too deep a topic to cover fully and impacts significantly more than just employee retention. Therefore, each area will be discussed from the standpoint of their impact on employee retention and not the totality of the discipline. A Typical New Employee Onboarding Scenario Let’s take a look at a typical start to a new hire’s onboarding journey. It’s your first day on the job. The day is filled with hope and promise. The interviews were exhausting, lasting several days stretched over several months. Many were conducted virtually due to the pandemic and precautionary guidelines (thankfully, they didn’t see your comfy fuzzy bunny slippers). The final interview included an in-person onsite series of interviews and a facility tour. You are nervous even though you are confident you made the right decision. As you walk into the office building for your first day, you notify the receptionist that you are here. He looks at you quizzically, not knowing who you are nor whom you are supposed to see. The receptionist asks you to have a seat, and he will track down who should greet you. “This is odd,” you think to yourself. “The interview process seemed relaxed, organized, and well-executed. Perhaps it’s nothing, and I’m just being critical. Relax – think happy thoughts. Today is going to be a great day!” Twenty minutes go by, and no one has come to greet you yet and begin your onboarding. You approach the receptionist and ask, “Sir, am I supposed to be meeting with HR first or my direct supervisor?” “I’m not sure,” he replies. “I contacted HR, but they did not answer. I left a message with the HR Generalist, who typically handles new hire paperwork. I am sure they will be here any moment.” And so, you go back to the seat in the receiving area where you had been sitting and continue to wait. Anxiety starts to build into frustration. “I did get the right start date, didn’t I?” you think to yourself. You pull out your cell phone, access your personal emails, and search for the welcome email with your start date information. “Yep, I got the right day and time.” After another 20 minutes, an employee comes in through the front doors. On their way past the front desk, the Receptionist stops them saying, “Akeem! So glad you are here. I left a voice mail for you a bit ago about this person starting today. Are you supposed to do their onboarding, or is the hiring manager?” Looking a little embarrassed, Akeem says. “I’ll handle it,” and he turns to greet you, arms full of coat, coffee, umbrella, and thick, overstuffed computer bag. Fumbling with everything to free up a hand, Akeem offers you a proper handshake and greets you. “Hi, I’m Akeem, HR Generalist. I hope you have not been waiting long.” Mentally you are quite miffed and barely contain the thought, “waiting long? I have been waiting for nearly an hour now,” from coming out your mouth. “Not too long,” you reply instead. “Very eager to get started for my first day.” This scenario often plays out in too many companies, from small independently owned businesses with under 20 employees to large publicly traded multi-national companies with over 60,000 employees globally. It does not matter if there is no HR presence, an HR department of one, or a large 100+ person HR department with defined HR discipline coverage and degreed/certified professionals, this first-day scenario and the corresponding train-wreck of an onboarding experience that follows it can happen anywhere. An experience such as this starts the time clock ticking towards resignation day. Not what any business wants when they spend so much money, time, effort, and energy to recruit the right person for the position. An effective new employee onboarding program is a critical step in retaining employees. The only constant in business is change, and change is the greatest source of stress, worry, and concern for most people regardless of career level. The onboarding process should be designed to reduce the new employee’s stress, anxiety, and concern by transparently and effectively communicating with them. Effective communication is critical. Each company is uniquely different, so each employee onboarding program should be customized to your company. Through the onboarding program, necessary compliance forms (such
What’s Going On with HR?
“What’s going on with HR?” you ask. Well, frankly, a LOT. Human Resources is a diverse collection of disciplines. We all love a succinct answer. In short, Human Resources includes anything that impacts the people working in and around the business and may even impact the vendors, clients, customers, and consultants to the company. But even that does not quite capture all that Human Resources is and does. So, to ask, “What’s going on with HR?” you can quickly see how expansive of a question that is. Rather than share all that is going on with HR, let us look at some current events occupying a lot of time, effort, and energy within Human Resources. While the industry, unique operations, organizational headcount, and revenue volume all impact the priorities of the HR function within each business, some commonalities have a high probability of being experienced by the largest number of HR functions across all industries, operations, headcounts, and revenue volumes. Talent Acquisition This is currently the most pressing issue facing businesses today. The sourcing, screening, interviewing, hiring, and onboarding of top talent to either grow the business, stabilize the business, or backfill positions vacated through voluntary or involuntary terminations is taking up an unbalanced and overwhelming amount of HR’s work today. The pandemic is a primary driver of the issue and not just because of the dangers to the health and even lives of the employee population. Many employees are resigning their positions not to go on unemployment or even to move to a competitor but instead because of their perception of how they were treated in the early stages of the pandemic when layoffs and closures happened; because of their perception of how they are being treated today with the controversies around masking, testing, and vaccinations; and because they have discovered during the layoffs in the early stages just what is important to them or the need and benefits of a better work/life balance; and so are leaving to go into different industries, open their own businesses, or into jobs they perceive will provide better opportunity to support themselves and their loved ones. Because of this, finding top talent and convincing them to join your organization is more challenging than ever before. We are further seeing massive exits from the workforce. There have been significant drops in the labor participation rate. Many attributed this to the pandemic alone, and that is not the case. We have known since the early 2000’s that the baby boomer generation would eventually retire. Up until February 2020, it appeared they would continue working far longer than any other generation in the workforce, but the pandemic did have an effect in accelerating the exit of Baby Boomers from the workforce. They began to ask themselves, “Is this really what I want to deal with in the twilight of my life? Isn’t family more important? Shouldn’t I enjoy all that I have built, gained, and acquired throughout my life rather than add more stress or risk my life and those I love by working through this pandemic?” So while the pandemic has affected the decline of labor participation, it is primarily the exit of a generation already known to be leaving the workforce that is having the significant impact we are seeing today. And with those exits, who is left to fill the void? If the labor participation rate decreases, Talent Acquisition has a big problem on its hands. They cannot recruit people who do not exist.” Total Rewards This is the second most time-consuming issue for many HR professionals today. Closely tied to Talent Acquisition and Talent Retention necessary to stave off or stem the tide of this Great Resignation, astute HR professionals are examining pay equity and pay parity. They are researching the benefits that are offered, and not just medical/dental/vision benefits but also all wellness initiatives, continued professional education coverage, and perks which make their employees’ lives easier. Many businesses are discovering they do not have the right combination in their total rewards program to obtain and retain top talent. There are adjustments that must be made, and some of these are costly. What is the alternative? Doing the same thing the same way and expecting a different result – well – we all know what that is. The only constant in business today is Change. HR professionals should be reexamining their total reward programs to improve the mix and meet or exceed organizational and employee needs. Talent Retention This is tied closely with Talent Acquisition and Total Rewards. It is what many businesses hope is an outcome of the efforts in Talent Acquisition and Total Rewards, and that is a mistake. Retention should be an initiative all its own. While the right Talent Acquisition and Total Rewards initiatives and strategies will have a significant and beneficial impact on Talent Retention, there is so much more to it. To retain talent, businesses must understand that people do not join a company exclusively for the role into which they are hired, they enter a company for that role and the potential for personal as well as professional growth. They look for increased responsibility, contribution to organizational success, giving back to the community, and income growth to achieve their own financial goals. While companies profess to provide this growth to employees, too many have been quick to replace employees before and even during this pandemic, and it has left a sour taste in the mouths of many employees. Businesses that are successful at reducing or eliminating the impact of the Great Resignation are genuinely focused on defining how they treated and currently treat their employee population differently and better than their competition; they provide a strong and positive culture that exemplifies caring and support for their people; they develop an active social cause employees welcome giving back to, and they clearly articulate a career path and the learning and development programs that will help their employees meet personal and professional objectives. While this
The Missing Employees
Are you missing employees? Where did they go? I just got off the phone with a restaurant owner who temporarily closed one of his locations so that he could redistribute the staff to the other three. I’ve also heard or seen in the last week: A Starbucks closing at 4:00 PM for lack of staff. A director in a large accounting firm reporting that two pay raises in 9 months (for remote employees) are being characterized by the 30-something accountants as “non-competitive.” Apple employees publishing an internal letter saying the company’s plan to require 3 days a week attendance is “unacceptable.” A wire service story noting that only 12% of office workers in Manhattan have returned to their offices. The manager of a new restaurant scheduling 27 interviews, then sitting through 26 no-shows. Wait times for services businesses that are are unworkable for customers. Our tree trimmer offered me a date 4 months out. The pool contractor’s backlog is seven months. Both claimed insufficient crews to handle the business. I talk to at least a dozen employers a week, and all are complaining about the lack of qualified applicants. Several have raised their starting wage rates multiple times, with no discernable change in the flow of applicants. What the hell is going on? To start, I don’t believe that it’s all the fault of supplementary unemployment benefits. It is true that the states which discontinued the supplements have somewhat lower unemployment rates, and that $300 a week is enough to entice a $10/hour employee, but the missing employees are across the wage range. Factors Driving the Shortage and Wageflation One fact is that the economic rebound since 2009 has not previously had much impact on wages. They were bound to catch up at some point. The Federal Minimum Wage of $7.25 an hour is now insufficient to pay for basic apartment rent anywhere in the USA. Supplementary benefits or not, no one wants to put in 40 hours a week and not be able to live on what they earn. Another is the absorption of women into the workforce. For much of the ’80s and ’90s, women working for the first time represented a net addition to the number of available workers. This had a depressing effect on wages, as there were more bodies chasing limited jobs. The employment market has adjusted to this new normal. Remote working has frayed the cultural relationship between employers and employees. Where workers often stayed in a job because they had friends there, or were comfortable with their responsibilities, now salary is rapidly becoming the only factor they consider. The inflationary pressures of deficit spending are shrinking the buying power of static paychecks. The lessening of COVID-19 is releasing a backlog of employees who “wanted to move anyway,” but were hanging on to what security they had through the pandemic. Most importantly, over 50% of the Baby Boomers are now over 65 years old. Generation X is much smaller, so these retirements impact mid-level employees and managers the most. The available pool of experienced people is literally shrinking. Missing Employees and Exit Planning If you are one of the Baby Boomers who are now 21% of the population but still own 51% of the private companies in the U.S., missing employees will impact you in more ways than just on your daily workload. Increased labor costs will have a direct impact on profitability, and therefore valuations. The challenge of retaining employees long enough to develop true proficiency is growing. Higher turnover means you’ll need more people for the same tasks. The long-term commitment of a relationship where someone is in training to assume control of the business becomes in many cases, unimaginable to an employee. Lack of experience in a management team also detracts from enterprise value. In businesses that depend on repeat customers, relationships may need to be reestablished regularly. I saw a cartoon a few weeks ago. An owner is talking to his employees. He says “When we said you were essential workers, we didn’t mean you should be paid like essential workers.” Perhaps they can be forgiven for misunderstanding. In our mission statements, we often say that employees are our most important asset. It looks like we may have to put our money where our mouth is. John F. Dini, CExP, CEPA is an exit planning coach and the President of MPN Incorporated in San Antonio, Texas. He is the publisher of Awake at 2 o’clock and has authored three books on business ownership. The single largest transaction and transition of your life deserves special attention. Are you planning to exit and sell your business? Business Exit planning is quickly becoming a buzzword in the legal and financial communities. Your professional advisors position themselves to provide tax, risk management, wealth management, and contract preparation services. BEST Exit Plan Advisor has been trained to manage your team of tax, legal, business, and financial planners to navigate your exit strategy. Click here for more details and a video on how to get started. If you want to see how prepared you are for transition, take the 15-minute Assessment at no charge: There is one indisputable fact – 100% of owners will eventually exit their business. The Assessment is a multiple-choice questionnaire that does not ask for confidential or financial information. Nevertheless, it is a critical first step in starting the discussion and planning process. Click here for more information concerning our free, no-obligation exit planning assessment.
Employee Pay in Focus: Transactional vs Strategic Pay Practices
Differences abound between transactional and strategic human resources, but even if the distinctions are clear to HR generalists, these terms get a little fuzzy when it comes to employee pay matters. Nonetheless, it’s important to understand the distinctions as these can be important to establishing the right pay practices and policies to keep your organization market-competitive. Let’s look at some critical differences between transactional and strategic approaches to employee pay, and answer some frequently asked questions that can help bring this subject into focus: Characteristics of Transactional Employee Pay Transactional employee pay practices tend to be short-term (or, for that matter, often shortsighted). They address situations but don’t address the “big picture.” They tend to be stop-gap in nature; interim solutions that might still need permanent strategic solutions down the road. Here are some common employee pay situations that are short-term and transactional in nature, rather than long-term and strategic: Hiring new employees at just above what they are being paid with their current employer Bringing new employees into the organization at a pay rate above existing employees to make sure the position gets filled Awarding merit increases without performing any proactive analysis just because they fit in budget Utilizing loose descriptions of job functions Using free salary data or letting employees drive the pay narrative with potentially misleading or inaccurate data from the internet Characteristics of Strategic Employee Pay Strategic employee pay practices tend to be longer-term solutions. They take the big picture into account and take the long view toward continuing marketplace competitiveness. Here are some common employee pay situations that are longer-term and strategic in nature, rather than short-term and transactional: Placing new employees in a market-validated pay range and comparing their history to others in the same or similar position for proper pay placement Evaluating and adjusting pay for current employees as needed when new hires must be brought in at higher rates Conducting a discrimination analysis before approving merit increases and address related issues proactively Utilizing job descriptions with clear responsibilities and standards for minimum as well as desired experience levels and education requirements Securing third-party published and scrubbed employer data or using a compensation consultant to secure salary data Answering Frequently Asked Questions to Clarify Transactional vs Strategic Employee Pay Practices Question: How can we bring new hires in using the prevailing market range when current employees are below market? Answer: First, think of your pay range in thirds: The lowest third of the pay range would apply to new and untested employees with little to no experience. The middle level would apply to fully proficient employees with several years of experience. The upper third is for seasoned employees with sustained performance over many years as well as a lot of experience. Obviously, you’ll need to have key information to properly place new employees into the appropriate pay range. For example, how much relevant experience will they bring to the job? Three years of experience? Four? None? You’ll then need to consider your current employees and align the new employee’s pay with other similarly situated employees. For instance, if a current employee has been in the job 4 years and came to you with no previous experience and the new employee brings 4 years of prior experience, you should pay these employees approximately the same. If you need to bring that new employee in higher than the existing employee because the market demands it, keep in mind when your merit awards will occur. If they are just a few months away, the current employee’s pay may exceed the new employee’s pay with their merit increase. If you just awarded merit increases, you may need to increase the existing employee’s pay to avoid creating discriminatory pay practices. You may also have to budget an increase for current employees and then execute the pay increases as soon as possible. You could also offer the new employee a sign-on bonus payable in various payments to keep the regular rates of current and new employees aligned. This leads us to the next question: Question: How can we realign existing compensation to market levels with minimal impact to financials? Answer: Tough question. It helps to budget for market-related increases each year. If that hasn’t been your practice and the pay ranges have fallen behind, you might provide increases every six months until you can get employee pay where needed. For employees below pay-range minimums, you can give merit increases first and then make a market adjustment if needed to help them reach the new minimum. Finally, you can use bonus programs, known as “variable pay,” in addition to base pay. Variable pay benchmarks must be re-earned each measurement period based on results. This enables you to hold merit increases in check; this can be important because merit increases permanently increase salary levels as well as benefits associated with base pay, such as life insurance, short-term disability, long-term disability, and sometimes retirement plans. Bonuses, on the other hand, are single pay-outs that do not normally increase base pay levels and related benefit costs for benefits (unless otherwise included per your benefit plan documents). Be sure to check your plan documents to clearly understand the definition of compensation before using bonus plans. Which naturally begs this question: Question: Why is a properly designed strategic pay program important to an organization? Answer: Among the many reasons are that a well-designed strategic employee pay program: Provides appropriate pay ranges for recruitment Promotes accurate job descriptions Provides a basis for determining the external value of jobs to market Provides baselines for reviewing employee performance and rewarding desired behaviors Ensures costs are maintained and managed appropriately Helps reduce turnover through improved employee morale and engagement when pay is not a dissatisfier and there are no pay equity issues The Bottom Line: It’s important to strategically plan your employee pay programs so you can attract and retain your top talent. Recognize that your employees are an investment and not an expense. The time and money it takes