Salary History? Don’t Ask and Don’t Tell
Last July, Illinois Governor J.B. Pritzker signed into law a bill that prohibits employers from asking a candidate for their previous job salary history. Illinois is not alone. In the U.S., there are currently 17 statewide bans and 19 local ordinances that have acted against discussing salary history. With more states adopting these practices in the next 6-12 months, the question of “why?” comes to mind. Some municipalities, like Philadelphia, are choosing not to follow this mandate, arguing that taking away this question was inhibiting an employer’s First Amendment right to free speech. The fact remains that asking a candidate for their salary history allows for discrimination and does not always provide the top-quality candidate that companies spend thousands of dollars trying to find. As business leaders, hiring managers, and recruiters, we have to ask ourselves— is knowing a candidate’s salary history all that important? After all, we have a set compensation range (low-mid-high) that we have budgeted for an open position. If a candidate meets and exceeds the requirements, qualifications, and behaviors for the role and fits within the compensation range, does it matter? After all, both the employer and candidate win. Maybe the employer doesn’t get the “deal” they wanted or lower their expenses by getting the candidate for less than the compensation range. The candidate may also get a lot more in compensation than they received in their last position. Is that an adverse outcome? Or could it have the effect of engaging and motivating the new employee to increase his or her performance? Think back to your last interview. You were probably a little nervous being the center of attention, knowing that one key answer could land you a job or send you back to the drawing board. You did your research on the role and knew the range a prototypical person in this position would make, but the company has not divulged their compensation range for the job. Then they ask the dreaded question, “How much are you currently making, or what did you previously make?” Most employers assume these guided questions are to measure compatibility between past and future positions. However, for many candidates, this question feels like a trap. If the current salary is too high, the candidate could be pushed aside for being overpriced or overqualified. Indicate a range that is too low, and the candidate might receive less than the value of the job. There are also ethical questions at work. Shift the Conversation When examining questions regarding salary history, there is an opportunity for labor compliance violations. This question allows for disparate impact, which unknowingly discriminates against a group of people, especially women when compared to men for the same position. According to Business Insider, a Hispanic woman makes 53% of what a white male makes in a given year. These statistics vary by state, as some have enacted policies to close the wage gap, but the average data shows that this gap is still very much alive. Assigning a salary based on past employment earnings continues errors of the past rather than righting a wrong and determining the adequate compensation based on the position and responsibilities it brings. By creating laws prohibiting employers from inquiring about salary history, many states feel they are taking a step toward complying with the Federal Equal Pay Act of 1963 and attempting to close the wage gap. How do we move forward and continue to find ways to make sure the candidate matches the role if salary history is now out of the equation? Carolyn Cowper, V.P. of Performance and Rewards with The Segal Group in New York City, advises, “Shift the conversation to the candidate’s salary expectations rather than salary history, then move on to focus on the candidate’s skill set and qualifications for the role.” Recruiters now feel it necessary to ask the candidate what they think they are worth — taking a net worth of all their talents, experience, and assets that they will bring to a new position. For example, one person could make twice the salary of another but only have half of the work ethic and drive. When you take a deep dive into the backend of the hiring process, we see that salary history tells us very little. In a study done by Workplace Culture, they reported that 86% of millennials would take a pay cut if it meant working at a company with a better company culture. Work-life balance, a culture of advancement, and education reimbursements are often more important than compensation to today’s candidates. As a business, it is in your best interest to find people that share similar values and goals to help grow the company into the future. The Market is Speaking Many states agree that it does not matter how much you made in your past job. You should, instead, be getting paid the market price of the current position. Candidates should take it upon themselves to research the standard salary rate before going to the interview, and employers should also monitor this as well to see if they’re competitive. There are many online sources for these statistics (Salary.com, Glassdoor, and PayScale). Company leaders, hiring managers, and recruiters should ask the question by taking a “Total Rewards” approach: What is your desired base salary? Bonus? Benefits? Vacation? Other rewards (for example, educational reimbursement) and then let the discussion progress from there. As record low unemployment continues, and there are less skilled workers available for more increasingly skilled open positions, there are already hiring and employment trends happening that would have been unthinkable just 5-years ago — retention bonuses, extraordinary counteroffers, and even limiting background checks. Even Non-Compete Agreements are on the block. They are already not enforceable in 4 states (including California), and resistance is growing with a Senate bill introduced last year looking for a nationwide ban. In such an environment, it stands to reason that asking for a candidate’s salary history and other employer-favored actions will become history. Be prepared.
Employee Engagement: “Did I Stutter?”
Poor Stanley. The lovable curmudgeon on the still popular TV Show “The Office” wants to be left alone so he can do his crossword puzzle in the middle of a company brainstorming meeting in peace. His boss, bumbling Michael Scott, tells him to put his game down and join the group. Stanley replies with a firm, “No.” Michael then says, “Stanley, we’re havin’ a little brainstorm session.” Stanley then proceeds to cut him off and says loudly and firmly enough so the whole room can hear it, “Did I stutter?” Michael becomes so embarrassed and flustered that he calls a quick end to the meeting so he can grab a glass of water. The episode continues with Michael and Stanley trying to come to an understanding and better define the boss and employee relationship. Do you think Stanley is engaged in his work? Do you think he is committed and connected to his organization? Do you think Michael may have something to do with that? According to SHRM, executives from around the world say that enhancing employee engagement is one of their top five global business goals. As a critical business driver in today’s highly competitive environment, employee engagement can have a significant impact on your company’s bottom line. According to The ISR Employee Engagement Report, “Companies with high levels of employee engagement improved 19.2% in operating income while companies with low levels of employee engagement declined 32.7% over the study period.” Is it any wonder that increasing employee engagement is a top-five global business goal? A highly engaged workforce is the key to retaining top talent within your organization, driving high levels of customer satisfaction and loyalty for sustained growth. However, how do you know if your workforce is engaged or not? Then once you identify low engagement as an issue, how can you address the problem before your bottom line starts to suffer? Is My Workforce Engaged? That is a good question because we often confuse job satisfaction and happiness with employee engagement. Therefore, the thought goes that if my people are happy, then they’re engaged. However, it is possible to have a happy and satisfied employee who is not actively involved in their work or committed to the company. According to Kevin Kruse, the author of Engagement 2.0, “Someone can be happy at work, but not ‘engaged.’ They might be happy because they are lazy and it’s a job with not much to do. They might be happy talking to all their work friends and enjoying the free cafeteria food. They might be happy to have a free company car. They might just be a happy person. But! Just because they’re happy doesn’t mean they are working hard on behalf of the company. They can be happy and unproductive.” Thus, happiness and job satisfaction are not useful indicators of employee engagement. It could be they have found a comfortable place to “hide” in your organization without the level of commitment and caring that could help propel your company to the next level. Gallup regularly conducts surveys on the topic of employee engagement, and they have found that nearly 70% of the workforce today is disengaged, causing employees and businesses to suffer dramatically due to increased turnover, low commitment, and reduced productivity. How to Address Low Engagement? Measure employee engagement each quarter to provide closer-to-real-time data about how your staff views the organization, their managers (who have a significant impact on their overall engagement), and their roles within the company. The powerful “heat map” it creates shows leaders exactly where problem areas exist as they slice and dice the data into targeted workforce segments (by the department, location, generation, tenure, and more). Scientifically based employee feedback surveys allow you to take a deeper dive into the company culture and pinpoint the root causes of disengagement. By collecting anonymous feedback regularly, it gives teams and leaders real-time insights from scientific data that can then be used to impact change quickly. If you’re looking to bring more meaning to your employees’ work experience and increase employee engagement and productivity, then start acting on a proven and predictive data format. We can help you build an action plan to drive high engagement and performance, which will impact your bottom line and your ability to compete better and win. In August 2019, close to 200 business executives met and issued a statement on “The Purpose of a Corporation,” radically stating that companies should no longer advance only the interests of shareholders but also invest in their employees. It could be a reaction to a changing economic environment and record low unemployment. It could also be that business leaders finally understand the importance of employee engagement. That’s right—Did I stutter? SOURCES: “Did I Stutter?” The Office, written by Brent Forrester & Justin Spitzer, directed by Randall Einhorn, 2008; Gallup Employee Engagement Poll, August 26, 2018; The ISR Employee Engagement Report by Towers Perrin; Engagement 2.0 by Kevin Kruse, Createspace Independent Pub, 2012.
Be an Investor When Recruiting and Hiring
Who you hire is one of the most important decisions and investments you can make in your business. However, recruiting and hiring today is more important than finding a person with the right skills and qualifications. Do the candidates fit our culture and strategic vision? Do they share our values and have the right behaviors to make them successful and provide your company a long-term return? Will they still be around in 5 years? Warren Buffett is considered to be one of the most successful investors of all time and is currently the third wealthiest person in the world. Regardless of one’s opinion of the “Oracle of Omaha,” it is hard to argue with his amazing track record of success. As the Chairman and CEO of Berkshire Hathaway, Buffett has inspired millions, while making billions through a philosophy of investing that can also be applied to successful hiring practices in your business. Aside from utilizing financial ratios and other analytical tools to find undervalued companies he can invest in, there are other key considerations that Buffett and many other successful investors look for before making a decision. Never compromising on business quality, taking the long view, and listening to those you know and trust, to name a few hallmarks of Buffett’s investment strategy. Could thinking as an investor also be applied to hiring? After all, when recruiting and hiring a person to join your company, you are making a major investment. That same hire can often be critical for the future success of the company. Time, training, compensation, benefits and other “rewards” for the people you employ are your investments in growing your business and making a return. In today’s low-unemployment, low-retention “candidate’s market,” approaching recruiting and hiring as an investor may make the difference and lead to better decision-making in this critical area. Never Compromise on Quality “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett Berkshire Hathaway was originally a textile manufacturer when Buffett first took control in 1962. He later stated that entering the textile business was one of his worst trades ever but kept the name. That experience taught Buffett that “you get what you pay for.” He was no longer interested in buying something at a bargain in the hope of getting a nice short-term return, especially when the long-term prospects for the business look terrible. He chose a path of “value investing,” in which he looks for prices that are low compared to their actual or future worth and often overlooked by other investors. Never compromising on quality can also be applied to hiring. For example, Candidate A is a high-quality candidate that matches all of the skills, qualifications, experience, behaviors and cultural alignment needed for great success in the position. “A” checks off all of the boxes, has been thoroughly screened and you can see a bright long-term future. Candidate B also has many of the same skills and qualifications. “B’s” behaviors and culture fit were not as strong and the references not as glowing, nor was there a projected long-term future with the company. Here’s the kicker— “B” wants 20% less in salary than “A.” How many would automatically gravitate to Candidate B because they felt they were saving the company money or had to stick to a budget? Quality investments yield high returns and increase in value over time, similar to Candidate A in our example. How does this apply to value investing? Candidate B will inevitably cost the company more over time and return less due to low engagement, poor cultural fit and eventual turnover – in other words a lot more than the 20% saved in Candidate A’s compensation. As Buffett has stated, “Price is what you pay. Value is what you get.” Taking the Long View Once asked how long he would hold a high-quality investment he made at what was considered a reasonable price, Buffett answered, “Our favorite holding period is forever.” Embracing a “buy and hold” investment philosophy, many of his investments have been held for decades. Buffett and investors care more about the future price than the value it was on the day it was purchased. As a business leader, you should care more about what a new hire can bring you a few years into the future instead of having them be able to “hit the ground running” and automatically start making returns on day one. Look for those candidates who are quick learners and can innovatively solve problems. They are the ones that have the experience and behaviors that will help them integrate quickly into your company and excel in the future. Smart investors also continue to invest – just as companies need to keep investing in their people. While you may not have the budget to increase their compensation, look for other ways to invest in your new hires and current top talent and leadership. In a recent Udemy “Workplace Boredom Report,” 46% of employees are looking to leave their companies because of a lack of opportunity to learn new skills, and 80% agree that being given more opportunities to learn new skills would make them more interested and engaged in their work. Do you offer continuing education, seminars, training programs and other developmental programs that will keep your employees learning new skills? There is a measurable ROI to upskilling your employees, and often it is in the form of productivity gains, increased engagement, more profitability and reduced turnover. Listen to Those You Know and Trust “Management changes, like marital changes, are painful, time-consuming, and chancy.” – Warren Buffett Warren Buffett has always noted the importance of only investing in competent and trustworthy management teams. He knows that when he selects partners or managers, their actions and decisions will be felt for many years. As a business leader, you too must be cognizant of selecting competent and trustworthy people to join your organization. They could have a
All’s Fair in Love and Retention
Employee retention can seem like war in the current candidate market, but it doesn’t have to be. Often, when top-grade managers leave their organization, it is because of reasons that could be addressed by company leadership and have little to do with salary. In our own internal surveys that we use with candidates, “Company Culture” is the number one motivation for making a career move. As recruiters, we often see candidates willing to take up to a 20-25% cut in base pay for an opportunity that provides more of a challenge, a better company culture, more work/life balance, and a “runway” to their future goals. To get your people to stay, you may be thinking, “Well, I’ll just increase their compensation and that should do it.” Or – when presented with an employee that is leaving, “I will make him a counteroffer he can’t refuse.” Worst case, your budget may not allow for it. Best case, you may get another year or two out of the employee, but the underlying issues for them wanting to leave still remain. The good news is that it is not just about compensation. The bad news is that if you’re not taking steps to address employee retention and understand why your talent is leaving, it is open season on your people. We have identified many clients and companies we work with that have excellent employee retention, and they all share the same four components that we call L-O-V-E (L for Learning and Development programs, O for a great Onboarding experience, V for Values and Culture, and E for Engagement). Thus, when it comes to retention, think about making LOVE, not War. Learning and Development How many of us have said to ourselves at points in our career, ”Did I learn anything new today or was it just another day at the mill?” Learning and development programs are proven ways to boost engagement and loyalty. According to Ellie Bertani, Director of HR Strategy and Innovation at Walmart, “I believe business needs to stop looking at employees as a cost center and realize they are an investment. Training them is an investment that will pay dividends in the future.” There are external factors at work as well. According to Niall McKinney, president of AVADO, “As more jobs become automated, employers need to help employees re-deploy in new or more advanced areas. Around 32% of current workers ages 16-54, regardless of their position, may need to retrain within the next 12 years. Research also shows that workers are leaving your company because they don’t see the career path and opportunity they’re looking for. They may have higher expectations, or they simply need guidance. They also may have been thrown into a position without proper onboarding or training and are learning simply by making mistakes, which can be soul-crushing. In a recent Udemy “Workplace Boredom Report,” 46% of employees are looking to leave their companies because of a lack of opportunity to learn new skills. This is where a more experienced counterpart or mentor can provide the training, skills, career/life guidance, coaching, and patience that can help them learn the position, see their fit within the company and culture, and see a future. Do you offer continuing education, seminars, training program,s and other developmental programs that will keep your employees learning new skills? Do you have a portion of your meetings dedicated to best practices or learning something new, or even a simple sharing of information? There is a measurable ROI to upskilling your employees, often in the form of productivity gains and reduced turnover. Onboarding Onboarding is a great tool for welcoming a new team member and first impressions here are lasting. Think about your own career. How many of us on our first day in a new job had to find a temporary workspace since our workstation wasn’t ready? They may not have had our email setup yet and didn’t even have new business cards printed. “I’m sorry, I didn’t get the email that you were starting today,” was often a common refrain. You can feel the love and sense of belonging in your new company, right? According to ServiceNow, 80% of workers experienced some issues when starting a new job. One-third stated they received no training at all, while 28% were unsure of their responsibilities and goals. 20% felt they were not fully onboarded after three months on the job! In fact, that same 80% would rather go on an awkward first date than attend a new job onboarding session or orientation. What do new hires want out of onboarding? In the ServiceNow survey, 58% want a walk-through of key processes or want a “buddy” or mentor they can turn to for questions. According to a recent Harris Poll, 93% of employers agree that a good onboarding experience is critical to influence the new hire’s decision to stay with the company. In fact, nearly 1 in 10 new hires leave a company due to a poor onboarding experience and the attrition rate can be up to 22% in the first 45 days of a new hire. The solution? Have a comprehensive plan for onboarding new hires. Your onboarding may include: a pre-boarding with your new hire (welcome packet and schedule, including a welcome letter from the CEO, sent prior to their first day); scheduled walk-throughs with key department heads; a longer duration for getting acclimated (most successful onboarding plans take weeks or even months); and the assignment of a coach/mentor to help them learn the new job quickly and immerse them into your company culture. Values & Company Culture Company values and culture are more important than ever when it comes to retention. Are you giving people insight into the company’s mission, values, vision and purpose? A good thing to do is write it down, not just have it on your web site, but have it visible throughout your entire operation. According to Bretton Putter, Founder and CEO of CultureGene, “The success or failure of a
Employee Retention Issues? Look in the Mirror (Part 1)
Part 1 of 2-Part Series on the Important and Timely Issue of Employee Retention There is a saying that employees don’t leave companies, they leave managers. Today, they are leaving more than ever. According to recent U.S. Department of Labor statistics, the average tenure of an employee in the U.S. is now only 1.5 years. We have ample statistics that clearly indicate money is NOT the reason for employees leaving a company. They do not resign on impulse, or in a “Jerry Maguire” moment of anger, delirium, or a personal epiphany. When they decided to join your company, they initially saw the opportunity as a great fit for their career and wanted it to be a successful long run. Unfortunately, somehow, the wheels they thought fit came off. If you take the time to thoroughly investigate the true reason for their leaving – AND YOU SHOULD – you will likely uncover that it’s not the products, customers, industry, competition, location, coworkers, commit,e or tools they have at their disposal. IT’S THE LEADERSHIP! When employees or ex-employees grumble about “culture,” or that “communication is poor,” or express frustration at the lack of career progression and professional development, they are telling you that it is the leadership they are unhappy with and leaving. Clearly, company leaders are responsible for setting the culture, communication, and career development within a business. For the sake of your company, and more importantly, your people, take one moment as a leader and be brutally honest with yourself in answering these questions: Do you find yourself behind closed doors a good portion of the day as you strategize or execute in private? Do you put your personal gain over your employee’s best interest when making decisions? Do you consistently affix blame on the departing employee for “not following the process” or working hard or smart enough? (Have you ever blamed yourself?) Do you promise the “stars” in career progression, but consistently find an excuse why the company cannot deliver them? It’s time to look in the mirror and answer these questions. A “company” is a legal entity. A “business” is a collection of assets and liabilities. No one resigns because of that. It’s the decisions, the motivation, the atmosphere, the ethics, the support, the training, the vision, and the direction set by leadership that will properly engage employees to stay with you in a highly productive manner. If they are not engaged, then take another look in that mirror! The next time an employee resigns, resist your patterned behavior to shrug it off as “another underperformer who didn’t follow the process.” Take a moment to reflect in that mirror on what it actually is they are resigning from. Too many times it is not the departing employee who doesn’t “get it.” It’s not the company they are leaving. IT IS YOU! So you looked in the mirror and – employee retention issues are your fault. Admitting that is a good first step. Should you act immediately to improve employee retention challenges? Can’t you just add it to the projects scheduled later this year?” Check out these two recent findings published in a recent Kiplinger report as to why you should act NOW. Unemployment held at 4.1% in December 2017. Look for 3.8% by the end of 2018 as it becomes harder for employers to find suitable candidates. The short-term unemployment rate (less than six months) has fallen to its lowest level in 65 years. Further proof of a tightening labor market is evidenced by lots of job openings in certain sectors, including health care, food services, construction, transportation, and warehousing. Openings in health care and food services are at their highest level in 15 years. If you lead a company of 500 or fewer employees, the urgency is heightened. The shortage of qualified workers is starting to squeeze small businesses. In industries such as manufacturing and construction, many small firms are finding themselves forced to hike wages. Not just to lure new hires… many smalls need to pay more just to keep their current workers from jumping ship. The problem will only worsen later this year. The economy is accelerating, and many small businesses want to expand in order to cash in on rising orders. But those expansion plans will bump up against the constraints of a tight job market. What are retention or engagement warning indicators you should be looking for? According to the U.S. Department of Labor: 55% of Employees are currently searching for other job opportunities. 40% of organizations report that losing key employees is the top concern. 33% of new hires quit their job in the first 6 months. 33% of employees know within 1 week if they will stay with that company long term. What do the statistics look like for companies with highly engaged employees? They are: 2x more likely to remain with their current company. 3x as likely to do something good for the company that was not asked of them. In addition: 51% are more likely to have engaged employees when companies’ values are properly communicated, clear, and understood by all. 78% of employees communicate they would retain/stay longer with their current company if they could see a clear career path for their career. “So, how much is subpar employee retention costing my business?” Employee turnover costs include more than job posting fees and recruiter commissions. Some costs include, but are not limited to: Revenue loss from unfilled Jobs. Pre- & Post-employment administrative functions and expenses. Pre-employment screening and interviews for replacement hires. Training Costs for new hires and promotions. Loss of Productivity due to overworked remaining employees. Loss of knowledge transfer opportunity. Click here for the full list of 20 Retention Cost Metrics available upon request. To help you identify your company’s specific cost of retention, we found this calculator on bonus.ly that you may find helpful. Just remember to check the “assumptions” that these automated calculators use to make sure they accurately represent your company’s situation. Up Next: Click Here