All’s Fair in Love and Retention
In the current candidate’s market, employee retention can seem like war, 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 has 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 counter offer 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 programs 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, and often it is 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 then 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
Employer Strategies to Succeed in a Candidate’s Market: Lead, Match or Lag
Part 2 of a 2-Part Series on the Important and Timely Issue of Hiring in a Candidate’s Market When I turned 21 years old, I was in my Junior year at Bowling Green State University and had just changed majors from Music Education to Business. It was then that my dad gave me my first $500 to invest in the stock market. With it came a book by Louis Rukeyser titled, “How to Make Money in Wall Street.” In that book, Mr. Rukeyser introduced me to an axiom of investing that no doubt predates him, but I found the application well beyond investing: “A bull makes money, a bear makes money, but a pig goes broke.” The axiom was referencing a rising economy (as in the horns of a bull pointing up) and a declining economy (as in a bear swiping down for its prey). But the reference to the pig is about those who invest with greed, trying to time the markets and get rich quick rather than selecting the appropriate investment strategy for the current market flow. Now, I’m not a market prognosticator here to tell you how to make a quick buck on Wall Street, but the axiom has some interesting applications that can make or break your company if you know how to apply it with three critical human capital investment strategies. The last article, “Employer Strategies to Succeed in a Candidate’s Market,” addressed various direct and indirect compensation elements that can be flexed in order to build customized and compelling offers to attract top talent in the current competitive candidate’s market. In addition, the need for a compensation philosophy and strategy was outlined. What are these strategies? Simply put they are: Lead, Match or Lag. Piece of cake, right? Well, as with all things in business, it’s not that easy. Let’s understand what they mean first. LEAD: This is the most straightforward. In short, you pay more for the talent than the going market rate. After all, who wouldn’t want to take a job that pays more than anyone else in the same role in another company? MATCH: On second thought, perhaps THIS is the most straightforward. All you have to do is match the current market. Surely candidates will buy into the fact that, “this is the rate… take it or leave it?” Right? LAG: Then there is the biggest money saver of them all and an employer’s dream. Pay less than everyone else for the same talent to do the same job. You’ll rake in the money and not have to share! Well, maybe not. Unfortunately, they just are not as easy as they sound, but they are the strategies that need to be employed and each really does have its own place. The compensation philosophy of the organization should include an understanding of the underlying strategy you choose from the above. Understanding where the market is will help you better set the appropriate compensation for each position and situation. The hard part is when the market is changing right before your very eyes— as in today’s market! As SHRM points out in their article on planning and design, “There is not one strategy that will work for every employer and organizations will need to ensure the approach they choose matches their mission, vision, and culture and supports the overall business strategy.” Rather than adhere to a singular strategy across the organization, especially in the current candidate’s market, consider implementing a combination of each. As an example, you might choose to: LEAD: A great option for those mission critical and hard-to-fill roles where attracting top talent in a timely manner will make or break organizational success. MATCH: A recommended option for mission important and challenging roles that could just be a pain to have to fill and where there is a high potential of attrition due to market perception. LAG: Many businesses have roles of lower importance where labor may still be plentiful or where vacancies are less damaging to the organization. For those roles where the time sensitivity or mission impact is low, this is an excellent option. Spreading out the strategy in this fashion across roles by importance and impact can soften the blow to your P&L and provide the cash flow necessary to apply the “Lead” strategy used in other roles. However, let’s not fixate on cost too much. Remember the tools in the toolbox from the previous article? Not all of your tools revolve around base compensation, direct compensation, or even compensation at all! That’s right, the strategies COULD conceivably look like this: LEAD: Mission critical, hard-to-fill roles include a robust relocation plan, signing bonus, and/or a diverse set of PERKS not offered to any other role in the organization (but offered to all roles in this category). MATCH: Mission important, high attrition and painful-to-fill roles include lump sum relocation of a defined range based on need, flexibility for remote work, a retention bonus for 2-3 years of service and/or an attractive but narrow array of PERKS. LAG: Low time sensitivity or mission impact roles include a retention bonus for 3-5 years of service and/or a narrow array of PERKS. Still, many hiring managers, particularly those with no budgetary control or line-of-site often jump right to, “I want XYZ person so just pay them more!” If you cannot reasonably do that because you will blow your budget and risk pushing the organization into the red, then you cannot always lead the market. Leading the market may not always be the right answer for your company and may not even align with your organization’s mission, vision and culture. Here is where Mr. Rukeyser’s investment axiom comes into play. As human resource personnel, compensation managers, or even accounting/finance professionals, basically the function that often holds this responsibility in small and some mid-sized companies, we need to be prepared to educate our hiring managers around the axiom of bulls, bears, and pigs. Where necessary we should instill proper controls to reel
Employer Strategies to Succeed in a Candidate’s Market
Part 1 of a 2-Part Series on the Important and Timely Issue of Hiring in a Candidate’s Market It’s a Candidate’s Market! We’ve all heard this statement, and many business leaders and hiring managers are sick of hearing it yet remain confused about how to properly address the current employment market. Business leaders want to know, “What does this mean and how does it impact my business?” Many current leaders and hiring managers grew into their roles as the Great Recession began its correction and hiring began to ramp up. Throughout the recession and its recovery, businesses became lulled into a false sense of security that labor was plentiful and inexpensive. Now many are earning a new kind of MBA as they scramble to figure out how to navigate this employment market, meet the demands of customers, and still make a profit. After all, supply and demand impacts labor too. No matter what the market is: when supply is low, and demand is high, prices rise. Right? Well, sort of. When it comes to a candidate driven market, compensation is always the big elephant in the room. We can look away all we want, but until we address it, that huge, gray, mammoth beast will just remain waiting to squash the deal you are hoping to close whether it is a hire, promotion, or even a retention bonus. From the standpoint of crafting offers in recruitment, where do you start? What do you do first? If you try to address every compensation concern on a case-by-case basis, it is doomed to fail. We recommend you be proactive and develop a compensation philosophy. Compensation Philosophy and Total Rewards What is a compensation philosophy? According to the Society for Human Resources Management (SHRM), “compensation philosophy provides guidance to compensation professionals in the initial setup and ongoing maintenance of the compensation infrastructure.” SHRM does provide concrete examples of philosophy structure elements that are typical of organizations and include setting target pay rates at some percentile of the market, providing incentives to meeting goals that deliver total direct compensation at a higher percentile, and long-term incentives such as stock options for senior professionals and managers when their performance aligns with shareholder objectives. Understanding the elements of a philosophy for your organization is critical to avoid the wild-wild-west behaviors around compensation that can bankrupt a company. There are 2 core types of compensation: direct and indirect. According to SHRM, “direct compensation refers to wages paid to employees in exchange for work and includes wage and salary, variable pay and stock awards.” According to HRZone, indirect compensation is “non-monetary remuneration provided to employees including annual leave, overtime allowance, health insurance, life insurance, company car, and mobile and pension funds.” The combined compensation and benefits, along with personal growth initiatives, is commonly referred to as Total Rewards.1 Certain elements of a Total Rewards Program cannot be adjusted to meet changing market demands on a candidate-by-candidate basis as those elements are built and negotiated a year or more in advance and/or there are legal constraints preventing flexibility. Elements dealing with direct compensation and other incentives and initiatives can be customized to meet the changing market demands and tailor a unique offer for each candidate. How can direct compensation be flexed to meet the needs of a candidate? We do not want to equate discussions of compensation with that of base pay. There are many ways to construct an offer that will be attractive and win the right candidate over the fierce competition. Instead of being fixated on base pay, flexibility can come in the form of: Bonus Incentives: If there are concerns about hiring too far outside the budgeted base, are there opportunities to adjust bonuses or commissions? Can you develop variable compensation appropriately tied to Key Performance Indicator metrics that provide revenue breathing room for you to compensate based on performance? When hires occur mid or end-of-year, can a guarantee of a minimal amount of bonus be made with flexibility tied to performance? Signing Bonus: When using a signing bonus, it is common to have an agreement with a claw-back option to help encourage the new hire to remain in their role. 1 year is standard, but there is flexibility depending on the size of the bonus and the level of the position. Retention Bonus: Developing a culture people want to work within is critical but more companies are layering in a retention bonus in support of a strong culture. The business rewarding an employee after 1, 3 or 5 years with a bonus goes much further than a plaque or “gold watch.” Relocation Assistance: The right talent may not always be within a reasonable daily commute of the work location and not every role is best performed remotely even if you are willing to let some roles perform at remote locations. Are you willing and financially able to provide a proper level of relocation assistance? This does not always have to be a full-pack move with a home purchase. A far less expensive option is a lump-sum relocation payment net of taxes for the candidate. If you offer relocation, terms should be defined in a relocation agreement including a claw-back option to help encourage retention. Being competitive in a candidate’s market includes the benefits and growth initiatives you offer, especially the indirect compensation elements of a Total Rewards plan, which can often make all the difference. Considerations When Developing a Total Rewards Plan The size of your company has certain implications around what benefits you must offer or limitations on how much you can offer (e.g. PPACA, HIPAA, ADAAA, ERISA, et al. requirements relating to who must offer medical coverage, limitations on costs for wellness programs, and pension/401k maximums to name a few). Not every company is required to offer benefits, and your company can be competitive in the market with or without them. What you offer and the degree to which you offer them can be a differentiating factor and cost less than direct compensation.
Employee Retention Issues? How to Keep Your BEST (Part 2)
Part 2 of 2-Part Series on the Important and Timely Issue of Employee Retention In Part 1 of Employee Retention Issues you took that long hard look in the mirror and realized you have a serious employee retention problem, and more than likely it is your fault as a leader. Just as you realize this, your bad employee retention dream becomes a nightmare. Your best salesperson resigns out of the blue. In a blink of the eye what you finally identified as a top strategic concern is now a raging fire you need to put out, even though you have a busy schedule and other initiatives underway. Now you not only have to find a replacement for this talented employee, which is incredibly difficult when skilled professionals of this caliber are currently in high demand, but you also have to temper the impact their departure will have on the rest of your team— who may be already exploring other career options. Whenever someone walks out the door, people notice, especially when they are good. Morale takes a hit, and it will push those not already looking for a way out to begin doing so. This is exactly why employee retention and job satisfaction should be placed at the top of your priorities list, and why finding unbiased professional advisory to do this so is critical. Why do I need an unbiased and independent advisor? Have you ever walked into the same room many times without seeing that someone left trash on the floor? Have you failed to notice that your significant other or a daily coworker got a haircut? These oversights are natural for us all. We get too close to our daily environment to see it objectively or with clear eyes. You may have extremely bright HR leaders on your team, but they may also be too close to the situation to provide the objectivity and tough honesty necessary to define retention strategies. Remember, you have already identified leadership as the culprit. Now asking that current leadership to figure out the answers treads on egos, fear of telling you your wrong, or concern of losing face with other employees. What retention strategies do I look for with an advisor? Before identifying a strategy with an advisor, you will be asked to begin looking at things from the employee’s point of view. It is imperative that you get out of your own way! All professionals are different with unique sets of behaviors, desires and goals. Yes, employees want to know they are being properly compensated at or above market rates. More importantly, employees want to feel they are appreciated and treated fairly. They want to be challenged and excited by their job. They then want the autonomy to do it. Provide full transparency to your advisor(s) in every area of the employer-employee relationship within your company. Only in approaching the situation in such an open and honest manner will you be able to embrace the key strategies that will improve your organization’s employee retention and boost employee morale. How? The BEST Employee Retention Process An effective employee retention program addresses all of these concerns and beyond. In fact, your efforts should start with the HIRING PROCESS… HIRE: Your recruiting and interviewing process sets the tone for an employee’s tenure at the company. Provide full transparency to candidates about the pros AND cons of your company, culture, products and their role. Clearly identify the role expectations with specific metrics they will be held accountable for. Doing so dramatically lessens the potential of a new employee feeling disenchanted that they were sold a “bill of goods” when being caught by surprise by something that should have been shared up front. TRAIN: Onboarding — Every new hire should be set up for success from the first day of work through 90 days and beyond. Develop an onboarding process where new employees learn about the job, the culture, how to contribute and thrive. Create an environment which fosters ongoing discussions, goals and opportunities to address questions and issues. Having something as simple as their business cards and workstation ready is a small way to show your commitment to their success. Mentorship — Pairing a new employee with a mentor will increase their ability to learn the ropes from a veteran with a wealth of resources and experience. Reverse mentoring is equally as beneficial in this process as the new hire offers a fresh viewpoint to an experienced staff. Training and Development — Ask each of your direct reports about their short- and long-term goals to determine how you can help achieve them and invest in appropriate professional growth opportunities for employees. MOTIVATE: Communication and Feedback — Keeping open lines of communication is essential for employee retention. Your direct reports should feel that they can come to you with ANYTHING and likewise, they expect you to be honest with them about improvements they need to make in their own performance. YOU need to proactively connect with your people and not vice versa! Work-life Balance — What message is your company culture sending? Burnout is very real. A healthy work-life balance is essential, and people need to know that management not only understands the importance but supports it. Dealing with Change —If your company is going through a merger, layoffs or other big changes, keep your entire team informed as much as you can to avoid feeding the rumor mill. Getting out in front of it, and accentuating the positive, will keep morale and motivation strong. Promote Teamwork —Foster a culture of collaboration that accommodates individual’s working styles and lets their talents shine. Clarify team objectives, business goals, roles, and inspire everyone to contribute ideas and solutions. REWARD: Employee Compensation — It is essential in this competitive labor market for companies to offer attractive compensation packages. That includes salaries, of course, but also bonuses, paid time-off, health benefits, retirement plans and all the other perks that can distinguish one workplace from another. Recognition and Rewards Systems: Make it a
