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. PERKS,
Focusing on Youth in Hiring is Hurting Your Organizational Health
In the Fall of 1984, Ronald Reagan, at the time the oldest U.S. President in history, was in a fight for re-election. In his first debate with youthful challenger Walter Mondale, he appeared tired and lacking energy. Many began to question his stamina for the job. In the second debate, he was asked a question about his age and being able to function in tough circumstances and in a crisis. Without hesitation, Reagan said the lines that we wish would be used more by older candidates seeking a job today: “Not at all… and I want you to know that also I will not make age an issue of this campaign. I am not going to exploit, for political purposes, my opponent’s youth and inexperience.” He never looked back and won re-election in a landslide. Underlying the humor of Reagan’s response (even Mondale laughed at the time) is the truth in his words. Do we, and organizations in general, consciously and/or subconsciously choose “youth and inexperience” over “experience and wisdom” to our detriment and even to the detriment of the younger employees we onboard? Are we missing training, coaching, mentoring, and even reverse mentoring opportunities that would ultimately lower turnover and benefit the entire organization? Is it time to rethink age in hiring, especially in the current “candidate’s market,” and get away from the misconceptions and perceived costs of hiring older workers and focus on the benefits? In Search of Experience and Wisdom “Age is an issue of mind over matter. If you don’t mind, it doesn’t matter.” – Mark Twain Most can agree that experience and wisdom are good things, but there are clearly also times when age and health can lead to poor performance. On the flip side, performance in younger employees could be just as impacted by a lack of training (investment in your personnel), mentoring, and coaching, which could lead to increased turnover and impact the future of your entire organization. We recently placed a 61-year-old candidate into a client who simply couldn’t ignore the fact that she would make the entire department better. Instead of age being a negative, this particular person’s depth of work and life experience, high energy, and continual learning mindset, as well as the fact that she had been a coach and mentor to several in the same field for decades, became a major positive. She didn’t need training— she was going to become the trainer. The client saw that this was a resource that many of his Millennials could tap into, and concerns over age and longevity in the position were overcome. Too often as business leaders, we look for “shiny and new” over “tried and true.” On the flip side, the disdain that many in the Baby Boomers and Gen Xers have for Millennials (and vice versa) is not a new phenomenon. Saying that Millennials are more prone to leaving jobs and switching companies than previous generations is misleading. They leave jobs because they are young and new to the workforce, and there was probably little in the way of training investment, coaching, and mentoring to keep them there and get them through the rough patches. According to Pew Research and a study they did comparing Millennials to Gen Xers, the percentage of 18-to-35-year-old employees who stayed with their employers for 13 months or more was 63.4% for Millennials in 2016 and 59.9% for Gen Xers in 2000. In addition, the percentage of these same groups who had been with their employers for 5 years or more was 22% for Millennials in 2016 and 21.8% for Gen Xers in 2000. It is easy to form generalizations about generations and blame the Millennials for leaving because they do not “have a strong work ethic.” It is also envy, and we have all been there. Ask an all-star major league baseball player from the 70s or 80s if he wouldn’t want the salary of even the most mediocre ballplayer today? What about Millennials just entering the workforce out of college? According to Mike Brown and the “The Class of 2018 Career Report” conducted by LendEDU, 41.3% had already found a job, and of those, only 37% envision staying at that same job for over 3 years. 28% of those who had found a job envisioned staying at their job for up to 3 years, while 25% thought they would last 6 months to a year, and 10% said they would leave as soon as something better came along (click here for the full study at LendEDU). The research indicates that younger workers are leaving your company, not because they are “Millennials.” They are leaving because they don’t see the career path and opportunity they’re looking for, and they may indeed have higher expectations, or they simply need guidance. They 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 when a more experienced and wise counterpart can provide the training, skills, career/life guidance, coaching, and patience that can help them learn the position, see their fit within the company, adapt to the culture, and see a future. Do you have a mentoring program? There is a wealth of company, industry, and subject knowledge in older workers that Millennials can tap into and that employers should value. Programs that enable knowledge transfer and connect younger and older workers have been found to have a high return on investment because of the impact they have on increasing retention rates, promotions, and overall employee satisfaction. There is also a benefit in reverse mentoring in which older executives are paired and mentored in turn by younger employees on technology, social media, and trends. After all, what organization couldn’t benefit from a free exchange of ideas, wisdom, and engagement between employees in different generations?
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 that 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 connect with your people and not vice versa proactively! 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 butalso 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 individuals’ 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
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