Starting A Great Retention
Strategies for Keeping and Attracting the Best and Brightest Talent Vast numbers of employees reporting burnout and wishing to leave, record-level quit rates, and millions of unfilled positions have led to concerning new terms, such as “The Great Resignation” or “The Great Reshuffle” and for Baby Boomer employees who’ve had enough – “The Great Retirement.” However, for most business leaders, it is becoming a “Great Headache.” We live in a time of “greats,” and they are generally not too good. In addition, we see firsthand high levels of career unhappiness across multiple generations. So, as employees continue to leave in record numbers and leaders worry about keeping their best and brightest while bringing others on board to fill gaps and continue their growth, how do we begin to get a handle on this and start a “Great Retention”? Of course, the pandemic is often seen as the root cause. After all, entire industries and labor pools have been affected (i.e., travel and hospitality), and some are seemingly changed forever due to the last 18 months. However, many of these challenges were already underway well before the pandemic – skills shortages, “war for talent,” record low unemployment, demographic shifts, generational attitudes concerning work, technology, and more. The pandemic has simply accelerated many of these changes. As business leaders, how do we move our own companies from a “Great Resignation” to a “Great Retention”? How do we change from the reactive mindset of the last 18 months to a more proactive approach designed to not only attract great candidates but to keep your best and brightest employees from seeking greener pastures elsewhere? In our discussions with clients and candidates, there are three “Cs” to pay attention to in the ever-changing employment landscape: culture, communication, and capital (the human form). Spoiler alert – although important, “Compensation” is not one of them. Your Culture When talking with candidates, we typically ask what is prompting them to seek a new opportunity? Far and away, the number one answer is culture. They report no empathy, understanding, work/life balance, and how their company handled the challenges of the pandemic has them looking to leave. In fact, according to a recent PI People Management Report, nearly 50% of employees are considering striking out for something new. Moreover, this trend is primarily driven by those earlier in their careers – 49% of millennials and 56% of Gen Zers are looking to leave their current positions. As we dig further into cultural challenges, we find a significant disconnect between company leaders and their employees in perceptions versus reality. For example, research from Human Resource Executive finds that 84% of CEOs believe empathetic organizations get stronger business results. On the flip side: 83% of employees would consider leaving their job to join a more empathetic employer. A case in point, we spoke to a candidate recently who was deeply insulted by his company leadership. He stated that the company went to a hybrid work schedule, usually a positive. “However, when they presented the plan, it was office days on Mondays-Wednesdays-Fridays because the boss said he didn’t want anyone taking 4-day weekends. They don’t get it – we have been working harder than ever, the company’s growth has been exploding, and he flat out accused us of being lazy. I’m burning out, working more overtime and weekends than ever, and more than a few of my team said, ‘I’m outta here.’ It is never enough.” Sadly – a true disconnect and a wasted motivational opportunity. Since the pandemic started, people who work from home across all generations are logging an average of two more hours of work per day. According to a recent Finery Report survey, 83% report working overtime was the norm, and 70% regularly work on the weekends. Pandemic burnout, resetting priorities, and a need for work-life balance are real. However, it also creates opportunities for companies with cultures that better address it through more flexible work schedules and letting employees have choices, setting clear work-life boundaries (fostering the need for a life outside of work), and increasing support. According to the Adobe survey, 78% of millennials and 74% of Gen Zers would switch jobs for a better work-life balance, even if offered the same compensation. Communication: Talk or They’ll Walk Working from home and hybrid work arrangements, while showing increased productivity, also make the employee feel less seen, heard, and valued. Our strategic partner, 15Five, a leader in employee engagement and management software, has just released their 2020 Workplace Report, and while there is no quick fix, a solution is emerging – frequent one-on-one meetings. When managers regularly communicate through ongoing one-on-one meetings, especially in WFH and hybrid environments, they increase their effectiveness as managers and their teams and company overall. The results are staggering: 82% of employees with weekly one-on-ones say they’re getting the support they need during the pandemic from their managers. 78% of employees state that weekly one-on-ones provide the necessary feedback they need to improve performance. 71% express more trust in their leaders, 72% feel more comfortable bringing up issues, and 73% are more motivated to go above and beyond in their role. Importantly, 1.4x are more likely to say they are currently looking for a new job with monthly or less frequent one-on-ones instead of weekly. Regular communication helps bridge the gap. Consider the outside pressures your employees have been under the last (18) months. It is no wonder that “burnout” is often cited as the reason for leaving a company or manager – they are losing the feeling of connectedness to their manager, team, and company. Staying up to date with an employee through weekly meetings helps managers understand how their people handle their work and where they need more support and guidance. The message– Talk, or they will walk. Communicate with your people frequently and one-on-one. Human Capital Investment Another casualty of the last 18 months has been learning and development (L&D) programs – only 29% of organizations have clear development plans for their employees. In
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.
Exit Planning: You Need to Grieve it to Leave it
Strategies for the Emotional Side of Exit Planning and Career Transition It was just a few minutes into our phone call, and our clients started to cry. Working on their business exit planning and reviewing the financial and transactional aspects of selling their nursery operation, it suddenly hit them as they looked over a beautiful array of plants in their greenhouse. Their nursery business was their “baby” that they had spent over 30 years growing day and night, and the fact that they were moving on brought tears of both joy and sadness. We empathized with them, and they began to apologize for their emotions and stated they were ready to move on. “There is no need to apologize, as this is all positive,” we said. “You are grieving the business, and this is an important part of your journey and transition to what’s next.” Accountants, lawyers, financial planners, business brokers, and business exit planning specialists all work in the transactional areas of selling a business. They bring expertise in each of their fields that, when combined, are critical to a successful sale or transition. However, what about the tears and the emotions involved in exiting a business? According to an Exit Planning Institute (EPI) report, over 75% of business owners who have sold their business profoundly regret it within a year after the sale. Most of these owners will end up grieving the loss of their business for many years to come. Many say that they have lost their identity and their reason for being – “How much golf can a person play?” How do we avoid this seller’s remorse, and what steps can we take to mitigate these feelings of regret during the exit planning process? We recently interviewed Chip Conley, a noted entrepreneur, author, speaker, and founder of the Modern Elder Academy. According to Chip, “We need to stop retiring from something and retire to something. There are (3) values people take from their company ownership – a sense of purpose, wellness, and community. They seemingly lose all three when they retire, and it can even accelerate their mortality by several years.” During the exit planning process, it is important to plan where the owner will find their purpose, wellness, and community after the sale or outline a personal vision of what life looks like after the business. It helps frame and answers the question, “What are we retiring to?” In addition, when working with owners on their emotional readiness for when they transition, “preparatory grief” or dealing with grief before the event happens is another way of preparing for the day they sign the papers and hand over the keys. In 1969, psychiatrist Elisabeth Kübler-Ross first identified five stages of grief in her book, On Death and Dying. She noted that those experiencing grief on losing a loved one (and a business can undoubtedly be considered a “loved one” to most owners) go through five emotional stages: denial, anger, bargaining, depression, and acceptance. Naturally, many will argue the merits of the process or disagree with the original and simplistic approach. After all, grieving is complicated, but there is consistency in our experience when the five stages are applied to exit planning. According to Dr. Patrick Downing, a psychologist who has worked with exiting business owners, “Grieving the loss of a business is not a seamless process, and there will be flip flops back and forth between the emotional stages— it is not a linear progression. It is all about finding cognitive strategies to help guide you through the emotions that hit you. It helps steer the emotions in a way to help process a sale of the business.” Thus, we find that exit planning itself can be akin to a grieving process. Denial “If you fail to plan, you are planning to fail!” – Benjamin Franklin There is one indisputable fact – 100% of owners will eventually exit their business. It could be through family succession, sale, liquidation, closure, death, or any number of reasons – many of which are outside the owner’s control. According to the EPI, 50% of these exits will be involuntary, and 40% of business owners lack even a basic continuity plan (should something happen to the owner). When it comes to exit planning, denial is by far the biggest hurdle. When we talk to business owners and ask when they plan to exit, the typical answer is 3-5 years. Ask them 3-5 years from now, and the standard answer again is 3-5 years. Denial is clinging to a false reality, and it plays a significant role in why 70-80% of businesses don’t sell. When we are asked by business owners when they should start exit planning, our answer is always a resounding “NOW!” Whether the business owner is in their 20s or 60s, we have never heard clients complain that they spent too much time planning. On the contrary, planning leads to business optimization, better decision-making, and less owner-centricity, all of which will drive up value in a buyer’s eyes. According to John Dini, author of Your Exit Map, “Five years is a reasonable planning time. Ten years is better. There is no time frame that’s too far out to be thinking about your exit.” Many owners can get stuck in denial indefinitely. We recently had a 72-year-old client tell us he wanted to delay the start of his business exit planning for at least six months, even over his wife’s objections, because he was just too busy. Certainly not what a potential buyer wants to hear. Overcoming denial is not easy, and it takes a lot of time, effort, and focusing on the bigger picture. We start with a preparedness assessment and a valuation because denial often manifests itself in postponing a departure and what an owner perceives as the fair market value for his/her business. How can one get past denial? Examine your fears, think about the consequences of doing nothing, and identify the irrational beliefs and your reality. Most importantly, talk to someone— a trusted
Rethinking Hiring in Horticulture
Effective Strategies for Hiring in the Horticulture Industry By Benjamin Molenda & Harrison Downing, Human Capital Advisors at BEST Human Capital & Advisory Group Are you excited at the prospect of increased demand in the Horticulture Industry over the next few years? But, on the other hand, are you concerned that you will struggle to supply material to meet consumer demand? You are not alone in these thought processes. Most companies are identifying areas to invest increased revenue in satisfying new requirements. Whether through R&D, new market channels, LEAN manufacturing approaches, supply chain amelioration, or bringing on talent for these and additional departments. When hiring in today’s changing climate, it is important to understand options, strategize a plan, and develop expectations, as the industry’s talent pool is critically thin compared to talent needs. The Process Scheduling interviews can be complicated, especially acknowledging that not only are your team members busy with their responsibilities, but the prospective candidate is likely busy in their current role. The chances of finding a quality applicant who is currently unemployed are slim. Thus, it is imperative to be realistic when setting a start date for a new hire. The traditional “2 weeks’ notice” is often satisfactory. However, occasionally, more time is required for the individual to leave their previous employer, potentially your same customers, and put them in a position for success. None of us want to burn any bridges. It is now a commonly accepted, if not begrudged, belief that quality professionals are not frequenting job boards and applying to postings. In discussions with many companies, posting a job is often more about marketing than actually identifying candidates. Utilizing current relationships to network opportunities, involving HR teams and other departments to brainstorm candidate flow, and inquiring with customers or suppliers on star players they interact with are among the options to identify talent in our close-knit industry. The graphic at right represents a recent mid-level position hire. The hiring project timeline included posting job descriptions on job boards, networking with industry leaders, and actively sourcing candidates through executive search. At a minimum, it typically takes (3) weeks to identify qualified individuals, (3) weeks to interview and offer, and (3) weeks for the individual to transition and start in their new role. For senior-level positions, plan to add a minimum of (2) weeks for each of the three steps. Because of this dynamic and the budgeting process, many companies start their hiring process a year in advance to identify what roles are needed in their organization. Hiring from within is a practical approach as it is quick, cost-effective, fluid with the company culture, and can motivate loyal employees who aspire to grow professionally. These items add up to expose less risk than hiring externally. However, internal promotion is not always the best option. Animosity between internal applicants can arise, leading team members not chosen to question loyalty. Another critical element to hiring from within is succession planning. As one hole is filled, another is created in the previous position. Active cross-training prepares team members for succession, strengthens the organizational chart, and motivates the team. Finally, from a legal and efficacy standpoint, a hybrid approach of external search and looking within ensures all available talent is vetted as there is a lack of candidates in our industry. Positions in Operations, R&D, Supply Chain, eCommerce, Analytics, and Sales are being created as companies match changing markets with innovation. Yet, retirement rates are increasing, reducing what is already a thin talent pool for horticulture. Add to this that CEA, Cannabis, and Hemp are hiring from the same talent pool as Ornamental, Nursery, Landscaping, Turf, and Greenhouse – there is indeed a growing talent gap. Casting a broad and flexible net when sourcing talent is crucial. One strategy includes considering all candidates, regardless of age. Another is compromising the amount of required product knowledge, customer relationships, or years of experience and instead focusing on a professional’s behaviors. This option requires increased front-end work through strategic planning and assessments. However, it will ultimately unlock a lucrative talent pool, allow for culture alignment, and increase productivity based on the candidate’s behaviors. We should not ignore experience and product knowledge. Painting a “purple squirrel” (what we call a perfect candidate) is an important thought project when conceptualizing a position, but how many purple squirrels have you seen? If there are (5) “boxes” that you believe must be checked for a role, it may be worth reducing it to a top (3). If a candidate shows strong behaviors, perhaps they can achieve the (2) boxes they cannot check with proper training and management. Conversely, it is nearly impossible to train or manage behaviors as they are set early in life. Behavior-based hiring dramatically opens the talent pool outside of the industry for the right fit. There will be repetitive conversations in interviews, but developing separate focus areas for each interviewer is integral to moving quickly. This approach also gives the prospect an understanding of potential interactions with the interviewer. Continuing to utilize virtual meeting resources early in the interview process allows for flexibility. One-on-one interviews with senior leaders are expected, but interview teams of 2-3 display company culture for the candidate and expedite the process. Once in interviews, an element to consider is how the candidate will be led based on their personality and responsibilities. The initial conversation with a candidate may be the most important. Spend it listening and learning. Listen 80% of the time and speak 20% of the time. Engage them about experiences, listen to what motivates them professionally, and focus on behaviors illustrated when describing achievements. Do not oversell the position or company as there is no perfect job or company. Accentuate the positives but be transparent about challenges and difficulties in the role. Truly understanding your prospect’s personality traits and professional behaviors will create a stronger relationship leading to higher buy-in, more productivity, and continued transparency. Congratulations, you have hired a strong professional! However, the process of engaging them is
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