Traditional research showed that money is not the prime motivator for employee engagement or loyalty. However, since the economic downturn and slow recovery, money has inched back to the top of the list of key factors for attracting and retaining a high quality, motivated workforce. What are the best and brightest organizations doing to use their human capital dollars creatively? Read on to find out!
Compensation is a key motivator in employee recruitment and retention. With smaller budgets, this means that the days of the “across-the-board” increase – i.e., everyone gets the same thing – are long gone. This practice was particularly predominant in the public sector. Local government, non-profit, library, college, university, and municipal workers could bank on their step increase and COLA each year. Thankfully, this practice has waned. Think about it: where is the return on investment for rewarding “seat time” and little to nothing else? In a scenario where all workers are slated to get a 4% across-the-board increase, what message does that send? Well, it tells the workforce that regardless of performance, you’re all walking away with a nice little bump in salary each year. The top performers become quickly demotivated – why bother trying so hard?! And the lowest performers’ bad habits are reinforced: Hey! I only have to do this much, and I get the increase! So, more and more, organizations are turning to increases differentiated by key performance indicators, skills acquisition, goal achievement or some combination thereof. Research from the Society of Human Resources Management shows that in order to get the attention of your top performers, you must provide an increase of 7-8%. There is no way organizations can afford to do that without having increases of 0% for the lowest performers. Organizations, including those supported by public dollars, are using their salary dollars more wisely, in a targeted manner designed to get the most bang for that buck!
In addition, these variable pay increases (some get more than others) are more frequently being applied as one-time bonuses or lump-sum increases, rather than applying the amounts to base pay. This way the organization sends the clear message that we expect this level of performance every year in order to receive this type of increase. It has to re-earned each year rather than being approached as a lifetime membership to a higher base pay.
Having a compensation philosophy that is widely communicated and understood, is another key trend in compensation. The philosophy should clearly state the organization’s approach to compensation: what is rewarded and how. It should have buy-in from the top of the organization and should be shared with all employees. Setting clear expectations and building organizational understanding of the role compensation plays in the success of employees and the organization as a whole cannot be understated. Are you expecting employees to work in teams? Are goals individually-based, team-based, organization-wide, or all of the above? Who is the market for competitive salaries? Who are you comparing yourselves to? Where do you want to pay in relation to the market? All of these are important questions as you develop a compensation philosophy for your organization.
Savvy organizations are also outpacing the incremental increases to the minimum wage being made by both the Federal government as well as some states. What are you doing for your lowest paid workers? Though this group can grow into your most loyal and dedicated employee group if they are treated well, they can also be the first to jump ship if they can find greener pastures elsewhere.
Importantly, though there are many, many job-seekers, in general, talent in certain sectors, particularly in digital, technology and creative fields, is hard to come by and in great demand. Your organization may be served well by differentiating markets within your compensation philosophy (see above) for certain sectors of your workforce. What can you do to ensure you don’t miss out on that next great employee? First, make sure your hiring practices don’t shoot you in the foot (so to speak). Does it take three weeks for Human Resources to schedule interviews? Do candidates hear back immediately from either a real person or at the least your e-recruiting system after their application has been submitted? Remember that your best candidates may be juggling multiple job offers, and you don’t want your organization to stand out as being the one that is least responsive or savvy in terms of recruiting. Secondly, expect some negotiating to take place. Especially in the hard-to-fill positions, your candidates will know that their skills are in demand and will expect to at least attempt to improve their situation before accepting an offer. Do your organizations’ policies and practices allow for this? If you have rules that say all new employees must start at the minimum of the pay range, for instance, or even language negotiated into employee association/union agreements, you may be dead in the water with certain candidates. Work to get the flexibility that is critical in attracting this type of talent.
Finally, think outside the box with creative and innovative perks for all of your employees. What can you offer that no one else can? How can you allocate some of the salary dollars in new and different ways that will foster employee engagement and loyalty? Savvy organizations are thinking about work-life balance and flexibility is key, particularly with Millennials and beyond. Telecommuting options, flexible scheduling, extra time-off and casual attire (all dependent upon your work environment and customer base, of course) are becoming more popular. We can’t all be Google, but nothing says you can’t offer some Google-like perks! Oil changes, yoga classes, child care, free lunch (ok maybe not every day, but occasionally), on-site gyms and basketball courts, pet insurance and even on-site concerts (it doesn’t have to be Taylor Swift!) are all things to think about for your workforce. The key is to be creative and to target things that interest your employees. The ones you’d like to stick around.