Economic Principles…Makes Sense
The law of supply and demand – you’re probably familiar with this economic principle. When one goes up the other goes down. As a geographic market experiences rapid population and economic growth, you might think an increase in job seekers will result in a decrease in the market value of jobs. If there are more people vying for a position, the less you have to pay in salary to fill the position. However, any good HR consultant will tell you this principle isn’t the only one you should consider in developing your compensation policies. Turnover is another factor which drives a job’s market value. As more companies move into a geographic region, the talent pool will begin to shrink. You will have to may more to attract a new hire. Retaining your top talent will keep you competitive in your industry and save you time and expense training in the long run.
Strategy Over Theory
Employers, looking to retain key employees, should develop a retention strategy. While most employers will state that they want to retain all of their employees, a well-designed retention strategy is likely going to require additional revenue to be invested in employees and is unlikely to require implementation across the entire organization. Employers need to evaluate their business and determine key positions in which they want to avoid turnover and identify talented employees whom they want to ensure they retain.
A retention strategy may improve the value proposition delivered to all employees. When budget constraints exist, your retention strategy should be designed with key employees and positions in mind. Consider these five tactics as you develop your organization’s employee retention strategy:
- Ensure that your managers actually know how to manager. Poor managers and pay issues are the two leading causes for employee turnover. Quality managers should be accountable, effective, honest, focused, emotionally intelligent, and motivated.
Tip: Consider if managers would benefit from training and development.
- Create a pay for performance culture. Key employees are often the best performers. Top performers become discouraged when they receive the same rewards as everyone else. Adopting a pay for performance system communicates that performance does matter. It allows leadership to allocate more financial resources to employees who are top performers. Keep in mind, organizations must be willing to deal with poor performers in order to take care of top performers.
- Verify that your total rewards package is competitive. Use external market data to identify if your total rewards are competitive. Ensure your total rewards strategy is well-designed, executed effectively, and communicated properly.
Tip: Consider putting in place long-term incentive pay strategies that promote top level employee retention.
- Foster employee engagement. Engaged employees are more content in their roles, perform better, and feel valued. Engaged employees respond to feedback and desire appreciation. They’re engaged and expect honesty.
- Communicate to employees (repeatedly) the organization’s values If the organization provides a workplace experience and total rewards package that are the envy of competitors, take the time to communicate that to employees. Employees don’t know what they don’t know. Take credit for the opportunities your organization provides to employees. It’s easy to communicate good news.
Tip: Annual Total Rewards Statements will effectively communicate your organization’s benefits providing employees with
greaterawareness, understanding, and appreciation for their total compensation.
Knowing that turnover is a substantial cost for an organization, employers have an opportunity to embrace a proactive approach to employee retention. An effective employee retention strategy just might reduce the costs or turnover and improve employee morale across the board.
Questions? Contact the Findley consultant you normally work with or Brad Smith at Brad.Smith@findley.com, 419.327.4414.
Posted February 6, 2019Findley Perspective, Human Capital