Solving The Retention Puzzle (Part 2)

In Part one of this series, a theme was established. First, it acknowledged that retaining top performer’s in today’s competitive environment remains a puzzle for many organizations. Second, I postulated a formula for some of the “known” elements. The formula suggests that each of this factors can contribute to the success – or failure – of a retention strategy. Successful Retention = f (Objective Expectations, Compensation, Training, Recognition, Feedback, Organizational Culture, and…) The objective expectations component (presented in Part one) is best summarized by the key first element identified by Marcus Buckingham and Curt Coffman in First, Break All the Rules: “Do I know what’s expected of me?”

Compensation – It’s Not Just Money

Performance hiring expert Lou Adler points out that successfully recruiting top performers is based on understanding that they will discuss – and accept – offers based on 1) a challenging position, 2) an organization they want to work for, and 3) a manager (or boss) they want to work for. Notice that compensation, particularly just money, is not on this “short list.” And the same points apply to retention. I’ve often asked managers at all levels a simple – but hopefully thought provoking – question: “If you increased the pay of your employees 25%, would it significantly change their performance?” The universal answer I get from all levels of management is “NO!” There are also too many examples of organizations thinking that money will keep an employee not only from leaving but will motivate the employee to better performance. Compensation increases can often be little more than a negotiating tactic when an employee uses an offer from another organization (or the threat of an “offer”) to get a raise. Top performers rarely act this way, and it’s rarely going to be a retention strategy for top performers. The ranking of compensation has changed in several long-term studies on motivation. Almost never the top item identified in a survey, typically 2nd or 3rd to “Interesting work,” it has now shown up as a top item. The reasons are likely to vary, from the current economic climate to the highly competitive environment for top talent in some fields. But one thing is emerging. A very recent survey showed that the top item was “competitive compensation” – not the highest, but what clearly is simply “competitive” – a ticket for entry to evaluate other factors. A “Total Rewards” strategy will reflect the use of both monetary and non-monetary rewards to align individual goals with the goals of the organization. It will frequently include alignment of personal and organizational values with programs encouraging and actively supporting pursuit of social or environmental activity. It’s likely to include better targeted benefits – including some of the atypical perks reported by start-ups. In a highly competitive, intense work environment basketball courts, pool tables, or arcade machines appear to be powerful “benefits.” While yet to be appearing as a national trend, it appears that “workplace concierges” are becoming popular in the highly competitive high tech environment of Silicon Valley – charged with serving almost all the needs and enabling employees to focus on work. Tying compensation to performance is the harder part of recognizing how “money + goals” can produce top performance and at the same time prove that it’s “not just the money.” Endless debate over “does money motivate?” will remain endless for many reasons. Some individuals, stereotypically some in sales, are clearly motivated by the financial incentives of money, perhaps commissions, as the scorecard for their success. But examples also abound of companies that have abandoned commission based compensation with successful strategies based more on customer service. It could be argued that the compensation element in a retention strategy is another example of a “Goldilocks” factor. “Too Little” will likely de-motivate employees to a “meets expectation” level or “just enough” performance level. “Too Much” will not motivate performance beyond what’s likely defined by the other factors, including a must mentioned factor – talent! Determining “just right” remains – and will remain – a struggle. The role of compensation is also complicated by two other factors that are being hotly debated right now: fairness and equality. Organizations have always attempted to determine pay based on the “value” of the work performed – not the external factors of what might be defined as a “fair” wage. So, fast food operations and retailers determine that the “job” not the “person” is worth $ x per hour – and that’s what they offer. It’s left to individuals to decide if they’re willing (or need) to accept that offer. The “equality” debate centers on the argument that individuals should receive “equal pay for equal work.” So, everyone performing the job of a retail sales person, or a fast food cook, or a teacher, or a mechanic should receive the same pay. While certainly correct when addressed as an issue based on illegal discrimination based on age, race, gender, and so on, it fails when compensation factors in experience, time served, and even some external factors like location. The complexity of compensation in fact forces the conclusion that it will rarely if ever be the main component in a retention strategy. Important yes, easier to get wrong than right, yes! But the first factor discussed, expectations, and the next factors to be presented, starting with training, are more important.

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About the author

Jim Schreier is a management consultant with a focus on management, leadership, including performance-based hiring and interviewing skills. Visit his website at www.farcliffs.com.     Disclosure: This post is sponsored by a CAREEREALISM-approved expert. You can learn more about expert posts here. Photo Credit: Shutterstock

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