By now you know that holding onto your top talent is a high priority—and that it is getting more difficult to achieve by the day. If you don’t develop a culture where employee engagement is prevalent, and your employer brand is highly regarded (and widely touted) by your best people, they will be tempted to pursue greener pastures. And these days, there are many such pastures for them to consider. As a result, you can’t afford to wait until a couple of your key people are walking out the door to start thinking about retention.
So, what should you be doing now to prevent an outcome later that you don’t want in this regard? Yes, you should make sure you are clear about such things as the impact of pay on employee engagement—and pay practices that kill it. You should know whether your people feel enthusiastic about the role they play in your organization. And you should understand and address the relationship between culture, employee engagement and line of sight. However, beyond all that, you should be aware of the informal rules that are forming around talent retention—since it will be hard to engage employees who are no longer working for your company.
The 3 Rules
Rules are used when you want to make an outcome more predictable. In business, certain informal rules emerge as companies start experimenting with different issues they need to address or problems they need to solve. When it comes to retention, there three dominant rules our firm sees emerging. The way to look at these is that applying them does not necessarily guarantee you will retain your best talent, but ignoring them pretty much guarantees you won’t. As you read through them, I think you’ll understand why.
1. Offer a Total Rewards Value Proposition
Organizations can have an A++ compensation offer and still lose an employee. Why is that? It is because financial rewards address only one of four different categories that your people examine when evaluating the experience they are having with your organization. The other three are just as vital. If any one of them doesn’t meet the standard your employees expect (and that others in the career market are offering), they will leave—or won’t join your organization in the first place.
This is what your employees want to be able to say about your company:
- I like the direction the company is headed.
- I embrace the company’s values.
- I believe the company can achieve its growth goals.
- The company’s purpose and mine are aligned.
- I see myself in the company’s future.
- I have a “seat at the table” in determining the direction of the company.
If that does not describe the experience they are having, they will likely feel they are in the wrong place.
Positive Work Environment
In this part of the Total Rewards framework, employees expect to feel like this:
- I like the nature of the work I’m doing.
- I am working within my unique ability.
- My responsibilities have strategic purpose.
- I work in a team of individuals with complementary skills.
- There are channels and processes for solving problems and decision making.
If your people are finding a deficit in any of those areas, they will not have a positive feeling about their work experience or environment. Sooner or later, that will prompt them to leave.
Personal and Professional Development
This is what your employees want to be able to say because of the experience they are having working for your company:
As a result of my immersion in the culture and resources of this organization, my unique abilities are improving—and I feel personally and professionally fulfilled.
Again, if this does not describe reality for your people, they will look for it elsewhere.
So, to be clear, ’m not saying compensation is not a factor in employee retention. It is. It’s a big factor. But it isn’t the only consideration—it’s one of four. But regarding pay, employees want to feel like this:
- There is a philosophy that guides pay decisions and I relate to it.
- There is a mechanism for sharing value with those who help produce it.
- I have some control over how much I can earn if I produce.
Most organizations don’t run into problems with their pay offering because they pay too little. They have problems because there is no philosophy driving how and how much they compensate their people. As a result, employees feel pay decisions are arbitrary and they become suspicious. This puts employers on the defensive when their people ask for a raise or request stock in the business—or when they ask why their bonus isn’t as high this year as it was last year.
2. Treat Your Employees Like Growth Partners
This is definitely a two-way street. Employees must want to engage as growth partners if owners are going to be expected to treat them that way. However, there must be a mindset leadership adopts towards employees that frames how they view individuals in their workforce before those people will be able to see themselves that way. Disney theme park employees see themselves as “cast members” because that is how the leadership of the company sees them—and treats them.
Employees feel like partners when you define a clear role for them instead of just hiring them for a position. They want to understand the strategic significance of their contribution and what outcomes you want them to “own.” A sense of partnership emerges when your people feel as though you trust them to be stewards of results that are key to company growth.
One of the ways this is achieved is by creating a pay strategy that reinforces the expectations you have of employees in their roles. This means you have the right balance of salaries and variable pay, as well as between short and long-term value-sharing.
3. Pay Your Employees (Well) for Value Creation
In today’s talent environment, people have an inherent sense for what’s “fair” when it comes to being compensated. I’m not talking about market pay data and what it can tell you about a given position’s worth. I’m referring to the expectation that today’s employee has of participating in the growth they help drive.
Most companies focus on building an “effective” incentive plan. And that’s kind of where the problem starts. Employees don’t want to feel manipulated into performing a certain way. They want to feel as though they are in a partnership with you as the business leader in driving company growth. And if they can create “added value” as a result of how they perform in their role, they think it is only “fair” that they enjoy the fruits of that effort. This does not necessarily mean they expect to receive stock in the business (however, in some cases it may). There are lots of way to share value without giving away equity. It just means they want to see a relationship between what they contribute and how they get paid.
So, there you have it. Three rules you should be applying right now if you want to better your chances of keeping your best people. Ignore them at your own risk. You have been warned.