https://www.vladvisors.com/what-is-an-employee-value-propositionThis post should be titled, “See, I told you so!” I’ll explain why in just minute. First note the cover headline below from the February issue of Fortune Magazine. The audience to whom the spotlighted article is directed is your company’s most highly skilled, strategic leaders. The lead-in to the feature article tells them this: “The job market is hotter than ever—and, for those in search of a new adventure, now’s the time to take the leap. Here’s what you need to know to land a new gig that showcases your talents…or to make the job you’ve got even better.”
In this Fortune Magazine article, author Geoff Colvin continues with this bit of insight and evidence directed at those in the workforce who possess superior skills:
The war for talent that obsesses tech companies is intensifying and is about to spread economywide. After almost nine years of mostly sluggish expansion, the U.S. economy has shifted into a higher gear and is creating jobs at a record pace. “The new year has started with a job market as robust as any in recent years,” reports the Korn Ferry recruiting firm. Indeed.com, the most widely used job site, says, “Get ready for a hiring boom.” With the labor market tighter than it has been in decades, workers who’ve been yearning to change jobs finally have their moment. (Ready, Set, Jump, Fortune Magazine, February 2018, Geoff Colvin, pgs. 44-52)
A headline for a series of graphs and statistics included in the article reads: Jobs, Jobs, Everywhere. One of the graphs under that headline has this note: Companies today have some 6 million openings they’re looking to fill. One callout box in the Fortune Magazine piece is entitled: How to Ask for Your Next Big Raise. Another has this heading: Seller’ Market—Nine Hot Occupations. (In this context, “sellers” is referring to highly skilled employees.)
Hello?! Are you paying attention? Do get it now? Is it clear why I should have entitled this post, “I Told You So”? For over a year now, I have been virtually screaming in this space that a talent war was on the way. McKinsey predicted it. CEO forums have been discussing it. And now organizations are feeling it. It is here—and your best people know it. The only question remaining is: What are you doing about it? (Okay, I’ll calm down now.)
1. A More Complete and Compelling Employee Value Proposition
The time has come for business leaders to pay closer attention to their pay, recruiting and retention strategies. If they don’t, they will lose. Those three business concerns need to be linked together strategically. And at their foundation there has to be a value offering that is creative, competitive and compelling. Chief executives can no longer just delegate compensation planning to HR and hope everything will run smoothly. Those days are gone.
So, what should you do?
Well, for one thing, immediately download the comprehensive guide VisionLink published entitled: How to Build a Complete and Compelling Pay Strategy. I mean, do it like right now!
To give you a preview, the guide will help you understand why you need to initiate the following steps “straight away”:
2. Assume a governing role. This is directed at the primary business leader in the company (CEO, President, owner). Pay needs a strategy. Strategy requires leadership. As a result, chief executives must assume a principle role in the discussion of a pay philosophy (discussed below) and the development of a pay strategy (specific compensation programs) that aligns with it. An organization’s rewards approach should grow out of the company’s performance framework—for which the company’s chief executive is responsible. They must reflect and support shareholders’ growth expectations and enable a performance culture.
The CEO is the ultimate steward of the shareholders’ interests and he or she relies upon a productive workforce to make sustained results possible. That is why the chief executive’s role in building the company’s pay philosophy and strategy is essential.
3. Determine what you’ve “hired” your pay strategy to do. This begins by thinking carefully about why you pay your people at all. Too often, business leaders look at compensation as an issue they just have to “deal with” and don’t give it much strategic thought. Perhaps they institute an annual incentive plan because they think they need one to be competitive, but then end up resenting the plan because employees view it as entitlement. So, they “fire” their bonus plan and “hire” another one in an attempt to change behavior or otherwise rewire the way their employees think. In reality, employing an incentive plan to make sure you’re offering a competitive pay package could be a legitimate reason to “hire” (institute) a bonus arrangement—if, in fact, that’s the job you need done. But you have to know that going in before you can evaluate whether or not it’s doing its job.
4. Establish a pay philosophy. (For regular readers, yes, I just brought it up again!) Once you have a general sense for the job you are “hiring” compensation to do you are prepared to formulate your philosophy about pay. Too many businesses don’t take the time to do this. As a result, their employees don’t understand what drives compensation decisions or the rationale behind their pay package. And business leaders end up trying one rewards program after another in search of a strategy that “works.”
5. Build a “complete” pay strategy. Once you are clear about the job you want compensation to do, and you have developed a pay philosophy that defines the underlying principles that will guide your approach to pay, you are prepared to start considering what specific plans your rewards strategy should include. This has to do with making sure you have a “complete” compensation plan—one that makes our employee value proposition both compelling and balanced.
One of the “jobs” most companies hire their pay strategy to do is reinforce the performance standards the company needs to maintain for its growth goals to be achieved. Business leaders have performance standards because they are trying to develop a performance culture. That environment exists when virtuous cycles of focus, execution and sustained success are reinforced and repeated. When they are, consistent wins are the result and a culture of confidence emerges; people know the company is going to succeed and they are invested in its victories. So the question we need to answer for ourselves is this: What approach to pay will reinforce and encourage that kind of cultural mindset and unleash employee commitment and engagement instead of stifling it?
In practical terms, to answer that questions you must figure out the balance you will need between guaranteed and incentive compensation(value sharing) to attract and retain the kind of people you want. Next, you will have to determine whether you want to prioritize short-term performance or long-term results in the way you construct rewards for your people (or if both are of equal importance). Then you will have to define the measure upon which your short-term value sharing plan will be based. You will also need to decide whether or not you want to share equity with your people; and if not, what alternative long-term value sharing plan you want to make available. And so on.
Promote your employer “brand.” Your brand is what both your employees and non-employees think of you as an employer. In reality, you don’t get to choose your “brand.” Others define it for you. For example, you likely have an impression of Google, Apple, Disney and a host of other employer brands even if you haven’t worked for them. It is true of your company as well. What do your employees say about your company when they are with their families? What about when they are with friends—or when they connect with an old college professor? What do they say about you at a networking event or in a social environment? And how does all of that comport with what you want them to say about you?
While you can’t completely control the perception of your business as an employer brand, you can decide what you want it to be—and then work to nurture it. This is how companies come to appear on lists entitled “Denver’s Top 10 Employers” or “Salt Lake’s 100 Best Places to Work.” Such recognitions are the result of a deliberate, strategic approach to identifying what you want your employees’ work experience to be—and then celebrating and promoting it as it is realized.
Folks, I really take no pleasure in saying “I told you so.” But a year from now—no, two months from now—if you haven’t taken action on these items, you will really leave me no choice.