How Compensation Impacts Retention: HR Unplugged Episode 3
In a recent retention survey, HR and business leaders listed better compensation as the number one reason employees are leaving their company. Yet, 61 percent of the respondents also said they’re paying their employees more than they were one year ago. What are HR leaders to do when pay demands are getting higher, it’s harder to keep top performers, and budgets are tightening as their companies prepare for a potential economic downturn?
In the third episode of HR Unplugged, Anita Grantham, Head of HR at BambooHR, shares advice on balancing employee and business needs when it comes to compensation, so you can retain top talent while protecting your organization. Here are three key takeaways from the discussion:
1. Give employees a sense of stability.
Unfortunately, some of us may have layoffs on the horizon. If that happens, be sure you “take care of the living.” says Anita. “When you go through layoffs, you often focus on all of the people that you’re laying off, and we don’t support the people that are still staying in the business.” She encourages you to get leadership and managers on the same page around compensation, so you can communicate what’s ahead to employees.
“People leave when they don’t know what to count on…and if the messaging changes people will jump ship,” says Anita. Make a plan and communicate it with your employees. For example, if you have to pause salary increases to avoid layoffs, share this message. It gives employees a sense of stability and lets them know what’s coming.
2. Create a clear compensation plan to avoid pay inequity.
“Pay inequity is a culture killer!” says Anita. “As soon as you bring in someone new making more than someone already existing, you’re going to kill performance and incentive for that long-time performer, and it’s just not fair.” To avoid this, you should:
- Stick to a clear pay philosophy
- Decide if your benchmarks will be at, above, or below market value
- Make sure you bring in all hires within that range
However, Anita freely acknowledges that “it’s really hard to find credible data sources” if you’re a small organization. “Self-reported data is not the source you should use,” she warns. “You need to use data reported by an organization into a system.” Anita recommends looking for surveys you can participate in where you share your own pay data and in turn get the final data back. But if you have more budget to spend, you can look into data sources like Bradford and Payfactor.
3. Step back and evaluate what top talent means to you.
Anita recommends that you start by asking yourself, “What is top talent for me?” Get really clear, but it doesn’t have to be a long list. There are likely already things your organization is doing that you might not be recognizing.
“Everyone is really hung up on compensation right now, and it’s just one lever. Find all the other things in your toolbox. When everyone else keeps coming to you saying, ‘It’s comp, it’s comp, it’s comp,’ go in and…look at exit interview data. Have focus group conversations. There is so much more to compensation,” says Anita.
People might be saying they’re leaving for compensation, but when you dig into it, that’s rarely the full picture. With a roundtable of leaders, discuss the following to figure out what you can do to have better retention:
- What do you value most at your organization?
- What do you hope to take from this organization to any other you work for?
- What would you keep from this career?
“Put those pieces together and it builds the reason why you win,” says Anita.
Compensation is just the tip of the iceberg when it comes to complete retention strategy, and these three takeaways are just the tip of the iceberg of the HR leadership knowledge packed into this session. Listen to the full episode here, and join our next live session by registering here.