What Are the Three Cs—and How Do They Help (Or Hurt) Employee Retention?
Hiring top talent in today's market is no small task. For starters, it's less likely a company will get away with low-wage offerings or lack of transparency around a candidate’s or employee’s compensation information.
A study conducted by ADP in the final quarter of 2021 showed that wages grew by an average of 4.4% nationally, and that job switchers made 8% more on average by switching roles.
Market forces due to the Great Resignation are pushing wages higher and incentivizing employees to switch companies if their own business fails to keep up. Due to a tight labor market, equitable compensation has grown even more important to attract top talent.
And employees are noticing.
In fact, 2021 through 2022 has been known as the "Quitter's Market" and the “Great Resignation,” with Americans leaving their work at historic levels. In December 2021 alone, 4.4 million people left their jobs.
While this backdrop is a difficult challenge for employers, it’s also a great opportunity to reimagine a future with better employment outcomes. To help you build your business value and retain a team you can trust, we’ll dive into the three Cs that impact employee retention:
- Career path
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3 Ways Improve Your Compensation Strategy
Finding and hiring the right employee is expensive not just in terms of money, but also in time—which is, effectively, the same as money spent. In the U.S., it takes companies between 36 and 42 days to find the right candidate, and costs an average of $4,425 per new hire. Then there’s the less quantifiable cost of missed productivity during a new hire’s onboarding and training—it’s not unusual for a new employee to take six months before they’re familiar in their new role.
And yet, even though employers are familiar with the costs of replacing employees, they’re still reluctant to give wage increases that rival the nearly 15% increase in pay the average employee gets when job hopping. If your employees know they’ll make more money if they leave their current position, why should they stay with you?
Finally, it's important to acknowledge the very real pay disparities that exist among U.S. workers. According to 2020 census data, median earnings of full-time, year-round workers still illustrate a wide gap in pay equity. Overall, women earn $0.83 to every dollar of men. The gap widens even further when broken down by race. Hispanic women earn only $0.57 for every dollar earned by their male counterparts, and Black women earn a measly $0.64 on the dollar.
These pay inequities don’t go unnoticed. Nearly 80% of employees say they want to work for a company that values diversity, equity, and inclusion.
Closing inequitable salary gaps is an important step towards valuing a diverse workforce.
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Step 1: Use HR Data to Close Pay Gaps
The best way to approach wage gaps is through objective compensation data rather than subjective judgment calls. With compensation data, your HR or People team can use data tools to compare salary ranges:
- For similar roles
- Within departments
- Against current market trends
What’s more, you can use this compensation data to inform each element of a candidate’s compensation:
Doing so will close current gaps within your company and ensure offers for new hires are fair and equitable. You’ll be able to achieve the following, for starters.
Step 2: Standardize Your Decision Making
By using compensation data, you no longer have to make judgment calls with each new offer made. Your hiring teams can all decide what to pay from the same foundations of truth, setting the stage for equitable compensation across your organization.
This real-time data also shows you what comparable companies are paying candidates across job titles and locations. Finally, it will help you reflect what your organization is paying across levels and bands, so you can use up-to-date internal benchmarks to inform your decisions too.
Step 3: Improve Employee Retention With Pay Transparency
If you’ve standardized your approach to compensation decisions, it becomes much easier to share the reasoning behind your decisions with candidates and employees. You’ll go a long way towards improving trust as a result.
A recent SHRM survey revealed that 91% of employees who believe their company is transparent about how pay decisions are made also said that they trust their organization pays people equally for equal work regardless of gender, race, and ethnicity.
Setting up this ongoing recognition of employee value requires starting with the right compensation offer. While outbidding competitors with higher salaries may help get a candidate in the door, it won’t improve staff retention long-term if your bid maxes out your budget and leaves no room for a raise. Compensation works best when the employer and the employee are aligned on the value of the employee’s contribution and their future potential—a process that starts with good hiring and continues through consistent conversations.
Tips for Building Compelling Career Paths
As humans, we need purpose and movement—in our careers, we want to feel like we’re contributing to something worthwhile and like we’re moving forward. Even if you’re giving regular wage increases to your employees, they’re more likely to job hop if they don’t feel like the organization is investing in their professional growth.
Step 1: Invest in Your Employees’ Career Development
Moving forward doesn’t have to mean climbing up the traditional corporate ladder. Think of more ways to develop your employees’ skills and give them opportunities to put them into practice.
The first step is to help each employee develop a defined, individualized career path. This path should be determined in consultation with the employee and should incorporate several concrete markers, such as:
- Performance milestones
More than anything, fostering a culture of learning allows your employees to tell you what they need to grow. Here are some suggestions for supporting your employees’ growth:
- Encourage them to attend conferences and trainings where they can meet peers outside of the organization.
- Invite experts in the field to train or give presentations to relevant teams.
- Provide tuition support for professional certifications, cross-disciplinary training, or further educational programs.
Investing in the long-term success of your employees proves to them that you value their work and are dedicated to advancing their careers. And by deepening or broadening the skillsets of your current employees, you’re also building business value while becoming more resilient to market shifts. When your employees aren’t stagnant, neither is your business.
Step 2: Consider Hiring and Promoting Employees Internally
Investing in your staff’s careers also means making a commitment to promote from within. While your internal hires may lack some experience that outside applicants have gained, promoting internally saves you the cost of having to search, vet, and hire an external candidate. Where experience is concerned, keep this in mind: any additional time and effort you spend bringing an existing employee up to speed in a new role is likely offset by the institutional and cultural knowledge they already have.
On top of recruiting internally, you can also create more loyalty by showing that your organization is loyal to its employees. Recognize your employees as they advance in their careers. For every milestone or successful project completion, give public recognition. That loud acknowledgement of their success goes a long way towards making your employees feel seen and appreciated.
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Level Up Your Company Culture
Of the three pillars of employee retention, culture is by far the most important factor. An employee will stay for the company’s culture even if the compensation isn’t over market rate, but someone qualified won’t stay long at a job with high compensation if the culture is toxic.
If you want your retention efforts to truly be effective, what your organization says about supporting employees and what your employees experience has to line up—and that comes down to reexamining and refocusing on creating a people-positive culture.
Step 1: Start with the Right Definition of Company Culture
It’s tempting to see defining culture as a one-time project—just find the perfect words to put on your office posters and company swag, and mission accomplished! Now you have a motto you can point to and use to rally the troops, right? Not so fast.
While it’s certainly important to define your company values, mission, and vision, all of which underpin company culture, culture involves more than what anyone in leadership or management says it is. At BambooHR, we think of culture as the sum of all the experiences in an organization; in other words, defining culture is only effective if your culture defines your organization in turn.
For example, it’s easy to say an organization values both work-life balance and a standard of excellence. But it takes more thought and planning to set up operations so employees can work at that standard and still feel comfortable leaving at the end of the day, whether they’re commuting home or stepping away from their home office. For both values to apply, a healthy sense of urgency can’t lead to daily emergencies.
Mixed messages on values can lead employees to feel like your culture applies to some, but not to all, setting the stage for unfavorable comparisons and dissatisfaction. Neither helps improve employee retention.
Step 2: Find the Best Culture Balance for Your Organization
Culture, at its core, needs to marry the human needs of your employees with the monetary and operational needs of your organization. This means exploring the complexity of these interactions and course correcting when employer and employee values conflict. It means working with every department and team to define how your values influence the specifics of day-to-day work.
As you assess and cultivate your culture, begin with the following aspects of your workplace:
- Communication: How open is your organization to feedback from managers to employees and from employees to the organization? Do your employees have an anonymous way to bring up criticism or suggestions?
- Accountability: How does your organization hold people accountable for their performance? What are the consequences of great or mediocre performance?
- Community: How do employees interact with each other? How does your organization affect your local community and beyond?
If you don’t have a clearly defined culture, start by understanding how your employees view it. Consider conducting an anonymous survey to ask questions about their experience, such as:
- Do employees think you’re inclusive?
- Do they feel supported in their roles?
- Do they feel micromanaged?
By seeing your culture for what it is, you can better shape it to what you want it to be. Ultimately, to increase retention, you need to create and maintain a culture that’s healthy, supportive, and welcoming. No single perk, poster, presentation, or bonus can make up for a failure in culture, because culture is the total experience.
Next Steps: Fine-Tune Your Employee Retention Strategy
If committing your business to higher compensation, clearer career paths, and stronger culture is intimidating, consider the inverse: high turnover, brain drain, disengaged employees, and fragmented teams. And it’s clear when a business hasn’t committed itself to the three pillars because word spreads quickly on company review sites and social media—and nobody wants to stay in an unhealthy organization. In the current job market which favors applicants, it’s more important than ever to keep the valuable employees you already have.
The three Cs require work, but they’re worth the investment. When you’re fully committed to your employees’ overall success, they’ll be committed to yours. You’ll have employees that only get more valuable over time and who contribute to the healthy, supportive culture you want to foster.
By consistently offering higher wages and better benefits than those of your competitors, your employees will have no reason to start looking for a new company. They’ll be happy, balanced, and overall satisfied with their role. And you’ll find improved employee retention as staffing worries become a thing of the past.
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