Tackling Compensation: Business Consulting to Retain Talent
Updated: Nov 1, 2022
In business consulting, we know that compensation is one of the most emotionally charged leadership challenges. Structuring packages that appeal to your employees requires considerable care and intentional thought to get it right, but it has also never been more critical for businesses to do so.
The phenomenon known as the Great Resignation continues to rage. As many as 44 percent of employees can currently be classified as “job seekers.” The past year has also seen unprecedented rates of resignations, with 48 million people across the United States quitting their jobs in 2021, setting an annual record. Pay is one of the chief reasons cited regarding why people want a new position.
At the same time, employers need to be mindful of the labor shortage. Some industries have experienced tremendous struggles trying to fill their open positions. About half of all openings in the hospitality and financial sectors, for example, went unfilled. This has shifted the power dynamic from the employer to the employee. Providing attractive compensation can help draw these highly desirable candidates to your business.
We also cannot discuss changes in the workforce without addressing remote work. The ability to work for any company, regardless of geographical location through remote work setups, has been highly disruptive. It has changed the workforce structure and how businesses want to look at pay.
Fortunately, there are techniques that businesses can use to structure compensation packages that employees appreciate. Let's explore how organizations can tackle compensation in their efforts to scale up.
The Problems Businesses Face with Compensation
Executives struggle to find the right balance between profitability, increases in compensation, and retaining employees as they build their compensation options. However, getting the right balance between these three is critical to the success of every firm. We will walk you through strategies that you can use to balance these three. Remember that focusing on just one area will not drive the required result.
Change your relationship with your staff
As you think about your staff and the compensation you offer, you need a shift in your thinking. Rather than focusing on why people leave, understand why they are staying. Based on our experience in business consulting, we see employees list reasons such as:
They enjoy working for a company whose values align with their own
They work with people they like
They feel appreciated and valued in their position
They like the nature of their work
Too often, employers focus on areas that do not matter much to the employees themselves. In other words, the business leaders consider what they think employees want instead of what their staff actually needs. To properly balance your compensation package, rethink the priorities employees equate in compensation and build a better relationship with the team. Uncover the reasons that keep them at your organization and use that insight to create a package that better aligns with their needs.
Design strategic compensation
In the Verne Harnish book, Scaling Up Compensation, he discusses five critical compensation design principles. We recommend people follow these ideas as they develop strategic compensation. Some key concepts to take away from this theory include the following.
Know the culture of your firm
If you want to redesign your compensation effectively, think about what your brand promises and what customers expect when they think about your organization. Your compensation should align with these expectations. Remember that the people drawn to your organization as employees have these same expectations about your brand when they come to work for you.
Don’t be afraid to be different when thinking about design
Don’t just look at what your competition does when designing your compensation structure. You want what you offer your employees to align with your unique culture and value propositions. Copying a competitor’s compensation will not give you any strategic advantage compared to others in the industry.
Tie your compensation to elements your employees can control
Too often, businesses tie compensation to metrics that employees do not control, which can hinder great opportunities for motivation. Similarly, if you connect the compensation to merely discretionary factors, it can result in entitlement. When you tie compensation to what the employee can control, it can give them greater autonomy and the drive to excel.
Give your employees what they crave
In another great book, Greg Jegerman’s Give Employees What They Crave, he explores the importance of respect, purpose, and relationship in driving positive change in your connection with employees. Focusing on these three areas can help you better engage with your employees and let them know that their work is appreciated. It creates a company culture where you better understand your employees' needs and interests. A more positive, appreciated work environment also becomes a key component of your non-financial compensation.
ALTA’s Business Consulting Will Help You Turn Your Company's Compensation Structure Into A Competitive Advantage
Dealing with compensation requires a broader approach than simply offering employees more money. You need to focus on the employee relationship alongside the package you offer. Leaders and managers need to re-engineer their relationship with their employees to better understand what matters the most to them. This will help you attract top employees and retain the great talent you have.
ALTA can work directly with you and your business to discuss strategies for designing compensation holistically. We will help you consider your employee engagement and how you can maximize your employee relationships through our business consulting services. Contact us today to get started.