With unemployment rates at their lowest point since the recession, many companies are once again facing a talent market that favors employees. Career opportunities for talented employees are greater than they have been in a number of years. So companies need to develop strong retention strategies now to avoid losing their key employees.
First and foremost, do you know who your ‘A’ players are? We advise our clients to start by identifying their top performers; i.e., the employees they cannot live without. To ensure you can retain these employees, determine what the marketplace is paying for those same roles in other companies. Identify companies of similar revenue and employee count and determine where you stand as it relates to that benchmark. If your company is paying below the mean, you should seriously consider increasing cash compensation. If you are paying what the market dictates, your leaders should communicate this fact to your key employees.
Performance-based bonuses are a key way to compensate your top performers. Today’s executives are being measured more by the value they create for the company’s owners than by simply getting the job done. We encourage owners and CEOs to create measurable, achievable benchmarks for key executives that can be monitored in a relatively easy and efficient manner.
Companies are also increasingly using alternatives like phantom stock plans and stock appreciation bonuses that put a percentage of the increased value over a specified time period into an executive’s retirement plan. These vehicles reward executives for growth and profits with a focus on specific goals and objectives that need to be accomplished.
But ideally, when owners think of a total compensation package, they shouldn’t just think of base and bonus. They should evaluate whether the structures and processes are in place to take full advantage of the talents and capabilities of their top performers. They should also think about which intangibles they can offer to make employees happy and provide them with the peace of mind that they are advancing their careers.
For example, some companies assign high-potential employees to cross-functional projects with executive-level visibility. Others randomly invite certain employees to join C-suite meetings. These types of opportunities help increase employee morale and enable employees to feel more involved in decision-making. While these opportunities may not tie directly to employee compensation, they go a long way toward making an employee feel like a valued member of the team with long-term career potential.
Ultimately, there is not one retention strategy that works for every company or even every A player. You have to know your organization and what motivates your employees. If you can figure out what is most meaningful to your key employees and be flexible in creating your compensation plans, it will go a long way toward encouraging them to stay and operate as engaged teams.
Tyler A. Ridgeway can be reached at email@example.com or 215.441.4600.
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