Most organisations will acknowledge that key employees will continuously search for better jobs (or be sought by recruiters) because they recognise their own abilities and know the value they deliver to their current employer. They understand the Power Law and the role of hyper-performers. If their remuneration does not reflect the value they believe they deliver, they will look elsewhere. They themselves know that their skills/ability are at a premium.
Furthermore, most organisations appreciate that the turnover of key talent is very expensive as it is not just the cost of employment (everyone is not equal), but the disproportionate level of productivity and value that this key talent delivers.
The majority of companies have a pretty clear definition of where their key talent is and acknowledge that their retention efforts are focused there rather than on the broader employee base. In the World@Work study, the most effective method for retaining key staff amongst respondents was to “pay key employees above the labour market”, primarily as cash.
Other interesting perspectives on ‘the money’ in the same recent Harvard Business Review article were:
A lack of understanding amongst employees of how they are paid relative to the market. Around two thirds of employees paid at market rates believe they are paid below market rates and about a third of employees paid above market rates also believe they are paid below.
Managers know that engaged employees are more effective. But, despite the vast amount of employee engagement research out there, very little of it focuses on a person’s primary reason for employment in the first place: getting paid.
One of the top predictors of employee sentiment, including “satisfaction” and “intent to leave,” is a company’s ability to communicate clearly about compensation and relativity to the market.
Open and honest discussion around pay was found to be more important than typical measures of employee engagement.
The key emerging themes are:
- A recognition that pay is the leading reason that employees join and leave organisations
- A disconnect between what employees are paid and what they believe are ‘fair market’ rates are for their equivalent role
- The criticality in attracting and retaining key talent – the hyper-performers
So, it is all about the money! Organisations need open and transparent discussions with all employees about their pay and relativity of this to the market in order to dispel the myths and uncertainties. Equally, companies need to recognise who their hyper-performers are (they themselves know who they are!) and the value (up to x12) they bring to a company’s performance. Their compensation needs to reflect the value they deliver. If not, there is a real danger they will vote with their feet and take their talent elsewhere.