You've just finished up the annual performance review with one of your top performers. It's now time to announce the merit salary increase. Instead of 3%, you announce a 4% raise. It's meaningful because it's above the guidance of 3%. The employee looks you in the eye and says, "You mean I busted my fanny for the company during this pandemic and I receive a pay cut?"
What is the epilogue? The answer is now the latest buzz phrase — the “Great Resignation".
This storyline is being told hundreds of thousands of times right now in America. It’s a result of a perfect storm that no one anticipated. Inflation has been hibernating for almost 40 years. Businesses in America went through the 2022 budget cycle in September or October 2021, and most every organization planned on supplying its workforce a routine 3 to 4% merit increase. That’s been a fairly standard percentage over the last decade or more.
So, what happened? The November inflation report came in at 6.8% while December’s rate increased to 7%. A dollar isn’t buying as many groceries these days or any other product or service for that matter.
9 Ways to Hold on to Your Top Performers
Companies are caught in a pickle. What should they do? Here are a few ideas you may wish to consider as you navigate these waters for the first time in many years.
Communication
Transparently communicate with your employees more so than ever before. Seek feedback on why employees join your organization and perhaps remain at your organization, and listen — really listen — to their responses. Make sure the qualitative aspects of your employment offering are the best they can be relative to culture, environment and engagement.
Opportunity
As the baby boomers keep retiring in droves, opportunities exist for people earlier in their careers to advance. Millennials are elevating into leader/supervisor/manager roles and Gen Zers are quickly moving up the ranks. Clearly express possible career paths and the related timing. Make it a “safe place” for employees to honestly communicate where they want to go with their careers. Open the conversation to hear what they’re specifically looking for long-term. Explain how current and potential future roles can get them there. If the path is muddy, people will leave for greener pastures.
Development
Employee engagement surveys cite development as perhaps the most meaningful topic related to retention. If you don’t have a training program or offer attractive tuition reimbursement plans, certifications and other educational opportunities, do so now and announce such initiatives immediately. Installing a robust employee coaching program is fast becoming a norm rather than a luxury in the workplace.
Incentives
Consider altering incentive programs and corresponding payments. Instead of employing the standard annual performance bonus, consider providing incentive dollars more frequently to grab the attention of the employee populace and keep them motivated. As of recent, one organization even provided its entire workforce an extra paycheck. Ensure that the incentives set the employee and the organization up for success — same team rooting for the same cause. Further, make it crystal clear how the incentives can be earned. Granted, this strategy may come with some risk if a company runs into a bad quarter or two after paying out bonuses earlier in the year. However, it may be a small price to pay in comparison to the cost of replacing a departed employee. Also, companies may wish to consider the liberal use of spot bonuses as another tool.
Raises
It looks like inflation will be with us until supply chain issues calm down and the pandemic reduces to manageable levels. Is it time to deliver higher raises? Again, a few percentage point increases in merit raises — couched as “special payouts” — may combat the whipsaw of trying to fill unexpected vacancies on your team. Take time to communicate valuable, positive and specific feedback on how the raises were earned by the employee’s strong performance.
Flexibility
Like it or not, working remotely has generally proven to be effective. Many companies have embraced this new phenomenon at the risk of degrading a company’s culture. Others have not. In the recruiting world, the first question from candidates is “what options do I have to work remotely.” Many boomers who are in leadership roles must listen to the market and truly understand the forces behind the scenes. If leaders turn a blind eye to this issue, turnover rates may explode, leading to expensive recruitment costs in addition to the “time factor” it takes to fill holes in the org chart.
Creative Options
During the pandemic, childcare challenges forced many employees, mostly women, to leave the workforce. To battle losing more employees, for this reason, offer a richer childcare stipend, provide an allowance for a childcare search service or even consider opening an on-site daycare. It may be expensive but is well worth it for retention purposes. For those employees not impacted by childcare issues, examine the use of a special technology allowance in the name of fairness.
Seek Automation
One question may be lurking — will compensation costs be forever changed or at least for the foreseeable future? If that is true, and organizations wish to maintain bottom-line profitability, it may be beneficial to look at other ways to save money and improve margins via automation, artificial intelligence (AI) or other techniques. Re-evaluate a wide range of resources being utilized, and evaluate if there is an expense that could be better utilized to pour into your employee population. Could a happy workforce yield a much greater return than other expenses on the P&L?
Talent Management
Your organization may be one of the companies that choose not to take the path mentioned above. If so, it would be wise to beef up your talent attraction engine by modernizing recruitment workstreams, enhancing the candidate recruiting experience, creating corresponding efficiencies and hiring experienced recruiters. And at the end of the day if you do lose some employees, give them a phenomenal exit experience that makes them question their decision to leave.
Frankly, there is no good answer or quick fix right now. Many companies have not faced this environment in their careers. All we can say is don’t put your head in the sand; take action — yesterday.