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It Takes More than Current Compensation to Keep the Right People on the Bus

A sign that the recovery may be gathering steam was reported in the May 3 Wall Street Journal article, “Raises Creep Back onto the Salary Scene.” In the article, Dana Mattioli provides examples of organizations like BASF Corporation, PricewaterhouseCoopers, Rockwell Collins, and others that have started to accelerate distribution of raises and award special bonuses to members of their teams who have helped make it through the last 12-18 months.

Mattioli quotes a survey of 459 human resources executives conducted by Towers Watson in January. In responding to the survey, “. . . 15% of respondents said that it had already become more difficult to retain key talent in the US than it was before the survey. Fifty-one percent said that by January 2011 they expect retaining key talent to become even harder.”

In our conversations with clients, similar concerns have been voiced regarding the ability to retain key members of their teams as the recovery picks up steam. While we agree that compensation is a piece of the puzzle, it’s clearly only one piece. And, importantly, just because the recovery may be occurring doesn’t at all mean companies are yet in a cash-flow position to grant salary increases of consequence.

Yet, when it comes to compensation, we know that employers can’t just sit on the sidelines either, promising to “do something someday.” Therefore, for key members of a team, and this is typically a relatively small number of people, we advocate considering longer-term incentive compensation programs, such as phantom stock, value creation, or deferred payout plans to directly tie ultimate payouts to specific results achieved. Such plans can significantly help drive performance and results, assure long-term tenure, and conserve cash during the interim.

Still, more to the point, compensation is not the only reason people leave.

As noted in our October post, Keeping the Right People 'On Your Bus,' employees tend to leave their jobs when they are dissatisfied, which is very different from believing they are under-compensated.

Our October blog post posed the question: How are you going to keep providing your best employees with job satisfaction when you are short on cash? As your cash situation improves, along with the hiring market, it is a good time to review the three reasons why employees tend to stay at positions. They have:

• the opportunity to take on challenging tasks and more responsibilities
• the opportunity to broaden their knowledge beyond the current functional area
• the ability to cultivate relationships, both inside and outside the organization

To end this post, we ask one straightforward, but not so simple, question:

Beyond increasing current compensation, what you are going to do to keep your team together?

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.