Posted by Jason Alexander
Whether through formal inquiry or informal advising, I’m asked daily for opinions in how to compensate new employees. Some of the questioning is based on factors which are unrelated to current economic conditions but most, if you reverse engineer their origin, stem back to the dilemma of talent acquisition versus long term talent retention. Over the last 12 months, most companies have been looking for ways to conserve funds whether through cost cutting, salary reduction, or even workforce reduction (layoffs). At the same time, companies are also hiring while, in parallel, trying to minimize the burn rate.
So, this now poses the most important question. What can I land a good employee for these days and what will it take to retain them? It is critical that both aspects of this question are addressed. Avoiding the temptation to low-ball an out-of-work employee for the sake of doing so will result in the distinct absence of a mass exodus when the market creeps back up into shape. For those of us that were in the business back in 2002 and 2003, we saw plenty of real life examples of this when the market rebounded in 2004 and 2005. The reality is that we’re seeing some of the same trends today. Organizations with money to spend are paying candidates 75% of their value without a long term retention plan in place. These are organizations that are begging to be used and discarded in a strong market.
Now, if you are on board with retaining a long term work force (which most people are on board with) there are options. The first option is to show a sign of confidence in a prospective employee by offering them, what I refer to as, strong market rates in a market that isn’t so strong. This goes a long way and typically isn’t forgotten. Most of these professionals have past colleagues that were low-balled and realize what a strong gesture it is to offer them appropriate wages when funds are tight. Option two is to bring an employee on board, acknowledge the current conditions, and let them know there is light at the end of the tunnel in terms of increased wages, bonuses, and creative means to result in a feeling of security.
Often times we hear the phrase “you only have one chance to make a first impression”. All too often, in the world of employer/employee relationships, we think this phrase pertains to the job seeker. I couldn’t possibly disagree more. In a down market, this phrase pertains, first and foremost, to the employer. If your first impression, to your employee base, is that of an unnecessarily frugal company that doesn’t pay people based on their value, that is a tough image to shake when the market turns around. Based on my experience, companies that have retained a long term workforce have been those that value employees, don’t prey on their vulnerable situations (especially when evaluating out-of-work prospective employees), and keep communication lines open.
Today’s market can make anyone blind to the long term vision of building their successful workforce. Many people and organizations are in survival mode and are “doing what they gotta do”. The advisable method of talent acquisition and retention is to evaluate the following hypothetical: What if we woke up tomorrow, the Dow was at 12K, unemployment was at 3% and there were twice as many open positions as there were good people to fill them. How would our employees feel about their jobs and current compensation? Your honest and objective results will dictate how you evaluate compensation decisions moving forward.