Adapted from the book Finding Keepers: The Monster Guide to Hiring and Holding the World’s Best Employees by Steve Pogorzelski, Jesse Harriott, Ph.D., and Doug Hardy. Published January 2008 by McGraw-Hill.
Most candidates naturally admit that compensation in all its forms (money, benefits, stock, paid time off, etc.) is the number one inducement to take a new job. It’s obviously also a motivator for staying in a job or for leaving it.
Most experienced managers have had a talented employee approach them and say, “I’ve been offered more money elsewhere, but I’d like to stay.” The market has spoken, the person has indicated a willingness to leave... and the manager has a choice. Assuming he wants to retain the employee, the manager can:
- Match the competitor’s offer; this should be done if the offer is demonstrably within the market and doesn’t create parity issues with other employees (if everyone is underpaid, you have a more serious problem).
- Work with the employee to find an equivalent reason to stay -- an accelerated promotion, greater participation in other forms of compensation, and so on, based on the employee’s performance.
Whatever the outcome, this is an opportunity to learn about the employment experience. At Monster,we always ask “why would you want to leave?” and also “why would you want to stay?” (as opposed to “what can I do to make you stay?” -- the difference is important). The answers tell you the importance of compensation relative to the intangible rewards of working at the company.
Recruiter Terry Frugoli remembers how he learned that a money question was about a lot more than just money and turned it into a retention opportunity.
I was working for OmniVision Technologies at a time when competition for software specialists was keen. I found out a talented software engineer -- a Ph.D. in image sensor technology -- was looking for work after just a few months on the job, and asked him in confidence, “What’s going on?” He said, “To be honest, the last job blindsided me with a layoff, so I’m feeling pretty insecure.” Then he said, “Other companies have offered me a little more money, too.” He was being completely honest.
So I went to his director, and explained the situation. He said, “We don’t want him to leave. Maybe we can move up his salary review and send him a message... if it means he’ll stay.”
Then I went back to the engineer and said, “Your director definitely does not want you to leave, and this is what we’re going to do to make sure you know how serious he is about your future here...” He looked at me, surprised, and he said, “You know, I’ve never had anybody take that much interest in keeping me in a company. It really makes me feel wanted.” We shook hands, and he’s still here, several years later.
Delayed compensation like bonuses, stock awards, and pension or retirement plan contributions is meant to induce people to stay when they’re at top performance, but it also provides intangible benefits, says compensation consultant Tom Wilson. “What does it mean to somebody when they actually receive a bonus, stock, profit sharing, or some other form of equity?” he asks. “It means they are a part of the club, they’re special. Stories of start-up millionaires notwithstanding, most company equity doesn’t result in huge payoffs. There’s certainly a monetary reward, but not so great that other companies can’t match it to land a great midlevel employee. The symbolic importance might be more important for retention than the actual cash value.”
For the purpose of retention, it’s important to note that particular forms of compensation come and go with the times. Stock options had great cachet in the 1990s until the bubble burst. Filling retirement funds with company stock seemed great until Enron and others went bust.
Today, employees want robust health and medical benefits. In Monster’s 2007 survey, 64 percent of employees in the United States rated health insurance as the most important benefit, and 82 percent rated it at least “highly valuable,” yet only 22 percent of employers offer free health insurance, and just 42 percent offer subsidized insurance. Health-care costs are hitting the bottom line hard for both employees and employers, but clearly there is a disconnect between employer and employee on the issue, and aggressive companies can view health care as an opportunity to gain a competitive advantage by delivering superior health-care benefits. The report indicates that such a cost may be offset by better retention rates and decreased hiring costs.
The same research from Monster Intelligence's study, Tug of War: Exploiting the Benefit Opportunity Gaps, shows that long-term, conservative, and reliable monetary benefits such as competitive 401(k) and pension plans are highly appealing to employees when they look at total compensation packages. Employers show a strong preference for annual performance-based bonuses, tying greater compensation more closely to today’s results.