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Dear Workforce How Can We Use Cash With Other Incentives to Drive Retention

Our IT product development company mostly serves large financial institutions. Although we have best practices in place for performance management and training, we continue to lose top-notch employees to some of these same companies that also are our clients. I’d like to know what combination of cash-based and noncash retention tools we could set up to help reverse the trend.
June 28, 2010
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Related Topics: Recognition, Reward (Recognition) and Incentive Programs, Compensation Design and Communication, Retention, Dear Workforce, Compensation
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Dear Tired of Turnover:
In some respects, this will be a difficult issue to address until you obtain one vital piece of information: the reason your employees are voluntarily leaving. This piece of information is critical to solving your retention puzzle. Spend some time collecting this information in whatever way possible to gain an understanding of the real problems—before you start throwing money at them. Indeed, this may not be an issue of compensation at all and instead may be caused by a variety of reasons. A well-crafted employee engagement survey can uncover significant needs within the current workforce. In addition, while exit interviews may seem outmoded, retaining a neutral third-party vendor to conduct them with key individuals who have left the organization could yield benefits. One of the reasons could be that some employees are more comfortable in a corporate setting, as opposed to a consulting environment.

Once you have determined some of the underlying reasons for the turnover, you can begin to develop specific interventions. Noncash programs will form a core component of any retention strategy. There are a number of low-cost ideas that you can implement to increase employees' levels of commitment to the organization. Recognition can be done in a variety of forms, and includes such things as enhanced job titles, gift cards, trips and awards. Intangible rewards also can be used effectively, and include things such as additional training and development opportunities, project leadership roles, and special task or process teams. Career ladders sometimes allow for promotions based on acquired and employed skills as opposed to actual supervisory openings. Mentoring programs can also create an environment of connection and support for high-potential employees.

If the organization determines that pay, incentives and/or benefits represent part of the challenge, then you will want to review the individual components of compensation and assess how they fit with your business strategy. This typically requires your firm to assess the competitiveness of its pay structures, total cash compensation and benefit systems. If necessary, adjust base pay to better match your marketplace. Examine recruitment strategies to see where you fall short in terms of pay offers. Implement a retention-incentive program on a project-by-project basis that provides for payment of part of the incentive into your retirement savings vehicle. Make sure vesting on these “company” dollars is not immediate.

Finally, you could also try to stop your clients from poaching your employees, although prohibiting this activity may be detrimental to your business model. Poaching may even be desirable in some cases. In any case, the company should review the consulting contracts with clients. Most client contracts stipulate at least the procedure, if not compensation, for hiring an employee from the consulting firm. However, be aware that no matter what you do with pay or incentives, there will always be companies out there that are willing to pay more than you do. In other words, they'll be willing to “buy” your employees if their skill sets are in demand. That is why the focus should be on getting employees engaged with your company. Engaged employees are committed and likely to stay longer and be more productive. In the long run, these are the people who make a difference to your business.
SOURCE: Bob Fulton, The Pathfinder's Group Inc., Glenview, Illinois, May 14, 2010
LEARN MORE: Please read why rewards and recognition should be developed as part of an overall retention strategy, rather than a stand-alone process.
Workforce Management Online, June 2010 -- Register Now!
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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