It's one of the worst-kept secrets in corporate America. If you were truly honest with your top young performers, you’d tell them they have to leave the company to get their true market value.
Disagree? Then you’re probably at a Fortune 100 that does a great job at identifying top young talent, rotating and promoting the early career stars just enough to let them see the promise of locking in for the long haul.
For the rest us, retaining top young talent is a shell game that’s part fear, part timing and part dare. Make that a double dare.
First, some stats: Mercer is reporting that U.S. employees are starting to see the effects of the economic recovery in their paychecks. The latest Mercer compensation report forecasts that the average pay raise in 2015 will be 3 percent, up from 2.7 percent in 2012.
More importantly, for top performers (a category Mercer watches carefully), the average raise will be slightly higher than the 4.8 percent that group received in 2014.
Yep, 4.8 percent. That’s your economic recovery, high performers. That’s why if you were an agent for high-performing stars in corporate America — especially those in the rank-and-file who are young — you’d tell them that the only way they are going to get where they need to be from a compensation perspective is to get a promotion by joining another company.
We’re daring employees to leave and most of them won’t answer the call.
In fact, you’d tell those young stars to switch companies three to four times in the next eight years, securing a 20 percent increase every time and effectively doubling what they make as a result as they enter their early to mid-30s.
Why don’t more young stars leave if that’s the reality? It’s simple — fear, economics and the concept of the dare.
Fear drives the majority of the positive retention you experience at your company. There’s no such thing as a perfect environment (your company), and the grass is always greener on the other side (your competition). But most employees still won’t make the decision to leave you.
That’s because there’s risk in making the decision to switch employers. Fear of a job change gone bad keeps a lot of employees — even high performers — with you, even when you don’t deserve the vote of faith.
Timing economics also contributes to the equation. Most turnover algorithms will look at time-in-job as a factor when turnover is most likely to occur. All things being equal, any turnover predictor worth its salt would say that the biggest flight risk comes in the one- to three-year mark of tenure.
Most employees don’t voluntarily leave in the first year because the job is new and still full of promise. Once an employee goes past the third year at a company, it’s harder to leave because of psychology of the benefits (real and perceived) that have been built up with tenure.
Last but not least: We’re daring employees to leave, and most of them won’t answer the call. There’s a reason the average raise is around the 3 percent mark and has been for decades. Companies have learned that this raise level is just enough to appease the masses.
I’ve got an old recruiting saying that reflects the reality of this dare: “The right salary offer for any candidate is the lowest offer they’ll accept.” Most employees aren’t negotiators. If you gave them no salary increase, many would look for another job in good economic times. But 3 percent? It’s just enough to appease them.
Companies are daring employees to leave. Because of fear and timing issues, most will accept the 3 percent and defer the decision to pursue other opportunities to another day.
All of this points to a simple reality: The employees most likely to leave you are high performers who have been with you for one to three years, have a behavioral profile that makes them comfortable with risk and have no family obligations that increase the fear associated with making a poor decision to switch jobs.
As talent pros, you can play this two ways. First, you should consider special merit increase programs for the employees in your company that fit the profile above. If you’re going to get anyone above the 3 percent you’ve budgeted, stretch with this crowd. The rest? Most of them won’t leave you; history has shown us that.
Finally, if you’re a parent of a high-performing young professional and you want him or her to succeed economically, think about advising your young worker to switch companies three to four times in the next eight years.
This path is not for the faint of heart. But if your kid is young and truly a star, he or she needs to leave in order to get paid.
The Mercer numbers show us that’s the way the game works.