Retaining Top Talent In An Inflationary Wage Market
By Scott Wetzel, JD - CEO, SkyView Partners
Forbes.com - As small-business owners witness indications of inflation across multiple goods and services, it’s time to revisit compensation for key partners and staff members.
Historically, as a service provider in the slow to change banking industry, monitoring and revising competitive wage changes was a far less acute concern. Today, as wage inflation burgeons across almost every industry, including banking, business owners must develop new policies to attract and maintain their most valuable asset — human capital. Business owners need to adopt increased frequency at which they review market wages and rely on less conventional sources of information.
As Steve Jobs said, “I consider the most important job of someone like myself is recruiting.”
In today’s hyper-competitive employment market, recruiting remains vital; however, retention needs to supersede recruiting.
Reviewing Compensation — The New Norm
Historically, annual reviews of compensation in mature industries served as an accepted and appropriate procedure; however, the rapidly changing overall economic climate coupled with historically low unemployment rates forces business owners to reexamine the frequency.
Employers who maintain an annual compensation review focused on cost-of-living adjustment (COLA) may find their workforce departing in unprecedented volume. The rule of thumb for the banking industry has historically revolved around annual compensation adjustments based on a myriad of factors to determine annual adjustments.
Today’s employers need to adapt compensation reviews that occur at a far greater frequency than annually. Employers will be well serviced to review wages on a semiannual and potentially quarterly basis depending on the current dynamics of their respective industry. As an example, despite the stagnant growth of wages in banking over the last few decades, the wage environment for top banking talent has evolved into a robust landscape driven by competitive industry incumbents and rising industry disrupters.
Wage inflation is a reality for historically stagnant wage industries; regardless of each employer’s respective industry, business owners would be well served to conduct more routine compensation audits.
Sources of Competitive Wage Information
Industry-specific data published within weeks or months of year-end no longer suffices as an accurate and timely barometer of wage growth. Bottom line: If you wait for intellectual capital providers to produce reliable and actionable wage information for your respective industry, it’s probably too late.
Sourcing timely industry wage data is no longer a perfunctory function. Business owners need to “get their hands dirty” to determine where wages are and where they might be going. The single greatest source of intel for wage growth for top talent is pragmatic but rarely utilized: Ask your top talent. The individuals you define as top contributors are not a secret inside and outside your organization. Although less enjoyable to admit, your most talented staff members are routinely courted by competitors or other industry-specific participants.
Developing a transparent dialogue with your staff around what they are personally witnessing or learning about in today’s labor marketplace without recourse can serve as a vital source of information. Collecting relevant information requires trust, transparency and tact.
Engage employees with some well-delivered inquiries, which might include:
• “What are your peers witnessing?”
• “Are any of your former colleagues providing you with insight into corporate compensation initiatives?”
• “Are there any members of our team whose compensation and/or job satisfaction needs to be addressed?”
• “Are you on the career and compensation tract you envisioned five years ago and a year ago? Has anything changed your vision?”
Human nature will naturally lead to selection bias: Staff may vividly recall industry peers garnering outsized compensation packages, whereas less desirable information is easier to forget. However, their perception is their reality: If their peer has retained more attractive compensation, they certainly feel eligible for commensurate compensation. Make sure you are routinely checking their “compensation pulse.”
Other industry employers and service providers can also serve as a useful gauge of information. It’s highly beneficial for industry participants to ascertain if they have incurred any recent staff departures, proactively or reactively adjusted compensation, and faced any challenges recruiting.
Industry service providers are an excellent source of information. Service providers witness staff changes across numerous organizations rather than an insular view of their respective organizations. Keep in mind: Service providers are also an excellent source of information about your organization to competing entities.
In summary, as the market for top talent continues to accelerate, retaining key employees implores business owners to reexamine their policies and procedures related to retention. Namely by revisiting the frequency for reviewing compensation in addition to sourcing relative compensation data from less conventional sources.
It’s an employees’ market. Business owners who accept, address, adapt and act will thrive against more laggard competitors in a very competitive market for talent.
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