Don’t get me wrong. Pay is important. Most of us are not independently wealthy and don’t work because of altruism. Studies that have been conducted since the beginning of time all bear this out. In most cases money will fall anywhere between #3 and #6 as the reason for leaving. That being said, money is important. People work to pay the rent, cover the car payment, send the kids to college and other things that add to their quality of life.
What’s the Key to Minimizing Money in the Equations?
As much as possible…your goal is to reduce the impact of pay as a factor in the retention equation. Studies have shown that compensating people near the average or slightly above the average for their occupation is the answer. I believe in paying above the average because “A” players are not looking to be paid “average.” The key is to know what the market is paying for certain skills…then pay at the appropriate level based on your company strategy. Then communicate that to your people. This is particularly important today because people will go on the internet and pull up statistics of their own from places like salary.com. Beat them to the punch and have your own studies available. Show them the information and discuss it in order to build a true understanding of the compensation process.
Compensation, money, or pay. Whatever you want to call it, how you divide the compensation pie within the organization is crucial. This is as important as how much you pay. Nothing will drive an employee out of the organization faster than paying some slug the same (or close to the same) as a solid or great performer. Don’t kid yourself. People have a pretty good idea what the person in the next cube is making and they compare how they perform compared to that person.
If you are a manager reading this, how you divide the compensation pie is the one area that most of you have a measure of control over. In most cases you have a say in how you divide the pay pie at the end of the year…..at least within certain parameters. Bottom line. Take the money from the lousy performers and give it to your solid and great performers. Unfortunately, most managers split the pie “equally” or pretty close to equally thinking this will keep everyone happy.
If you have great employees, you need to go to bat for them. Ask for more for them and be ready with a sound rationale why it’s good for business and the impact to the business if they leave. The most that you can be told is “no.” Then you know you have to use other tools to help retain that solid performer.
You shouldn’t care if your slugs are happy or not. If they don’t like it, let them leave…you will be better off. Your best people can always find another job. They’re good and other companies recognize it. You should not be looking for equality…you should be looking for fairness. Fair IS paying the solid performers more than lousy performers. After all…they are worth more to the organization. When that slug complains take advantage of the opportunity to start a constructive dialogue about their performance. Tell them they got what they got because of their lousy performance then tell them what needs to change if they want to see more money in the future. Discussions with lousy performers are not fun but they are a part of being a leader. I would rather have that discussion than have to scramble to replace a top performer.
It’s not all about the money. But, money does play a role in retention. The key is to have a well thought out strategy that compensates “A” players like they are “A” players. If you do that and take care of their other needs, money will not be the issue that prompts them to start looking for another job.