As previously published on In Business Madison December 19, 2012 issue
After the past few years of pay cuts, pay freezes, and meager raises, signs of continued economic recovery have given many workers the confidence to hunt for new opportunities outside of their current organizations. In fact, 32% of U.S. employees are seriously considering leaving their current companies. In an effort to prevent the loss of top talent, business leaders are taking action to stem turnover.
The stakes are high as increased turnover can undermine efficiency and effectiveness, sabotage employee morale, and send recruiting and training costs skyrocketing. Low turnover, on the other hand, can increase salary expenses, which in turn can make it difficult to maintain adequate staffing levels, and may lead to lower productivity if workers become complacent in their positions.
One way to determine whether a company’s compensation plan is competitive in the industry and region – and sufficient to keep key talent from fleeing or becoming too comfortable – is to benchmark it. A thorough knowledge of how pay rates and benefits stack up with similar positions can help one attract and retain talent, keep a competitive edge, perform annual performance reviews, and manage the bottom line.
Tips for benchmarking compensation
- Start with job descriptions: Having thorough descriptions of each position, rather than titles alone, ensures that you’re able to match skills, responsibilities, and experience for each job. Organizations should seek input from employees and managers when developing the descriptions.
- Choose the data carefully: With a variety of compensation survey data available today, it is important for companies to select surveys that offer comprehensive coverage of their industry, location, and type of organization. This may entail using multiple survey sources, noting how the data is collected, its effective date, and geographic differentials. Aim to align job descriptions closely, with the goal of matching responsibilities by 70% or more.
- Select the positions carefully: Companies shouldn’t expect to benchmark all of the positions in their organizations. Instead, they should choose positions that are standard across industries (e.g., accountant, administrative assistant, etc.) or are consistent within their industry (e.g., registered nurse, etc.). For hybrid positions, they should consider comparing those with other positions that require similar skills, responsibilities, and decision-making within the organization.
- The softer side of compensation: Compensation alone may not translate into loyalty or satisfaction, and it isn’t the only direct link to productivity. Regular evaluation of efforts to retain, motivate and engage employees is critical to having a balanced workforce and company culture. These softer compensation practices can include:
- Mentorship programs
- Internal/external training
- Understanding and assessing workloads
- Professional development opportunities
- Social media engagement
- Home office flexibility
- Specialized recognition
It is also important to benchmark a company’s entire compensation/benefits package, and certain resources that can assist in this process are already available to most companies. For example, benefits providers can often provide benchmarking data to determine how competitive a benefits package is compared to others in the region and of similar size. They can also share the most common plan designs, average employer contribution, and which products are most popular.
Finally, employees in this market can likely dismiss the fact that they are not the most highly paid among peers at their position if they get to perform rewarding work. Being able to connect their work to the strategies of their company and feeling like they are part of something bigger can also be a source of satisfaction.
Not sure what matters to your top talent? Ask them. The most important thing when you’re trying to avoid losing key talent is creating an environment where you can have a nonthreatening conversation about compensation. Find out what benefits are most important to your employees and where there may be gaps. Do a survey. The findings may provide valuable information to help guide your compensation decisions.
Bill Bohn is executive vice president at Associated Bank and president and CEO at Associated Financial Group, LLC