Companies invest extensive resources, time, and energy into their business strategies with the end goal of maximizing profitability. Talent management plays a major role by investing in those people who will make those business strategies happen. The success of a company is largely dependent on how they invest in those people performing the job responsibilities. There are many factors that go into answering the question; how does a company attract and retain the right talent? Much of the answer depends on the type of industry sector being looked at in depth. However, this research paper will investigate how some leaders in the service industry are attracting talent for their organizations; what some industry leaders will do to motivate their workers; and take a closer look at how some of the most sought-after companies are retaining their talent. Some strategies mentioned include sign-on bonuses, high wages, additional vacation time, perks, on the spot awards, and non-cash awards. Even so, workers continue to ask for higher wages and better benefits along with having a great company culture. In turn, the job market is very competitive for organizations who need to charm the best talent into working for them. Nevertheless, for most companies, compensation packages are still the leading incentive to attract the right talent for an organization, motivate employees to perform efficiently, and retain the most talented people.
Keywords: compensation packages, retain, motivate, talent
There are many factors that go into answering the question – how does a company attract and retain the right talent? Much of the answer depends on the type of industry sector being looked at in depth. However, for most companies, compensation packages are still the leading incentive to attract the right talent for an organization, motivate employees to perform efficiently, and retain the most talented people.
Varying compensation packages are used by organizations to help attract the right talent that gives them a competitive edge. In order to attract good talent, a fair and adequate compensation package needs to be considered. According to the Encyclopedia of Business and Finance, three major determinants of compensation include what the market will bear at the time, the type or work and the scope of the job, and the individual characteristics of the person, such as skill level and education (Lee, 2014). Some examples of ways companies look to attract are through paying top dollar for skilled workers in highly competitive markets or paying higher wages during select times throughout the year. Studies from the Encyclopedia of Business and Finance have shown that one-fourth of all employees would consider leaving their current job if they were offered a 10% raise elsewhere. Further cementing, that a paycheck is still very important because people have financial responsibilities. Companies who can’t afford top dollar could explore a comprehensive compensation package, such as a package would include more vacation time, flex time, or other company perks such as a discount on products (Lee, 2014).
Some companies that are doing really well or are very well known in their sector can offer their employees “bragging rights for holding a job others are dying to have”, according to Peter Cappelli, Professor of Management at The Wharton School (Cappelli, 2015). Cappelli believes that a company may not have to compensate a person as much in wages but lean more towards attracting through other company benefits. Furthermore, Cappelli reinforces that a company really needs to understand what skills or applicant qualities they need for job. Instead of searching through hundreds of applications, being prepared with these goals in mind will help to narrow the search focused on a smaller pool of qualified applicants, which in turn saves time and resources (Cappelli, 2015).
A journalist from Forbes Magazine reinforces that companies such as Apple and Goggle have quality candidates that are eager to work for them, because “they’re not recruiting talent – they’re attracting it.” (Clark, 2014). Along with Cappelli’s previous theory of understanding the skills and competencies a company is looking for from recruits, Forbes suggest not to overlook talented people because of biases. There could be talented people at any age, with any gender, or just candidates who are re-entering the work force that may have been out for a while, so it is important to keep an open mind. The last way that Forbes mentions that a company can attract the right talent is to make sure that the right leaders are being promoted to set the pace for the rest of the team. Really great leaders treat people with respect and they take care of their teams by promoting fairness in the workplace. The cost of having the wrong person in charge can lower the morale for the rest of the team, causing people to “leave because of their bosses, not their companies.” (Clark, 2014).
Another article investigates workplace wellness programs that help employers cut costs and attract better employees. The interest in better health and benefit packages to employees are a result of spending so much time in the workplace and approximately 60% of Americans receive benefits from an employment-based plan. The draw to employers is that some programs can lead to a reduction in health care costs, as well as health care premiums. A company may choose to focus on benefits and incentives that promote healthier workers, rather than focusing on wage, thereby, strengthening their ability to attract employees (Baicker, 2010).
Motivating employees in the workplace requires an organization to offer monetary and intrinsic rewards. When employees are motivated in the workplace it benefits not only the employee but the employer as well. Employees may have the opportunity to move up in the company or take on new responsibilities that will help to diversify their performance portfolio. The employer also receives the benefit of higher production levels and an efficient workplace. Some ways to motivate employees might include bonuses that reward performance through financial incentives; perks such as social outings, extra team member discounts or free sample products, theme days in the workplace and holiday parties; additional educational incentives to help team members to become more skilled and prepare them for the next level; and positive reinforcement through recognition such as awards and certifications.
A few suggested uses of awards and bonuses by Human Resource Management International Digest include: “sign-on bonuses, a retention bonus, spot award bonus, holiday bonus, non-cash award, and culture-specific bonuses.” (Law, 2016). When the job market is very competitive, companies may use a sign-on bonus to elevate the appeal of a compensation package. It is a dollar amount that is paid in total to the applicant for signing onto a specific job that needs to be filled right away. A retention bonus would incentivize employees who possess a critical skill from leaving, or to influence a skilled worker to complete a critical project, and acknowledgment for hitting a milestone. There are other awards that are not as costly if the budget does not allow, such as spot award, holiday pay or bonus, and non-cash awards. A spot award would normally be used for circumstances that are in the moment to reinforce positive performance to recognize the result. For example, every time a customer would call on a manager to brag about how their experience was amazing, the manager would award a team member with a gift card to a popular coffee spot or lunch café. When a major holiday comes along, an organization could award top performers with supplemental time off to stack with vacation time, flexible holiday hours, or a holiday bonus to include with their paycheck. Some examples of non-cash awards would include certificates of appreciation and thank you cards. The corporation Ascena Retail brands for example would send every field team cheesecake, and the management staff turkeys, in addition to a holiday discount perk and increased pay. In short, extrinsic motivators such as bonuses and compensations may be enough to motivate team members to stay on a shorter term bases, monetary strategies can be combined with intrinsic motivations such as recognition and challenging career advancements to retain employees for a longer time (Law, 2016).
Retaining the most talented people is a focus of many successful organizations that includes emphasis on healthy workplace culture. Consistent recognition is the most effective way to create a magnetic culture where people want to stay and work longer than a year. In fact, a study shows that the level of engaged team members falls dramatically from 36% in their first year to only 17% after one year of employment (Sheridan, 2013). One reason for employee turnover is due to excessive absenteeism. This problem can be costly long term for an employer because it lowers the productivity levels. Absenteeism is a term used to describe unscheduled absences from an employee at work. Many absences have legitimate reasons, such as illness and family issues. However, absenteeism can also be traced back to other factors such as poor work environments and employees with a lower sense of commitment. Problems with employee morale is a common concern when the work load is shifted to other employees to maintain production standards. Lower productivity levels could mean profitability levels for a company may lower as well. It is important that an organization has a policy in place to address excessive absenteeism because of its negative impacts in the workplace, as well as reward those employees who are punctual and responsible with time off. For example, team members might receive a higher percentage of raise in year end evaluations for decreased absenteeism.
In an article found in The Journal of Business, author Ruiz-Palomino suggests that “though salary is still an important factor, it is with a combination of responsibility, respect, and recognition that fully increase its contribution to motivate in the workplace.” (Ruiz-palomino, 2013). Offering a fair compensation is what the majority of workers are looking for. Too small of a wage can be “de-motivating”, and too large of a salary does not motivate either. Challenging work and advancement opportunities along with company culture need to be layered in along with the compensation package.
Organizational decline mentioned in the journal happens when the economy is facing tougher times and with that comes concerns of job losses. When a product that a company produces is no longer in demand, the company looks to make cuts and payroll is one of the biggest costs. Job insecurity happens when people who work for an organization are fearful of losing their positions with the company. The greater the job insecurity the higher the risk for turnover. There are some actions an employer can take to help reduce this phenomenon through non-cash-based rewards, as mentioned earlier such as flex time, certifications, and recognition (Ruiz-palomino, 2013).
Pay-for-performance systems can also help to retain top talent. For employees the benefits would be higher pay for work that exceeds the company goals or expectations. Author Bukovinsky for CPA Journal writes, “Organizations that tie compensation to performance produce better financial results than those that do not” (Bukovinsky, 2013). As such, PFP systems may also be complex and not effective if they are not done properly. Bukovinsky recommends that the system be designed around the behaviors that are aligned with the company goals and culture to maximize the “powerful motivators” that this type of system effectuates (Bukovinsky, 2013).
For most companies, compensation packages are still the leading incentive to attract the right talent for an organization, motivate employees to perform efficiently, and retain the most talented people. Depending on the industry type and varying work types, companies can enhance their compensation package in a number of ways to help to achieve a competitive edge. Talent Management is a major factor because is leverages the people who are carrying out business strategies that help to maximize profits. Regardless of the type of sector, an organization can use a number of diverse or varying monetary awards initially to attract the talent they need as well as to keep them motivated, such as sign-on bonuses, health benefits, vacation packages, product discounts, higher wages and pay-for-performance systems. To retain employees on a long-term bases, companies need to evaluate what motivates the type of people they need to carry out their company culture and goals. The better a company understands various factors for turn-over in the organization, the sooner management can look into both extrinsic and intrinsic awards that will support a company’s vision.
