The state of the labor market is changing. Unemployment rates are dropping and companies are opening up hiring budgets. Organizations that believe employees are lucky to simply have a job in this economy are headed for trouble. The job market is quickly becoming a candidates’ market.
Some 44.4 percent of insurance companies plan to increase staff, according to “The Semi-Annual Insurance Labor Market Study” by The Jacobson Group and Ward Group. In today’s job market, top performers have options should they choose to move on.
Retaining critical talent is a major concern. More than 70 percent of corporate leaders are highly concerned about retaining critical talent over the next year, and two-thirds expressed the same concerns about their high-potential employees, according to “Talent Edge 2020: Blueprints for the new normal” published by Deloitte. These concerns are not unfounded as the industry veers toward an impending skills gap.
With Boomers preparing for retirement, employers are finding that they lack incumbent talent. Adding to the complexity of the problem, many organizations made necessary cuts during a down economy, and hiring and training fell to the wayside. Faced with these threats to every organization’s talent pipeline, retention must be top of mind. The workforce may make or break a business.
Why Compensation is Important
It should come as no surprise that compensation ranks among the top concerns of today’s workforce. A competitive salary determines the caliber of talent organizations are able to attract, engage and retain.
A majority of workers (59 percent) do not believe that employees within their organizations are rewarded according to job performance, reported a recent study, “Workforce Mood Tracker” by Globoforce. Seventy-four percent of respondents have left a job because they did not feel appreciated.
On the other hand, companies with engaged employees enjoy the benefits of more satisfied customers, higher revenue and increased efficiency. Engaged employees understand an organization’s goals, can clearly communicate their roles in achieving those goals and can discuss how they impact the overall success of the organization.
Capitalizing on the connection between employee productivity and salary is paramount to keeping the talent pipeline strong. With competitive compensation, a company can raise each individual’s performance and affect the bottom line.
Align Your Strategy
A solid compensation plan works hand-in-hand with the greater human resources strategy. An agency’s current career development program will help define the intervals for advancement. While human resources must track and document the process, the management and development of a workforce is best accomplished by line managers.
Start with an assessment. Look at all positions, organization-wide. Categorize positions as supportive or strategic. Supportive staff includes operational and administrative roles. These people keep the organization running. Strategic players have an effect on the bottom line; those who contribute to organizational wealth. Not all positions are strategic, but all are important. If not, it is assumed that they are eliminated. Invest in and manage different roles accordingly.
Metrics for bonus plans must be clearly defined. Vary bonus criteria between the differentiated position groups. Incentive compensation should recognize and reward results, as well as commitment to company values. Therefore, bonus compensation awards should reflect the participants’ overall contribution to the advancement of the organization’s desired cultural attributes.
Don’t neglect the details of a compensation plan. Benefits are just as important to today’s employees as base salary. A retirement plan that offers some level of matching will encourage employees to build their career with your organization. Flexible work options factor into salary considerations. Many workers would opt to telework if given the option, even if it means a lesser raise.
Clarity in this process is essential. Position descriptions must be created for each position and organized by job family. Performance plans and assessments should be documented for each position. Transparency is important; employees want to know what is expected of them, as well as what they can expect from their employer. Performance is improved when expectations are communicated, measured, recognized and rewarded.
To be effective, a compensation plan must reward high performance while differentiating talent. It needs to be attractive to high-caliber talent and have a meaningful impact on retention and engagement. If these needs are met, your compensation strategy can successfully support your business strategy.