Hiring Insights

Word count: 620; Approximate read time: 2.5 minutes

In relation to controlling executive pay at companies that received “bailout” money, I heard someone passionately comment this week, “how you spend your money is up to you…but if you’re a beggar on the corner and I give you $5, then by golly I want enough control to prevent you from crossing the street to buy beer at the convenience store.”

Is this an accurate comparison and valid concern?  I think so.

Solution?  Simple…just cut the salaries of top execs by 90% (as “Pay Czar” Kenneth Feinberg is reportedly planning to do within the next few days).

Problem solved!!

Well…um…maybe not.  According to an article in the Associated Press, the decision to “cut the pay of top executives at companies on taxpayer life support will help quiet the popular outrage over excessive compensation. But it introduces a new concern: brain drain.”

Oops!  Can anyone say, “the law of unintended consequences”?!!  (Remember what happened to 30,000+/- workers in the US yacht manufacturing industry when Congress (1990?) tried to extract more money from high income earners by levying a 10% “luxury tax on yachts?)

But before I get up on a soapbox…and before we wag a collective finger too vigorously at Congress (is that even possible?), let me take a sharp turn and challenge US to look at our own businesses to see what obvious factors we might be ignoring in this economy.

For example…EMPLOYEE RETENTION.

SPECIFICALLY, the retention of those performing in the top 10% within your company.  “Turnover,” you say, “is at an all-time low.”  Admittedly it may not be an issue you’re FORCED to deal with today…but take heed.

Hairline fractures of today can be the earthquake of tomorrow.

This has always been true, but I’m prompted to write this now based on this finding in a 10/09 research study:

“Today’s employers feel that employees are loyal due to the economic times, but the reality is they are not.  Because of this, there is a strong likelihood that when the economy turns for the better, employers could find themselves with valued employees jumping ship. This places pressure on them to put retention measures in place now” – Katherine Jones, Human Capital Institute

Of COURSE you are dealing with other pressing matters.  But retaining your TOP talent can too easily get tucked away in Stephen Covey’s Quadrant #2 (important but not urgent).  Now imagine, however, that you LOSE 2 or 3 of your key employees (presumably NOT over new pay rules for executives).  How quickly will the issue of retention be screaming at you from Quadrant #1 (important AND urgent)?  Unfortunately, by the time you realize it’s a problem…you may be too late.  The 10/09 study goes on to say:

“As the economy rebounds, those workplaces that have not invested in their people could face a mass exodus of employees, potentially crippling the business” – Jesse Harriett, Chief Knowledge Officer, Monster Worldwide, Inc.

We can all criticize Congress for making bad decisions and having a lack of foresight.  But let’s not follow in their footsteps in a way that will cause major regrets.

And in case you need a PRO-active reason to address retention issues too early rather than too late, consider one last finding from the study: “Forty-eight percent of workers say their productivity has been affected by a fear of being laid-off.” It would seem that, according to this statistic, properly addressing retention issues BEFORE you experience turnover will deliver an immediate ROI.

The MOST significant thing you can do to impact retention is to realize its importance and assign the proper priority.  Once you’ve crossed that hurdle, in addition to simply applying “The Golden Rule,” you may want to refer to this comprehensive list of practical ideas on how to retain employees.