by Adrian U. Taylor, CPA Tax Manager at Yount, Hyde & Barbour, P.C.
Human capital is a critical component to successful businesses. This is why selling your business vision or philosophy to potential new hires is important. Equally important and possibly more, is reselling your business core values to top performers year after year. Business owners know their top performers, the ones that set the tone for the entire workforce, raise the bar for everyone, the people your business cannot afford to lose.
The question becomes: How do successful businesses attract and retain top talent?
We cannot ignore the fact that money is a key consideration when employees chose to join or stay with a company but, it is not the only reason. However, if we start with securing competitive compensation packages (because most businesses have access to salary and benefit guides or industry data like the table below) we can see projected 2014 raises.
Source: 2013 Towers Watson General Industry Salary Budget Survey
Since businesses have tools to help solve the compensation piece of the puzzle, why is recruiting and retaining employees one of the biggest challenges that keep business owners up at night? And it does keep business owners up at night for good reason.
Most know, or have heard, the statistics regarding the current hiring environment:
• On average, it costs approximately $8,000 to replace a U.S. worker earning just under $40,000 a year, according to the Society for Human Resource Management (SHRM). These costs include advertising, recruiting, interviewing, hiring, training and maturation time to full productivity.
• 78 million baby boomers are projected to retire in the next 15 years forcing businesses to focus additional resources on recruiting efforts, Department of Labor (DOL).
• More than 60 percent of Generation Y or Millennials (birthdates between 1980 to the early 2000s) leave their company in less than three (3) years, SHRM.
• Unemployment for specialized skillsets remain below historical averages while general unemployment rates are relatively high but declining, DOL.
As referenced above, compensation is not the only reason – notice the differential between top performers and average performers for the projected 2014 employee raises, less than 2%. Is this adequate incentive to secure top performers? Maybe. What happens when a top performer hits the end of the pay scale?
These questions bring us to the second piece of the puzzle, nonfinancial motivators. Common examples are:
1. Employee acknowledgement and respect
2. Team camaraderie and fun
3. Flexibility and time off
4. Increased responsibility and challenges
5. Personal development
A recent study surveyed hundreds of personnel asking each person to think of the “best place” they have ever worked during the course of their career; and list three (3) attributes of “why” this was the best company they had ever worked for – “salary” was rarely mentioned as one (1) of the top three (3) reasons. Likewise the same personnel were asked to list the “worst employer” and provide three (3) characteristics of why such employment was not desirable. Again compensation was seldom listed.
Many businesses understand these motivators. Furthermore, they realize not every employee is motivated by the same factors or weighs such factors equally throughout different phases of their career. Great businesses ensure management knows their team members and knows what drives each individual’s performance. It has been said, employees do not leave companies; they leave managers.
To that end, Simon Sinek presented, “How Great Leaders Inspire Action” popularizing the concept of the “golden circle”. It is a model that starts with the question “Why?” He says every organization knows what they do, some know how they do it but, very few know why they do what they do. For those who have not seen the video, the link is here, it is about 18 minutes and a powerful message to watch.
When Sinek asks businesses “Why?”, the answer is not to make a profit. He insists making a profit is a result. Henry Ford once said, “A business that makes nothing but money is a poor business.”
You may be asking yourself, why is this relevant to recruiting and retaining employees? It is the final piece of the puzzle: Your business purpose, cause, belief – why you get out of bed in the morning – is the reason your people come to work every day. The “Why?” helps create the culture.
“Companies continue to struggle retaining my generation, and, as a result, it costs them a lot of money and productivity that they could be saving if they created a stronger corporate culture to support them,” said Dan Schawbel, founder of Millennial Branding and author of Promote Yourself: The New Rules for Career Success (St. Martin’s Press, 2013).
Sinek further suggests, if you hire people who need a job but do not believe what your business believes, they will work for a paycheck. I would add to that, when a better paycheck comes along, they will take it. But, if you hire those who believe what your business believes they will work for you with their blood, sweat and tears. These are the employees that are working hard or working late when no one is looking. The employees all businesses are looking for.
In closing, years ago, people spent their entire career at one company. Today that is simply not the case. Businesses are going to have to work harder to attract and retain employee loyalty. Creating a culture that inspires employees will help lead to increased employee satisfaction and reduced turnover.