Many of you have these jobs in your organizations. You fill them with new (or nearly new) graduates, either from college or a particular technical school certification or licensure. Then you expose them to a year, maybe 18 months, of intense training and development, after which they are prepared to assume a critical role and set of responsibilities.
Or be lured away by a talent competitor for significantly more money.
These employees could be manufacturing technicians or nurses. They might work in the physical sciences or account management. What they have in common - regardless of their role or your industry - is that you have invested time, energy and resources into making them very valuable, and now your pay program may be preventing you from paying them commensurate with that value. That annual 3% merit opportunity simply won't cut it in these circumstances.
Situations like this often drive a lot of fire fighting, a lot of adhoc market adjustment activity. Unfortunately, this type of reactive approach only feeds employees' perceptions (and the possible truth) that the organization doesn't recognize how valuable they are. That they must take matters into their own hands in order to get paid what they're worth; not a tough thing to do when the recruiters start calling.
Do you make your employees too valuable too fast? First of all, congratulations! Likely you've invested a lot in defining the competencies required for success in an important role and you're delivering the necessary training experiences to get employees there quickly. Well done you! Now let's make sure you aren't undermining that investment with your pay practices.
Here are a few thoughts on tackling that challenge.
Gather data to understand the problem. Start by collecting the data necessary to get a clear understanding of the nature and scope of the problem. You might look at your market adjustment activity, information on departures, counter-offers and what can be gleaned from exit interviews. Is this a more general and diffused issue - or is it concentrated in a particular job or job family? Is compensation really the driving force behind quits and threatened quits, or are there other forces at work?
Seek market reference points to confirm the value trajectory. If you are indeed hiring "fresh outs" and losing them 12-18 months later, and you have confirmed that compensation is a significant factor, focus on the kind of market reference points that will help you understand the value trajectory that these employees take during the first critical years. Career centers at educational institutions often have information on new grad job offers, allowing you to confirm the starting point. Then try pricing the kinds of jobs to which they are fleeing. Note that these might be very different roles in very different organizations from yours. Use this to estimate the typical net change in value for these employees through and following their development period.
Audit/adjust pay policies and practices accordingly. If you have an employee group where, thanks to your training efforts, the market value needle is moving at a rate that "regular" merit increases - or even merit plus promotional combos - can't possibly match, you've created a poaching risk. Time to consider carving out this job - or job family - for a different approach. This might be a tighter series of more narrow salary ranges, coupled with an accelerated salary review process, allowing employees to move both through and up as they hit developmental milestones. Or it might be a defined set of salary steps overlaid on a the regular salary range, allowing a rapid progression through the first 12-18 months (again, assuming development and performance milestones are met), after which they can be rolled back into the regular cycle and process. Or something else still.
How have you responded to situations where you've made employees too valuable too fast? What advice and experience can you share?
Ann Bares is the Founder and Editor of the Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a range of client organizations. Ann serves as President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of the Advisory Board of the Compensation & Benefits Review, the leading journal for those who design, implement, evaluate and communicate total rewards. She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.
Creative Commons image "Arrows showing up" by FutUndBeidl