However, salary increases are not going to be enough to keep staff happy. For the fifth year running, U.S. employers are projecting a modest 3.0% base pay increase for their employees in 2016, according to Hay Group data.
So sans monetary incentives, what new strategies can be employed to engage and retain employees and move beyond take home pay as a motivating factor? Here are 3 secrets to finding and keeping the best millennials as employees.
1. Offer alternative compensation. More than previous generations, millennials—who grew up in an era where the job market and overall economy have been poor to mediocre, at best—are accustomed to seeking out alternative motivations in their work beyond their weekly paycheck, such as meaningful and challenging work, occasions to learn and develop skills, and opportunities to lead. Understanding these alternative motivations is key to identifying which techniques are best employed in engaging and retaining employees.
A recent Korn Ferry survey found that 4 out of 5 executives said alternative forms of compensation would resonate better among employees, when compared to raising wages. Increased emphasis on and frequency of these alternative compensation opportunities have shown to be key in retaining top talent. Overall, 97% of respondents said they were increasingly important. As a result, many organizations reported increasing levels of investment in building out career planning frameworks, improving work climates and culture, retooling performance management and feedback processes, developing enterprise-wide recognition programs, increasing investments in reward statements that communicate rewards better.
2. Make the career path clear and attainable. When it comes to employee retention, organizations need to renew their focus on the role of the corporate office in strategizing approaches to identifying and keeping top talent. Revisiting clarity in job roles, career paths and succession planning processes can all help to provide employees with the clarity they need to further invest themselves in the company. But in today’s competitive talent marketplace, it’s not just about the hunt for talent. Beyond securing best-in-class leaders, companies must nurture those individuals―especially Millennials, who crave regular feedback in the workplace―and ensure career opportunities are available and visible to them.
Even in the C-suite, nurturing leaders and refining assignment and succession planning strategies are critical to extending executive tenure and ensuring retention of those, such as the CEO’s direct reports and mid-level managers, who may be affected by a sudden CEO departure. We have repeatedly seen the best performing organizations ensuring their leadership pipelines, as well as succession planning and assignment planning processes are robust, and that top talent executives are touched more frequently in these planning processes. The best assignment and succession management processes effectively balance the demand and supply aspects of succession planning by not only ensuring that these processes are in place, owned by senior leadership and supported by HR, but also that key talent is actively apprised and engaged in the assessment of potential future opportunities―both for the next role, as well as ultimate destination roles.
3. Paying for performance will pay off. Variable pay plays a key role in engaging and retaining employees. The vast majority of organizations are quite willing to pay for performance, but only if they, in fact, get that performance from employees. Organizations see variable pay programs, both short-term and long-term, as more directly delivering on pay for performance goals. Clearly defined programs that strike the appropriate balance between individual, team and organization performance, and draw upon the right performance metrics, will help companies better reward and, in turn, retain employees. Yet implementing these programs should be done with care; increased emphasis within variable pay programs on quantitative, bottom-line measures at the expense of “softer,” qualitative measures presents a serious potential for unbalanced behaviors and unintended consequences on the business, as a whole. In our work with high performing organizations, we see more focus on metrics that are leading indicators of performance, as opposed to trailing indicators and financial metrics.
Examples of these leading performance indicators include human capital measures (e.g., employee engagement, key talent retention, workforce efficiency) and customer measures (e.g., customer engagement, retention, growth in key accounts).
With conservative base salary increases firmly entrenched as the “new normal” in the post-recession era, corporate leaders can take inspiration from the demands of Millennial workers as they tailor variable pay and other non-financial strategies into differentiated rewards programs that retain and attract top talent.