Four strategies — some related to compensation and some not — provide options to attract and retain talent in the face of aggressive competition.
The war for certain talent is underway, but getting caught up in the vicious cycle of matching compensation can be costly and create inequity in the long term.
Instead, take a disruptive approach and mix and match four strategies, some with and some without a pay element, depending on the use case.
The right strategy will depend on the scale and nature of your current talent risk and the norms for the segment in which you’re competing.
An increasing number of organizations find themselves competing fiercely to attract and retain the talent they need to accelerate growth and performance. While money won’t fix all of today’s complex talent problems, compensation remains a critical differentiator — though for some roles more than others. What options are there beyond the vicious cycle of matching compensation?
Jessica Knight, VP, Research, at Gartner, says progressive organizations are winning by pushing beyond incremental solutions. “In the same way the pandemic forced organizations to rethink their hesitancy around remote work, today’s labor market is prompting executives to reconsider their approaches to attraction and retention. They are considering bolder moves around compensation/benefits, talent sourcing and role design in the face of aggressive compensation offers from competitors.”
Your talent risk profile should drive your approach
Matching compensation can become unaffordable over the long term and cause issues of inequity in the workforce that damage morale. But the success of disruptive approaches, which offer more than just compensation, will depend in part on your specific talent risks.
Nearly half of organizations report significant concerns about turnover in the coming months. Remote and hybrid working setups have expanded the options for many employees — beyond basic economic incentives to move jobs.
To understand how this trend affects your organization specifically, consider:
Scale. Do you face competition for a few targeted roles or across broad segments of the organization?
Nature. Is the talent shortage temporary or a more systemic attraction or retention challenge the organization must address for the long term?
Context. How differentiated are the options you are considering compared with what is already offered across your organization’s specific location(s)?
Four disruptive strategies
Money is always a key factor in talent strategies, and it can be especially effective for finding and keeping certain talent in certain situations. Financial services firms, for example, seem likely to use bonuses as a retention tactic for 2022. But there are other strategies to consider.
Many organizations are increasingly trying to inject flexibility and humanity into the employee value proposition (EVP). And mixing and matching compensation- and non-compensation-related strategies provides more options for you to tackle the specific talent challenges you face.
No. 1: Pay to play via compensation and benefits
Examples include signing and other bonuses, increased base pay, decoupling of pay and location, and tuition reimbursement. These strategies directly respond to market rates for labor and offer a quick return on investment for a role that must be filled immediately. They also provide a clear and tangible employer branding message.
The downside is that these tactics can be expensive to implement — and you could still find yourself matched or outbid by a competitor. These incentives can also create issues of fairness if existing employees perceive unequal treatment compared to new hires or those incentivized to remain.
No. 2: Pay to play via time and workload
Shorter or flexible work weeks for the same pay, a guaranteed maximum workload, and pay adjusted to workload are just a few ways to provide a lasting and highly differentiated position in the market. They can also increase productivity and employees’ sense of well-being — and help reduce attrition resulting from burnout.
The challenge is that competitors can easily follow suit, and these policies are difficult to dial back down the line without creating new engagement and retention problems. They may also involve significant change management effort and cost, and end up raising equity questions if benefits are not available to all employees.
No. 3: Bet heavily on your existing employees
Retention bonuses and incentives, accelerated promotions, and mobility programs that, for example, move talent internally to ensure high-demand roles are filled, go a long way. These approaches can be quick to implement, signal commitment to key employees and reduce the time that key positions are open — and the productivity lost as a result.
Costs vary and a byproduct can be increased turnover among less tenured employees who see making a move as the quickest way to boost their pay and position. The additional compensation employees can command when moving — the “switching premium” — will be key to your success in general, as whatever incentives you offer must match what’s available from the competition.
No. 4: Radically expand your talent pool
It’s key to rethink the definition of “qualified” talent and predictors of long-term success. Reduce or eliminate arbitrary requirements around education, location or experience to capture talent that might otherwise be screened out. Implement or expand apprenticeships and other pipeline-building activities, such as probationary employment.