.. nies offer profit sharing plans. A typical profit sharing award is 5% to 6% of employees’ base salary. Lump sum merit awards provide financial recognition for an individual’s job performance in lieu of merit-based salary increases. This is an effective way to provide financial recognition, especially to those individuals whose base salary is already relatively high.
The lump sum merit award must be re-earned each year and is usually paid during an annual salary review period. Although paying all employees higher than average salaries and bonuses would seem to be a pay strategy that would attract the best employees, there are several drawbacks to this approach. Employees who receive higher than average compensation may be less willing to do the necessary work associated with the job, but will focus more on the menial tasks of the job function. If all employees are paid higher relative to the market, then there’s less room for salary differentiation between the best performers and the average performers. Also, if a highly paid employee performs poorly and termination becomes necessary, it can become a problem for the organization.
Regardless of which method is used, an organizations compensation strategy should focus on allowing for a diversity of skills and styles, differentiating in pay between the best performers and less valued performers, and providing career advancement opportunities. Benefits More than ever, employers are looking for new ways to provide the best employee benefits without exceeding their budgets. Employee benefits such as medical, dental, and vision coverage, life and disability insurance, and retirement plans can help attract and retain the best employees. According to a 1999 survey by the Society for Human Resource Management, other frequently offered fringe benefits include 401(k) matches, relocation assistance, educational assistance, year-end bonuses, domestic partner benefits, and a company car. Paid vacation is among the most commonly offered leave benefits. However, time off has yet to register among employers as a retention tool. Nationwide more organizations are experimenting with a smorgasbord of fringe benefits including day care for children, elder care for parents, gyms, massages, subsidized meals, financial counseling and concierge services.
Work/Life Initiatives While compensation remains a key bargaining chip in recruiting qualified workers, many employers realize that in today’s tight labor market, helping workers juggle the hectic demands of work and family can aid in keeping them. According to a telephone survey, conducted by Randstad North America, the parent company of several employment firms, employees want to balance competing work and family responsibilities. Fifty one percent of employees said they would stay at their current job rather than switch if their employer offered flexible working hours. Also, 62 percent said they prefer a boss who understands when they need to leave work for personal reasons over one who could help them grow professionally. Fifty-one percent of employees prefer a job that offers flexible hours over one that offered an opportunity for advancement.
Although job fit is important, culture fit determines whether someone is highly likely to remain with an organization. Every organization has its own unique culture or value set. Most organizations don’t consciously try to create a certain culture. The culture of the organization is typically created unconsciously, based on the values of the top management or the founders of an organization. Employees commit to and want to remain with an organization whose culture they connect with.
Providing career advancement opportunities is critical for retention, especially for those employees who are career oriented and are in the early or middle stages of their careers. Companies should whenever possible, promote from within. Career development discussions should be held at least annually or whenever the employee requests it. Although, an employee should take the initiative and own their career development plan, the organization should encourage its development. Career counseling is another effective developmental tool.
Typically the manager is the best career counselor for the employee since the manager can impact work assignments which can foster career development. Employees should be encouraged to explore career interests to help prevent burn out or frustration and surprise from reaching a dead end in their career, and to enhance the employee’s skills and, therefore, value to the organization. Another retention strategy is listening to employee ideas and complaints. Employees who do not feel listened to will be demotivated. Listening to employees gives them a sense that they are valued and provides them with a sense of control over their work situation. Providing recognition to employees is another retention strategy.
Types of recognition can range from a simple thank you for a job well done, to a plaque or financial incentives. A mentoring program can be an effective retention tool. As part of its effort to attract and retain top talent, Mercedes Benz, USA recently initiated a mentoring program that pairs experienced managers with student interns. The program offers the students an opportunity to get to know someone other than their direct supervisors and build strong ties to the company. Conclusion In an effort to reduce turnover and increase retention, organizations should find out from their employees what they truly desire that they currently arent getting. Organization must exert a great deal of effort to develop an effective retention strategy in todays market. Companies must also be able to identify whether turnover is caused by external or internal factors.
In the case of internal factors companies can do several things to retain staff. One of the first things an organization can do is hire the right candidates. The recruiting and selection process is very important. The first place to look for employees is within the organization. Someone that might not have been considered could be perfect for the position.
This also shows employees they have an opportunity to get ahead. If an organization decides to fill a position with an external job candidate, they should hire carefully. Recent studies show that nearly 80 percent of turnover is due to hiring mistakes. A job candidate with the right technical skills is not enough. Companies must be concerned with not only finding employees that are qualified for the job, but are interested in the overall performance of the organization. Employers must consider whether the candidate shares their company’s vision and will adapt to their workplace. Companies should strive to continually develop strategies that will make their organization an employer of choice.
Some strategies include maintaining ongoing two-way communication with employees. Managers should be trained to give recognition and praise and not wait until the next job performance review to tell your employees what a good job they’re doing. Managers must provide positive reinforcement on an ongoing basis. Match the skills and interests of employees with their work assignments. Make the necessary adjustments to ensure that employees are effectively aligned with what the company needs them to do and what they are best at and enjoy doing.
Employers that make a significant percentage of the compensation package variable will benefit both the organization and the employee by encouraging high-caliber performance. Few companies truly differentiate between better than average and less than average performers when salary increases are given out. Business Reports.