The costs of hiring and retaining quality talent are among the foremost concerns for any business. The total costs of paying benefits and compensation of your workforce can easily become a significant part of your operational expenditures. If not managed carefully, an overpaid workforce can slow down business cycles and impact your growth trajectories.
On the other hand, and underpaid workforce is less likely to stick around for the long-term, and will probably be on the lookout for a better offer. The challenge for modern businesses lies in finding a balanced way to attract, retain, and motivate talent without impacting company growth. In other words, you need to align your compensation structure with your growth strategies. This blog will attempt to show you how you can do this.
Aligning Employee Compensation with Business Growth
There is no cookie-cutter approach to creating working benefits and compensation structures. A lot depends on the specifics of your business. Employee compensation alone is no guarantee of success. However, customizing your approach to rewarding employees based on historical data and strategizing can greatly increase your chances of successfully attracting and retaining talent for growth.
The key focus should be on allocating more pay and benefits to employees that offer the greatest return. These will primarily concern hard-to-fill roles requiring in-depth expertise. Here’s how you can start building a pay and benefits strategy that corresponds to your long-term business goals:
- Start Gathering the Necessary Data
- Look Into Modern Compensation Practices
- Maximize the Return on the Compensation You Pay
Let’s examine these in more detail below.
Start Gathering the Necessary Data
Most established businesses are already sitting on a treasure trove of data they can use in their compensation strategy. This means they already have everything they need to measure the cost and corresponding output for specific roles within the business. Knowing this makes it easier for you to apportion compensation to the roles with the highest output.
However, even if you run a startup company, it is still possible for you to obtain the data you need. Of course, you will need to adapt your approach, since data isn’t readily available within your organization. But that doesn’t mean you have to wait for employee turnover to start gathering employee data.
One aspect you need to consider is that most startups are looking for a different breed of talent from your average employer. Startups provide smaller salaries and wages while making up for it by offering stock options to workers. This is geared towards making an employee a stakeholder in the risks and rewards of doing good business.
There are plenty of third-party sources that you can turn to gain business intelligence. For example, many staffing agencies conduct and share wage surveys with employers. You can also look into the pay scales your competition is offering for comparable roles. This puts you in a better position to make a decision regarding apportioning appropriate compensation plans for specific roles. You can also follow up with lost candidates and former employees, paying special attention to their preferences and pay expectations.
Look Into Modern Compensation Practices
There is a common assumption that to attract top talent to your workplace, you need to spend top dollar. After all, employers like Google, Facebook, and Microsoft offer some of the highest pay scales in the tech industry, and consistently attract and retain some of the best talent in IT staffing.
But this argument overlooks one important aspect – each of the employers mentioned above has established a strong employer brand within the industry. A strong employer brand means more candidates will prefer that employer as a place to further their career goals. A poor employer brand will, on the other hand, will actually discourage talented individuals from signing up with your company. Here are a few ways you can leverage your compensation practices for a stronger employer brand in the modern candidate market:
Offering a Positive Work Culture
As contrary as it sounds, the actual compensation you pay is lower down on the list of priorities for most candidates when compared to the workplace culture you offer. A healthy and fair environment encourages employees to get on board and stick with you for the long-term.
In fact, a workplace culture that nurtures talent, offers challenging situations, and focuses on individual growth will get more attention than the compensation and benefits plan. This is one reason why the startup culture is still going strong. If budgetary constraints don’t allow you to break the bank to hire the best team around, the least you can do is offer them the best work-conducive environment possible.
Allowing Reasonable Working Hours
A healthy work-life balance is again a higher priority than pay for many workers. While it may not always be possible for you to hand out raises or performance bonuses, you can make up for it by offering more reasonable hours to your workers. Many workers view flexible timings and the option to work from home very appealing, and will often settle for a smaller salary than they want if they are offered that. The trick is to maximize their hourly rate by allowing occasional free time, or not scheduling tasks that go past the day’s end.
Incentivizing Team Performance
Individual top performers may be the exception in a team, but you can incentivize their performance in a way that includes the whole team. This will encourage greater synergy among your top performers and your less-experienced workers. Working together, they can boost team performance far more, especially when that performance is incentivized. Motivated towards a common goal, you will find your team’s output increases many times over compared to the incentive you offer.
Customizing Benefits to Types of Individuals
Across-the-board benefits and compensation plans are no longer how it works in the workplace. This is especially true if you have a diverse workforce consisting of different generations of workers. You need to customize your program keeping in mind the types of employees you have, and what their preferences are. This usually results in a more efficient appropriation of resources in a way that resonates with the needs of your workforce, leading to you retaining top talent.
For example, younger millennial employees place more focus on career advancement, professional development, and gaining technical expertise. They will likely settle for a smaller pay if offered a challenging role that nurtures their abilities and skills. On the other hand, older employees tend to have families and kids they need to spend more time with.
Their focus will be more on maintaining a steady work-life balance, so offering flexible hours and remote working opportunities can appeal more to them than higher pay. It all boils down to classifying employee types and figuring out how to best compensate each class of employee based on their role, preferences, and needs.
Maximize the Return on the Compensation You Pay
For business managers, one of the biggest priorities is to get the most possible output compared to the compensation and benefits being offered to an employee. Maximizing output means more productivity, and ultimately, more revenue for the business. But to have teams working at optimal output, you may have to consider a few aspects.
For instance, you need to pay close attention to employee needs and preferences. These will show you what motivates them most, whether it’s the base salary, the commissions, the perks, or any fringe benefits. You should also ensure that your best performers receive the most reward. Of course, there needs to be scrutiny on rewards being on merit, and not as the result of personal favours or a cosy relationship with a superior.
Finally, be sure to treat your employees fairly and with objectivity. A fair employer that pays less is still a better employer than one that pays more but is known for workplace bias.