Acquiring and retaining human capital is crucial for an organization’s growth and success in a world where there is a constant war for talent. So does salary become the most compelling tool for employee acquisition and retention? This is a topic of continuous debate and deliberation amongst employers; a dilemma that seldom resolves.
It seems that a satisfactory salary to hire and retain is an elusive global phenomenon.
Even in the Middle East and North Africa regions, staff turnover is reportedly on the rise, with remuneration topping the list of reasons for employee resignation, as per the Middle East Salary Guide 2014.
And if we do consider that cracking the desirable salary is the key to hiring and retaining talent, the booming Indian start-up industry gets us thinking.
The Indian start-up industry is a very good pay master. A whopping 82 percent start-ups pay above the market median and yet it has a high attrition rate of 21 percent. Surprisingly, the most common reason for attrition was pay.
Likewise, even in the Indian IT sector employees were satisfied with their peers and bosses but dissatisfied with their wages as revealed by the Monster Salary Index Report with WageIndex and IIM Ahemdabad.
This is despite the fact that they enjoy the privilege of slightly higher bonuses as compared to the national average.
So the question is how much salary is a good enough one to acquire and retain talent even in the best paying sectors? This is a dichotomy that resonates across economies and sectors.
Dig deeper and one starts unveiling the layered factors responsible for hiring and retention and their relationship with salary.
It is important to find out what actually matters to an employee to come on board and stay on board. Is it primarily money or do other intangible factors edge their way into making this decision.
A majority of people have confessed that although salary does top the list of employer selection criteria, money isn’t everything.
A good career opportunity is also high on the list, followed by benefits like a good working atmosphere, a good work/life balance and a challenging job.
Similar to the Indian job market, for employees in South Ease Asia and Middle East job markets the value at work is not just limited to money.
A bunch of other factors take priority, such as job security, career advancement, base pay and title, learning and development, and the reputation of the organization.
This leads us to the thought that salary is not just the reason that attracts talent but it is always a combination of factors.
The reason we often see talent making a beeline to work for companies with a high brand value even though they are not the best pay masters.
Also, in the modern workplace, the perception of salary is viewed differently by Generation X and Y. Generation Y has slogged hard for their qualifications, worked hard for their promotions and believes it amply deserves the money it is being paid.
It has the patience to weigh things between job security and getting a raise. It is ready to wait for promotions to retain its association with a valued organization.
Whereas the Generation X workforce is constantly asking itself “what am I doing here?” Only the answer to this question will determine their employee engagement.
Salary is crucial for them to get hired but job satisfaction is equally high on their agenda. And many a times, even retention pays are not enough to hold them back.
Which brings us further to the question: are retention pays worth the investment? If pay for performance is not good enough to retain the loyalty of a talent, does it make sense for the employer to dole out an incentive to the employee to do nothing but just remain in place in an organization? Many argue that if the company was better run with a fair pay for performance one would not need to bribe people to stay.
Therefore, retention bonuses should be used sparingly in the rarest of rare cases. And in the case of Generation X for whom mobility is an innate trait nowadays, it is best to let them go even if they are top performers and treat the attrition as a cost of doing business.
A window open with a returnee policy could work as an incentive.
And even though the combination of salary, designation and employer branding decides talent acquisition, the reasons for a talent to quit usually have little to do with money.
They are more tilted toward the psychological aspects in relation to an organization’s workings. It is often said that employees don’t leave companies, they leave managers.
Therefore the ability to retain talented employees is a critical skill for managers where money does not talk much.
One of the main reasons for employees quitting an organization is the lack of vision communicated by their managers regarding the organization’s future and the role they play in it.
The lack of importance in this big picture leads to a lack of enthusiasm in the current role to seek greener pastures.
Also, displaying no empathy to employees’ grievances discourages loyalty toward the organization. So listening helps.
And lastly, employee retention nowadays is more about the kind of motivation provided than the amount of money offered. Is motivation ‘extrinsic’ or ‘intrinsic’?
The extrinsic motivators like the traditional carrot and stick rewards like cash bonuses or no salary hikes have ceased to work.
The intrinsic ones like feeding of internal desires to do good work or create a successful product work better.
Especially with Generation X one needs to break this myth that financial compensation will be a sufficient incentive to engage and retain good talent or drive high performance.
Even though salary is one of the most compelling factors for talent acquisition along with other intangible factors, its weightage in employee retention is often a misconception.
— Sanjay Modi, managing director, Monster.com, Middle East, India, South East Asia, Hong Kong
