Two most important ways to maintain a steady employee graph in an organisation is compensation and retention
Devavrath Nambiar

Have you ever lost key personnel to other companies? Was it expensive to find and train replacements? Could you have prevented the loss and at the same time created a policy that actually helps to attract the best and the brightest candidates? Well, the two most important and most effective ways to maintain a steady employee graph in an organisation is retention and compensation.

Retention
Retention has become an essential business strategy for companies that wish to remain productive into the future. Retaining the key personnel is critical to the long-term success of an organisation. A retention strategy has become essential if your organisation is to be productive over time and can become an important part of your hiring strategy by attracting the best candidates who know of your track record of caring for employees.

To maintain a stable workforce, employers must deliberately engage in retention activities. These efforts range from re-recruiting interviews to family activities and individualised salary packages. People need to feel wanted, valued, appreciated. They want to do meaningful work and have some say in how their jobs are designed, managed and measured. Employees want to be stable but are often chased out by those who are more concerned with power and position than with caring for people.

Top ten retention tips for employers:

1. Treat your employees like you treat your most valuable clients. It is cheaper to keep your good employees than it is to hire and train new ones.
2. Get your employees to fall in love with your organisation.
3. Strong retention strategies become strong recruiting advantages.
4. Retention is much more effective when you put the right person into the right job. Know the job. Know the employee and his motivations.
5. Money is important but it is not the only reason people stay with an organisation. If your compensation plan is in the top 20-30 per cent of your industry, then money will often not be the reason why people leave.
6. An employee committee to help develop retention strategies is a very effective strategy.
7. Leadership must be deeply invested in retention. Management must be skillful communicating company policies in a way that creates buy-in from their staff and be open to employee input. Help create a sense of ownership in your employees.
8. Recognition, in various forms, is a powerful retention strategy.
9. Remember, the fun factor is very important to many employees.
10. Know the trends in benefit packages. Do your best to offer the ones your employees need. Consider offering the best of the rest.

Retention factors
Major retention factors are compensation and benefits (money can not be ignored), clear business goals (where do I fit in?), well defined jobs, rewards and recognition, strong communication and well trained management/leaders.

Does the culture support: innovation-risk taking (freedom from fear to try innovative approaches without put downs,) encourage creativity, supportive accountability (culture is made up of: organisational values, how we define ourselves, how we interact, what is acceptable and what is not)?

Clearly, a competitive advantage in today's turbulent employment environment is not achieved easily. Building a stable workforce takes considerably more than just throwing money at people or giving them use of a fancy car. There's more involved than just a lot of aggressive recruiting or strong attention to retention. To achieve workforce stability, with all its financial and operational advantages, employers must invest energy in resources in a range of discrete strategies. Woven together, these aspects create a comprehensive model for building and maintaining that coveted condition of a solid, stable workforce that drives more dollars to the bottom line. In fact, one of the most important retaining strategies we should look at is an effective compensation and benefits programme for the employees in the organisation.

Compensation
Compensation refers to all forms of pay and rewards received by employees for the performance in their jobs, including all forms of cash, benefits, services, and perks. It is important to recognise and communicate your total compensation as all the pay you are providing your employees. This should be done so that the value of what you are offering in compensation is clear and that it in turn attracts and retains the people you need.

For many companies, maintaining a compensation program that supports the strategic goals of the organisation and meets the needs of employees is a difficult challenge. This challenge is intensified when a similar program must be designed to operate in multiple countries with different cultures. For organisations competing in a global market, compensation management requires thorough understanding of the taxation of compensation and benefits, differing state of social systems, differences in living standards as well as employee values and expectations.

You have to measure compensation levels against other employees in the company, against other employees in other companies in similar positions, and against performance. You have to determine the salary ranges for existing positions, and adjust those periodi-cally to compensate for economic factors (cost of living changes, inflation) and competitive pressures (industry demand for that type of employee, profit margins). You often have to determine a salary for a new position, or if you promote someone to new responsibilities. Plus you have to comply with government regulations regarding discrimination, contractor versus employee determinations, and union or other contractual obligations. For all this you need to have a well-designed compensation plan for your company. Otherwise failure in compensation design leads to failure to motivate (behavioural change).

Typical compensation design problems include:

• Failure to tie pay closely to achievement of objective and realistic performance measures
• Failure to regularly measure and provide feedback on performance
• Failure to design variances in pay related to performance that are large enough to be perceived by the employee as worth the effort
• Over-reliance on salary as the only significant method of financial rewards

In my experience, the biggest single impediment to the use of money as motivator is the manager's inability or insufficient effort to measure employee performance accurately and regularly, give performance feedback to the employee regularly, and set goals/standards that are challenging, realistic, and have strong relationship to business success. Since it is easier to measure performance and set performance standards/objectives in some jobs than others, money as motivator is more effectively used only in some jobs. Nevertheless, company wide incentive plans can be powerful in the right circumstances. Another major impediment is when employee motivation and effort, is overwhelmed by the impact of poor business strategy or poor business environment (i.e. the economy).

Compensation design (which goes far beyond the issue of labour market competitiveness) is not a panacea for performance problems nor is it the silver bullet for business success. However, a well-designed incentive plan has the potential to be a powerful tool (not just a 'hygiene factor') that businesses should not ignore.