I worked at a non-profit organization for a few years, and the employee turnover at that company was frightening. This particular group attracted young adults right out of college, like myself, who believe in the mission, work hard, settle for nothing short of excellence, and are willing to sacrifice personally for the good of the organization and ultimately the good of the community being served by the organization.
And that lasted less than three years for most employees during the time — the three years — I worked at that organization. The turnover was high because talented, driven young people attract opportunities, and even when unemployment is a societal problem on the whole, they can often choose from multiple offers. And even people who are passionate about a worthy cause can eventually understand that they’l need to provide as much as possible for their families and their futures. Unless they come from independently wealthy families, higher salaries and good health insurance benefits eventually become the better choice than sharing a cardboard box with three other roommates while following a passion.
Non-profits and private sector companies can both benefit from investing in human capital, and that comes down to compensation, which includes wages, salaries, and bonuses, and benefits, a category that includes everything else a company offers its employees.
Companies that are able to offer employees, especially those in the ranks other than executives, the best packages of compensation and benefits in their industries have a better chance of succeeding.
- The best employees have more offers to choose from, generally. Employees who are more likely to help the company succeed are more likely to succeed personally in any endeavor. These employees are more likely to choose companies offering offering the best compensation and benefits among the competition. Recognizing and appreciating talent does not go unnoticed.
- When employees feel appreciated, productivity increases. Productivity is the key to success for companies, whether it’s a non-profit company, a governmental organization, or an employer in the private sector, and that’s why companies spend so much time, money, and effort on training employees to be productive. Perhaps that money would be better spent in compensation, which studies have been shown to increase when employees are more satisfied, regardless of productivity education.
- Satisfied employees are correlated with increases in the value of the company. One study found a correlation between employees’ level of self-reported satisfaction and stock market values. The study is confident in its cause analysis: “Thus, successful efforts in increasing employee satisfaction appear to enhance overall firm productivity, which is subsequently rewarded by investors through higher equity values.” (University of Central Missouri)
If an executive or board of directors wants a company not only to succeed but to succeed at a level of excellence and to be the best in the business, the company must attract the best employees. High-quality, high-skilled, and high-effort workers, those who would be best to help a company achieve its goals, will attract many offers, and unless there is some compelling reason outside of compensation, the way for a company to stand out among the competition is to offer the best wages.
There are some caveats. Studies link employees’ overall satisfaction with the company’s success, and satisfaction can come from benefits other than compensation. The fact that people aren’t always motivated solely by money is a good thing, but some of the ancillary benefits that companies use other than compensation to attract employees can be difficult to compare from one job offer to another. And any one employee is likely to have different non-monetary motivations than any other employee.
Every worker needs compensation, though. For anyone who is not independently wealthy, work is something someone does to make sure they can afford the basic necessities of survival and beyond. Employers seem to often find ways to downplay the importance of compensation, despite the understanding that financial needs are the core to survival. I’ve heard company executives rationalize low salaries and substandard, if any, benefits by downplaying the importance of compensation in employee satisfaction.
The danger of encouraging a culture where the best employees look for nothing more than the highest-compensated acceptable position is that they’re more likely to abandon the company when faced with a competing offer later on. The solution is to keep employee satisfaction high and to continue offering the best salaries. From a high-performing employee’s perspective, companies don’t compete with each other just through the initial hiring process, but through the entire tenure.
There are many cases where the best employees choose the options that aren’t the most financially attractive, at least in the short-term. A highly-motivated and highly-talented individual might choose to work in public service if his or her long-term goals are political in nature, for example, or perhaps there is such a strong belief in a cause that personal survival can take a back seat. That second situation, a burning need to support a cause with one’s life work, is simply more likely to occur among those who for whatever reason have little need to focus on their own finances. Of course, ignorance of finances, willful or otherwise, is yet another way that someone can choose the least financially attractive option.
You might have noticed that companies tend to look at external influences when rationalizing pay cuts, low salaries, and lay-offs, especially if it offers the opportunity for the company to garner press in the mainstream media. First we heard from business owners who threatened to lay off workers if a Democrat were to be elected President of the United States in the 2012 elections, and now the scapegoat for poor corporate fiscal management is the Affordable Care Act (“Obamacare”). Rarely, if ever, are the companies that place external blame for the dissatisfaction ahead of their competition. Those at the top have found a model that allows them to attract the best employees despite any external threats.
Although competitive salaries and benefits may be the best way for companies to stand out and attract the best workers, it won’t solve all of society’s problems. You can’t solve poverty by turning all low-paid fast food jobs into well-paid positions. If you raise pay by too much, these same jobs become attractive options to more people, and with more competition for those positions, those on the margins of society will have a more difficult time competing for those same jobs.
Here’s what companies can do today if they want to achieve excellence and profit in their fields.
- Recognize that the value of a company comes from the quality of work among its employees.
- Make the positions in your company stand out, so the most talented employees will be competing for open positions.
- Offer the best salaries and benefits across the industry for any particular position.
- Assemble the best team possible, and the company’s challenges can be overcome more easily.
Do you think companies should offer the best compensation packages to attract the best employees? Is it better for a company’s long-term to keep human resources expenses as low as possible?