Some practical retention strategies that allow you to recognize labor market realities and value-differences between
employee segments are new compensation plans, job redesign, job customization, strengthening social ties and
hiring the less mobile. Linking potential defectors with internal job opportunities is another
market-based tool for retention.
New Compensation Plan
Compensation matters when you cannot recruit or keep qualified people if they find the compensation unfair and even
people who are driven by their profession see their compensation as a sign of the company’s appreciation.
Therefore, these people will walk away if they feel undervalued. Here are some compensation strategies in
regards to retention:
Figure out what wages your industry is offering by hiring a compensation-consulting firm or trying more affordable
options such as tracking classified ads on the Internet, networking with members of HR organizations or
consulting trade organizations.
Examine internal pay disparities and make sure that the wages for similar jobs in the organization are equal or
close to each other.
Don’t assume you have to outspend your competitors. You also need to keep in mind that compensation produce only
temporary performance improvements but not continuous. One of the retention champions we studied in the previous
chapter, Southwest Airlines, has almost the lowest entry-level pay within the industry and its employees are
highly motivated to achieve the company’s strategy with half of the industry defection. The other retention
champion, SAS Institute, pays no more than its competitors do and does not offer stock options to its employees
unlike most other high-tech companies, yet it has one-quarter of the turnover rate in its industry.
No doubt, SWA and SAS are not only companies to prove the limited value of pay as retention tool. Other strategies
also have a great impact on retention and some advises for market-based compensation are:
Pay premiums to skilled employees with crucial, rare expertise and stop premiums when the skilled employees are
more available or less important for your business.
Pay signing bonuses in stages - for example, when the high positioned employee completed an important task or some
In another retention strategy of job redesign, you firstly need to identify the satisfactory and dissatisfactory
tasks within a particular job, separate them from each other and give the dissatisfying task to other people who
would appreciate. Outsourcing the undesirable task is also an efficient solution that is applied by almost every
Therefore, if there is a high turnover in key jobs that are difficult and costly to refill, you need to ask some
Which parts of the job are dissatisfactory for the employee?
What would we need to add to keep it as a “whole” job, if it is needed when we separated objectionable tasks from
What alternatives, other than giving them to someone, do exist to handle the objectionable tasks?
W1hich is more costly to the organization, job redesigning or the current turnover rate in the key job?
Fitting people to jobs and dictating where, when and how the work will be performed fail to serve individuals’
primary interest, which is to fit the work into their life situation. Companies should consider current and
potential employees as their customers and endeavor to recognize and satisfy their needs, especially when supply
and demand in the labor market favors the employees.
Customization is a powerful tool, either in product and service of the economy or in the labor market. Many
companies have customized their product and service, including Levi’s allowing its customers to create unique
jeans for its shoppers or Dell building & offering customized computers for its customers. This kind of
strategies became huge success in a highly competitive buyer’s market. In the labor market, customization of a
job favors both employees and the company. Think about what can be obtained by job redesign, where it can be
performed (telework) and how can work be changed and improved.
Strengthening Social Ties
Another retention strategy is to create group cohesion or social ties by creating social network and
personal bonds between employees. Individuals are loyal to their colleagues more than they are to the companies
so developing social ties between your employees, especially among key employees, will reduce turnover rate.
Hiring the Less Mobile
When recruiting, people usually focus on finding and attracting those who would fit to the job and the position
perfectly, therefore who are more difficult to retain. However, people with less work experience, skills and
education than required, therefore with a less employment mobility, may perform credible job and provide
your company a higher retention rate.
Having less talented people to fill the required position means more training or redesigning the job. In each case,
the cost of training and/or the job redesign should not exceed cost of turnover for that position.
Tap Your Internal Labor Market
Most employees, especially the talented ones, are aware of the opportunities outside and inside of your company. In
large companies, it is easier for potential defectors to shift to another operating unit or department. So make
sure that internal postings are easy to access and keep in mind that online internal job search tool is
another good way to do it.
While creating such a tool, be sure that the language and the presentation of the tool delivers the message and let
people be aware that you want them to stay in their current position or in another. It is also good idea to make
the tool fun to use by graphics, training programs, anecdotes of other employees who have already shifted their
position within the company. Another tip is to personalize the tool and allow people who are concerned with
confidentiality to use personal e-mail address.