Aggressive compensation, career development, key elements of employment deal
What does it take to recruit and retain “e-talent” — those wizards of the digital age who are the lifeblood of Internet-based businesses?
Rich stock options? Outrageous salaries? An espresso bar?
When it comes to recruiting the elusive e-worker, there are almost as many myths as there are realities.
There is no doubt that some “e-business” skill sets are in high demand and short supply. The dramatic growth of Internet-based businesses across North America has led to a strong demand for a variety of Internet-related skill sets — including Web design, marketing and new business development. But such roles — particularly with an Internet focus — are comparatively new, which means experienced talent can be hard to come by.
This has implications for organizations requiring this type of talent. Recruiting and retaining “hot skills” generally demands a fairly aggressive approach to compensation — as well as a well thought-out and integrated human resources strategy that addresses other critical issues, including learning and development opportunities, and work environment and cultural issues. All of these factors shape whether an organization is seen as an “employer of choice” by the types of individuals the organization seeks to recruit and retain.
While successful people management can be a challenge in any business, the distinctive characteristics of an e-business environment can definitely compound this challenge. E-businesses are generally characterized as fast-moving, supported by an equally fast-paced decision-making process, a strong focus on customer service and innovation, and the effective deployment of rapidly evolving technology.
This means e-talent requirements often include a blend of marketing savvy, technical know-how, and the capacity to innovate and make decisions in the complex and often ambiguous world that is cyberspace.
Defining the employment deal
So what should an e-business employer do to recruit, retain and optimize the performance of its e-talent?
First, consider what employees look for in an e-business employer. While compensation and other HR programs need to be financially sound and aligned with the needs of the business, consideration must also be given to the needs and values of the individuals being recruited and employed. By effectively balancing employer and employee needs in a win-win employment deal, an organization can optimize the value of its investments in its HR programs.
A recent study on North American compensation practices, conducted by Towers Perrin, indicates that employees change jobs for distinct reasons. Table 1 (page 28) illustrates the top five reasons why employees join, stay with and leave organizations.
While this study presents the human resources viewpoint, these findings have been confirmed through other research, including research reflecting the employee viewpoint. It is clear that while base pay is a key consideration that influences decisions regarding employment, the nature of the work opportunity and the work environment are also of critical importance. For example, interesting project work and the opportunity to use leading-edge tools have been found to be especially important for technical or “knowledge” workers, particularly in high-tech environments. Similarly, the opportunity to own stock — especially stock seen as having high-growth potential — has been a major draw for high tech and e-business start-ups seeking to recruit experienced talent from more mature organizations.
As a result, an effective HR strategy does not rely on any single component to drive its recruitment and retention efforts. The most successful organizations take a multi-faceted approach to establish themselves as a premier place to work.
Competitive pay packages essential
An effective employment deal starts with a competitive pay package. Clearly, any organization seeking to recruit and retain talent — particularly hot skills — needs to have a good sense of competitive pay practices. For e-businesses, the compensation challenge is especially complex because potential hires often have high — and sometimes unrealistic — expectations about pay. These expectations have been strongly fuelled by the media, which has given much play to stories about individuals who have earned their fortunes through lucrative stock-option arrangements offered by start-up companies.
The reality is that “get-rich-quick” opportunities are more the exception than the rule. And not every job seeker is looking for that — especially since higher reward potential often comes with high risk. E-businesses need to emphasize the competitiveness of their total package — while accepting that a few hot prospects will be lost because they want more than the organization can realistically offer.
However, on the flip side, e-businesses need to recognize a competitive pay package often demands more than just an attractive base salary. It is not unusual for such pay packages to include a mix of compensation elements that can include base pay, annual incentives, signing bonuses, retention bonuses and long-term incentives.
Sometimes pay packages for hot skills include compensation elements that are not typically offered to employees at that level elsewhere in an organization. This means organizations must now define “multiple” employment deals to address the reality that some talent is harder to find and keep than others.
Work environment
The pace of change and operating style required for a successful e-business is generally different from that of an established “brick and mortar” operation. This can lead to cultural and systems discord within organizations that have both types of operations. E-businesses must define systems that are appropriate to their operations, in-line with the types of people they need to recruit and retain, even if it means challenging the brick and mortar status quo.
Developing an appropriate culture for a successful e-business, regardless of whether it is part of an established organization or a new, independent venture, is a critical success factor.
Creating a work environment that is appropriate to the circumstances, and achieving a solid market position as an “employer of choice” is often predicated on creating value beyond compensation. An optimal work environment is one where employees feel respected and valued, where learning and development opportunities abound, where work schedules and dress codes are flexible, and where strong leadership supports an exciting, successful company image.
Recruiting and retention strategy
Unplanned turnover has significant cost implications. The loss of key talent can also impact your organization’s ability to serve customers and implement critical projects on time and on budget. The following can help you develop an effective recruitment and retention strategy.
•Define your organization’s employment deal or deals. Does the deal vary by employee population? What does your organization expect of its employees? What does it have to offer in return?
•Determine the most effective vehicles for advertising your organization’s recruiting needs. What has delivered the best results in the past? Job postings? Employee referrals? Internet postings? Search firms?
•Consider using contingent or contract employees to enhance flexibility while responding to potentially short-term needs for specific skill sets.
•Consider formal technical skill assessments during the selection process.
•Consider using some additional compensation elements, such as sign-on bonuses and retention bonuses, to develop a competitive pay package.
•Emphasize learning and development opportunities in the recruitment process.
•Communicate what your company has to offer from a total rewards perspective, including compensation, benefits, learning and development and work environment elements.
Highly skilled e-business employees have their choice of extremely lucrative job offers. However, not all companies can afford to (or may want to) compete for the most experienced or sought-after individuals. As a result, some companies are following a strategy of hiring less skilled/less experienced e-business employees with less lucrative (but still competitive) compensation packages that include the promise of significant training and development opportunities. Organizations following this strategy make provisions for a significant training and development budget.
The downside of this strategy is that, in time, many of these less skilled/less experienced employees join the cadre of those highly sought-after experienced individuals. This underscores the importance of building an employment relationship that is grounded in elements that include, but are not limited to, competitive compensation.
Compensation strategy
Competitive compensation is a fundamental component of any employment deal. The following can help you develop a compensation strategy that effectively addresses the need to recruit and retain hot skills.
•Take a fairly aggressive approach to compensation that may include above-median base pay and total cash and review pay levels more than once per year.
•Consider multiple compensation elements, including annual incentives, project/team incentives and hot skill premiums. Consider other types of rewards, including cash and non-cash recognition and special assignments. Don’t build your entire compensation offering into base pay. This becomes a fixed cost that may become out of line with the market as some skills cool and others become hot.
•Consider offering stock options below the executive level. The size of long-term incentive awards made under a broad-based plan typically varies by employee and is most likely to depend on factors such as individual performance and salary grade/band.
•Provide superior performers with superior rewards. Recognizing high performers is a critical success factor for any retention strategy. The most common rewards include higher base salary increases, larger variable pay awards and special training and development opportunities.
•Adopt a pay-for-performance philosophy and ensure that an effective performance management system is in place to support this philosophy.
Learning and development strategy
Learning and development opportunities are a priority among e-businesses seeking to attract the best and brightest from a market of well-educated and highly mobile individuals. These individuals typically seek lifelong learning more so than lifetime security. Some would prefer to advance by applying ever-deepening technical expertise and shun managerial career tracks.
This has prompted e-businesses to embrace non-traditional career paths as one means of recruiting and retaining technical talent.
•Offer dual career tracks (such as, technical versus management).
•Formally define potential career paths for e-business roles.
•Assist employees with career planning, for example, by ensuring that development plans are completed and providing access to development and skill/competency assessment guides and tools.
•Consider training and development programs beyond such standards as tuition reimbursement, conferences and new technology training. For example, consider providing advanced management training, leadership development training, mentor programs and unpaid or paid training sabbaticals.
•Ensure that adequate training investment budgets have been set.
Work environment strategy
Work environment practices shape the day-to-day work experience of e-business employees and play a key role in communicating the company culture. As a result, they have a major impact on an organization’s ability to retain key staff. Of particular interest to employees are programs that will help them balance work and personal responsibilities.
•Consider providing a variety of flexible work arrangements, such as flex-time, telecommuting and casual dress policies.
•Provide a competitive health/welfare and retirement benefits package. While e-business employees generally place less emphasis on traditional benefits, versus other employment deal elements, a competitive benefits package can create positive perceptions if well communicated and delivered.
•Provide time off at fairly aggressive levels based on experience and position.
•Make available an array of benefits and perquisites. In addition to the more traditional ones such as employee assistance programs, family-care leave policies and fitness subsidies, e-business employers are offering more contemporary benefits such as massage therapy, espresso bars, games rooms and stress management programs.
•Develop a strong employee communications process that fosters two-way dialogue and emphasizes information sharing about how well the organization is doing, how employees can contribute to organizational success and how such contributions are rewarded.
Focus on total rewards
Compensation and HR practices for e-businesses are following similar trends as in the high-technology industry. Generally, e-business employees are looking for a competitive total rewards package that emphasizes the following.
•Open communication around the business and the associated risks and opportunities.
•Career growth opportunities, such as a job that will improve the incumbent’s future employment opportunities and that involves working on “cool” projects and the latest technology.
•An equity stake.
•Work flexibility and time off at aggressive levels, based on experience and position — if not during an intense project then afterward.
•A competitive base salary, where the incumbent understands what it takes to earn a pay increase or achieve a promotion.
•A competitive incentive opportunity, where the incumbent understands what it takes to earn an incentive award and where there is a clear correlation between results and rewards.
•A comprehensive benefits programs covering health and welfare and retirement.
Given the as yet untapped potential of business in the digital age, it is unlikely that the demand for e-talent will abate. To that end, e-businesses — mature and emerging alike — will continue to face intense competition for the best and brightest. The organizations that consistently deliver a meaningful employment deal that considers both employer and employee needs and values will likely be the most successful in this battle for talent.
Rich stock options? Outrageous salaries? An espresso bar?
When it comes to recruiting the elusive e-worker, there are almost as many myths as there are realities.
There is no doubt that some “e-business” skill sets are in high demand and short supply. The dramatic growth of Internet-based businesses across North America has led to a strong demand for a variety of Internet-related skill sets — including Web design, marketing and new business development. But such roles — particularly with an Internet focus — are comparatively new, which means experienced talent can be hard to come by.
This has implications for organizations requiring this type of talent. Recruiting and retaining “hot skills” generally demands a fairly aggressive approach to compensation — as well as a well thought-out and integrated human resources strategy that addresses other critical issues, including learning and development opportunities, and work environment and cultural issues. All of these factors shape whether an organization is seen as an “employer of choice” by the types of individuals the organization seeks to recruit and retain.
While successful people management can be a challenge in any business, the distinctive characteristics of an e-business environment can definitely compound this challenge. E-businesses are generally characterized as fast-moving, supported by an equally fast-paced decision-making process, a strong focus on customer service and innovation, and the effective deployment of rapidly evolving technology.
This means e-talent requirements often include a blend of marketing savvy, technical know-how, and the capacity to innovate and make decisions in the complex and often ambiguous world that is cyberspace.
Defining the employment deal
So what should an e-business employer do to recruit, retain and optimize the performance of its e-talent?
First, consider what employees look for in an e-business employer. While compensation and other HR programs need to be financially sound and aligned with the needs of the business, consideration must also be given to the needs and values of the individuals being recruited and employed. By effectively balancing employer and employee needs in a win-win employment deal, an organization can optimize the value of its investments in its HR programs.
A recent study on North American compensation practices, conducted by Towers Perrin, indicates that employees change jobs for distinct reasons. Table 1 (page 28) illustrates the top five reasons why employees join, stay with and leave organizations.
While this study presents the human resources viewpoint, these findings have been confirmed through other research, including research reflecting the employee viewpoint. It is clear that while base pay is a key consideration that influences decisions regarding employment, the nature of the work opportunity and the work environment are also of critical importance. For example, interesting project work and the opportunity to use leading-edge tools have been found to be especially important for technical or “knowledge” workers, particularly in high-tech environments. Similarly, the opportunity to own stock — especially stock seen as having high-growth potential — has been a major draw for high tech and e-business start-ups seeking to recruit experienced talent from more mature organizations.
As a result, an effective HR strategy does not rely on any single component to drive its recruitment and retention efforts. The most successful organizations take a multi-faceted approach to establish themselves as a premier place to work.
Competitive pay packages essential
An effective employment deal starts with a competitive pay package. Clearly, any organization seeking to recruit and retain talent — particularly hot skills — needs to have a good sense of competitive pay practices. For e-businesses, the compensation challenge is especially complex because potential hires often have high — and sometimes unrealistic — expectations about pay. These expectations have been strongly fuelled by the media, which has given much play to stories about individuals who have earned their fortunes through lucrative stock-option arrangements offered by start-up companies.
The reality is that “get-rich-quick” opportunities are more the exception than the rule. And not every job seeker is looking for that — especially since higher reward potential often comes with high risk. E-businesses need to emphasize the competitiveness of their total package — while accepting that a few hot prospects will be lost because they want more than the organization can realistically offer.
However, on the flip side, e-businesses need to recognize a competitive pay package often demands more than just an attractive base salary. It is not unusual for such pay packages to include a mix of compensation elements that can include base pay, annual incentives, signing bonuses, retention bonuses and long-term incentives.
Sometimes pay packages for hot skills include compensation elements that are not typically offered to employees at that level elsewhere in an organization. This means organizations must now define “multiple” employment deals to address the reality that some talent is harder to find and keep than others.
Work environment
The pace of change and operating style required for a successful e-business is generally different from that of an established “brick and mortar” operation. This can lead to cultural and systems discord within organizations that have both types of operations. E-businesses must define systems that are appropriate to their operations, in-line with the types of people they need to recruit and retain, even if it means challenging the brick and mortar status quo.
Developing an appropriate culture for a successful e-business, regardless of whether it is part of an established organization or a new, independent venture, is a critical success factor.
Creating a work environment that is appropriate to the circumstances, and achieving a solid market position as an “employer of choice” is often predicated on creating value beyond compensation. An optimal work environment is one where employees feel respected and valued, where learning and development opportunities abound, where work schedules and dress codes are flexible, and where strong leadership supports an exciting, successful company image.
Recruiting and retention strategy
Unplanned turnover has significant cost implications. The loss of key talent can also impact your organization’s ability to serve customers and implement critical projects on time and on budget. The following can help you develop an effective recruitment and retention strategy.
•Define your organization’s employment deal or deals. Does the deal vary by employee population? What does your organization expect of its employees? What does it have to offer in return?
•Determine the most effective vehicles for advertising your organization’s recruiting needs. What has delivered the best results in the past? Job postings? Employee referrals? Internet postings? Search firms?
•Consider using contingent or contract employees to enhance flexibility while responding to potentially short-term needs for specific skill sets.
•Consider formal technical skill assessments during the selection process.
•Consider using some additional compensation elements, such as sign-on bonuses and retention bonuses, to develop a competitive pay package.
•Emphasize learning and development opportunities in the recruitment process.
•Communicate what your company has to offer from a total rewards perspective, including compensation, benefits, learning and development and work environment elements.
Highly skilled e-business employees have their choice of extremely lucrative job offers. However, not all companies can afford to (or may want to) compete for the most experienced or sought-after individuals. As a result, some companies are following a strategy of hiring less skilled/less experienced e-business employees with less lucrative (but still competitive) compensation packages that include the promise of significant training and development opportunities. Organizations following this strategy make provisions for a significant training and development budget.
The downside of this strategy is that, in time, many of these less skilled/less experienced employees join the cadre of those highly sought-after experienced individuals. This underscores the importance of building an employment relationship that is grounded in elements that include, but are not limited to, competitive compensation.
Compensation strategy
Competitive compensation is a fundamental component of any employment deal. The following can help you develop a compensation strategy that effectively addresses the need to recruit and retain hot skills.
•Take a fairly aggressive approach to compensation that may include above-median base pay and total cash and review pay levels more than once per year.
•Consider multiple compensation elements, including annual incentives, project/team incentives and hot skill premiums. Consider other types of rewards, including cash and non-cash recognition and special assignments. Don’t build your entire compensation offering into base pay. This becomes a fixed cost that may become out of line with the market as some skills cool and others become hot.
•Consider offering stock options below the executive level. The size of long-term incentive awards made under a broad-based plan typically varies by employee and is most likely to depend on factors such as individual performance and salary grade/band.
•Provide superior performers with superior rewards. Recognizing high performers is a critical success factor for any retention strategy. The most common rewards include higher base salary increases, larger variable pay awards and special training and development opportunities.
•Adopt a pay-for-performance philosophy and ensure that an effective performance management system is in place to support this philosophy.
Learning and development strategy
Learning and development opportunities are a priority among e-businesses seeking to attract the best and brightest from a market of well-educated and highly mobile individuals. These individuals typically seek lifelong learning more so than lifetime security. Some would prefer to advance by applying ever-deepening technical expertise and shun managerial career tracks.
This has prompted e-businesses to embrace non-traditional career paths as one means of recruiting and retaining technical talent.
•Offer dual career tracks (such as, technical versus management).
•Formally define potential career paths for e-business roles.
•Assist employees with career planning, for example, by ensuring that development plans are completed and providing access to development and skill/competency assessment guides and tools.
•Consider training and development programs beyond such standards as tuition reimbursement, conferences and new technology training. For example, consider providing advanced management training, leadership development training, mentor programs and unpaid or paid training sabbaticals.
•Ensure that adequate training investment budgets have been set.
Work environment strategy
Work environment practices shape the day-to-day work experience of e-business employees and play a key role in communicating the company culture. As a result, they have a major impact on an organization’s ability to retain key staff. Of particular interest to employees are programs that will help them balance work and personal responsibilities.
•Consider providing a variety of flexible work arrangements, such as flex-time, telecommuting and casual dress policies.
•Provide a competitive health/welfare and retirement benefits package. While e-business employees generally place less emphasis on traditional benefits, versus other employment deal elements, a competitive benefits package can create positive perceptions if well communicated and delivered.
•Provide time off at fairly aggressive levels based on experience and position.
•Make available an array of benefits and perquisites. In addition to the more traditional ones such as employee assistance programs, family-care leave policies and fitness subsidies, e-business employers are offering more contemporary benefits such as massage therapy, espresso bars, games rooms and stress management programs.
•Develop a strong employee communications process that fosters two-way dialogue and emphasizes information sharing about how well the organization is doing, how employees can contribute to organizational success and how such contributions are rewarded.
Focus on total rewards
Compensation and HR practices for e-businesses are following similar trends as in the high-technology industry. Generally, e-business employees are looking for a competitive total rewards package that emphasizes the following.
•Open communication around the business and the associated risks and opportunities.
•Career growth opportunities, such as a job that will improve the incumbent’s future employment opportunities and that involves working on “cool” projects and the latest technology.
•An equity stake.
•Work flexibility and time off at aggressive levels, based on experience and position — if not during an intense project then afterward.
•A competitive base salary, where the incumbent understands what it takes to earn a pay increase or achieve a promotion.
•A competitive incentive opportunity, where the incumbent understands what it takes to earn an incentive award and where there is a clear correlation between results and rewards.
•A comprehensive benefits programs covering health and welfare and retirement.
Given the as yet untapped potential of business in the digital age, it is unlikely that the demand for e-talent will abate. To that end, e-businesses — mature and emerging alike — will continue to face intense competition for the best and brightest. The organizations that consistently deliver a meaningful employment deal that considers both employer and employee needs and values will likely be the most successful in this battle for talent.
