As a lifelong Red Sox fan, the news last night of Jon Lester signing with the Chicago Cubs stung. A lot. My first reaction as a fan was to place the blame squarely on Lester himself. “We drafted him!” and “we treated him so well when he was here, what happened to loyalty?” were some of the first thoughts I had. Then, my experience as someone in the world of talent management and acquisition set in and a different perspective and thought process started to emerge. I started to think about how often companies see great talent that “grew up” with them leave for greener or more lucrative pastures. A realization hit me after the initial sting as a fan of Lester leaving – that this is the same exact scenario we see playing out in companies every day. Let’s dig in deeper – shall we?
-Employee is hired at a less than market value early in his/her career and given an opportunity with the company to learn and grow.
-Employee is trained, promoted and given the 3 – 5% compensation annual increases per “standard” corporate “best practice” (I put that term in quotes because I hate – repeat hate – that expression – but that is for another column).
-Employee gets great experience, making he/she very desired in the market
-Employee gets contacted by other companies at significantly greater compensation in a higher level role
-Employee sees his/her own employer recruiting actively for similar roles or roles that would be growth opportunities in his/her company at higher compensation than what he/she currently earns and also sees new hires being added around him/her at increased salary than what he/she earns
-Employee accepts recruiter calls from other companies and decides to take new opportunity
-Employer tries to counter-offer employee at compensation level of what he/she has been offered with promise of new responsibilities and growth
-Employee wonders why it took threat of leaving to get fair market value and leaves
-Employer hires new employee for now vacant role at significant cost increase of prior employee and with long training ramp up period when the employee in place was already performing and was a known and “valued” employee. New employee’s success? TBD.
I have seen this exact scenario played out countless times over the years. Much like the case with Jon Lester, it was too little too late. With any company in growth mode, there is always the knee jerk reaction to look externally for talent for newly created roles. There is also the common thought process that if you give your employees nominal annual increases that they will feel they are being compensated fairly with the market. The question I ask is why? In my opinion, this is a very shortsighted way to look at business and, most importantly, talent. What message does this send to your employees if you: a. look external before looking internal for new roles and opportunities b. don’t pay them in relation to what the market is dictating for their skills and experience? As I mentioned in prior posts, there is tons of compelling data out there now that shows categorically that people who get new roles every 2 – 3 years earn significantly more than those who are “loyal” and have long term employment with organizations. Seems weird to me that we would value new and frankly unproven talent to the talent we know and value already in house? Yes – you can go out and recruit an ace new sales rep for your new product launch, but what about the junior rep you have on staff who would love for that career opportunity? What does that person think when they aren’t even considered for the role? And then what does that person think when they see the new person come in at almost twice what that person is earning? I will tell you if you don’t already know. What that person thinks is that his/her company doesn’t value him/her and that there is a ceiling for them at your organization. Result from this thought process – time to answer those recruiter calls.
Time to rethink all of this folks. If you are concerned about retention (and you should be) then you should make a habit of looking internal before external. Even if the employee might not fit the need, the act of expressing interest and loyalty to your own employees (funny how loyalty works both ways) goes a long way towards keeping your own valued employees where you want them – working at your company. Also time to rethink “raises”. 3 – 5% simply isn’t keeping up with the Joneses anymore. Take a long look at market data and pay your valued employees accordingly – don’t wait for them to be scooped up by companies who will. The Red Sox offered Jon Lester in spring training 75 million dollars. Guess what? The Cubs and three other teams (Red Sox included, hat in hand) just offered him 155 million. No surprise though that he didn’t take the Red Sox offer even though it was more than twice what they offered him prior. Loyalty works both ways.