Love ‘em or Lose ‘em: Taking Care of Your Top Performers

Stacey Carroll, M.B.A., CCP, SPHR

Director of Professional Services & Education

7,000 Positions. 50 Major Industries. 11 Countries.

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Agenda

Risks associated with losing top performers.

Fatal compensation mistakes

Failure to reward performance

Poor incentive design

Following macro-trends

Creating a compensation plan to retain top

performers

Other considerations for retaining top performers

Risks Associated with Losing Top Performers

• Top performers contribute more to the bottom line.

• Your reputation as an employer comes from current and former employees.

• Sensitive information leaves with your employees.

• Innovation comes from top employees.

• The “war for talent” is not over.

Did you know? Research shows that 45-50% of top performers are actively looking for a job. This is significantly higher than middle and low performers.

Fatal Compensation Mistakes

• Failure to reward performance

• Poor incentive design

• Following macro trends

Failure to Reward Performance

Top performers want to work for organizations that reward their performance. It’s not so much about the money – it’s more symbolic than that.

Remember Google’s announcement at the beginning of last year?

You get what you measure/reward.

Healthy competition is better than a low-performance harmony.

Most organizations have significant budget restrictions.

“To get the attention of your better performing staff members, you must offer a variable pay rate of seven to eight percent, in addition to their base pay.” - SHRM

Poor Incentive Design

• Many organization know they need to pay for performance, but lack the expertise to design a plan that makes sense.

• Line of sight

• Contributes to business results

• Rewards results not activity

• Organizations try to make things more complicated than they have to be.

• Organizations lack knowledge or systems to design good goals.

Following Macro Trends

Following trends in compensation is interesting, but not well suited for making decisions about compensation (example next slide).

Markets are moving – and so are employees.

What “everyone else is doing” is rarely the strategy to be a market leader.

How does pay go down?

If the average increase budget is 3%, that will have a

very different affect on the company’s ability to retain

key employees depending on the current state of

competitiveness at the organization. Average comp-ratio of .82;

Average Range Penetration at 6%

Average comp-ratio of .89; Average Range Penetration at 23%

Average comp-ratio of 1.24; Average Range Penetration at 107%

Creating Compensation Plans to Retain Top Performers

1. Start with a well-designed base pay plan that is sensitive to what is happening in the market.

2. Decide as an organization how people will move through the range.

3. Design incentive plans for employees that rewards performance and business contributions.

4. Do NOT spend money on low performance.

5. Measure, track, reward and repeat.

Merit Matrix Example

Profit Sharing Plan Sample

Bonus Targets: Employees are eligible for a bonus in an amount equal to a percentage of their base

pay. The bonus targets are based on grade level of their position and the company’s operating income

percentage. The chart below illustrates the bonus targets by grade and profitability.

Operating Income

7% 8% 9%

Meets

Expectations

Exceeds Expectations

Meets Expectations

Exceeds Expectations

Meets Expectations

Exceeds Expectations

Pay Grade 1-3 2.00%

2.50% 3.00%

3.50% 4.00%

4.50%

Pay Grade 4-5 4.00%

4.50% 5.00%

5.50% 6.00%

6.50%

Pay Grade 6-8 6.00%

7.00% 8.00%

9.00% 10.00%

11.00%

Pay Grade 9-11 10.00% 11.00% 12.00% 13.00% 14.00% 15.00%

Incentive Plan Example

XXX MBO example at $40K

0% did not meet goal $ -

3% met goal up to .01% $ 1,200

6% improvement beyond .01% $ 2,400

Cost MBO (excluding external factors)

Reduce by $1.00 $ 500

Reduce by $1.01 = $2.00 $ 750

Reduce by $2.01+ $ 1,000

Other Considerations

Top performers want an opportunity to contribute.

Top performers should be given opportunities to do what that they do well.

Top performers deserve good managers.

Top performers network with other top performers.

Good communication has the power to engage employees and poor communication can destroy a well-designed initiative.

Stacey Carroll, M.B.A, CCP, SPHR

Director of Professional Services

PayScale, Inc.

Connect with me on LinkedIN:

http://www.linkedin.com/in/hrstacey

Thank You!

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