Covering Up Culture With Compensation

Our current talent shortage is not the first one American Business has faced.  We saw it during the Dot-Com bubble, and different industries have experienced it in a more specific way.  During each of these periods of shortage one trend is constant; to compete businesses feel they must increase the compensation of their employees to attract and retain them.  It doesn’t work.  Someone will always pay more and business will continue to raise wages to be competitive.

More often than not the number one reason that business does not succeed in attracting and retaining talent is their culture.  A friend of mine, Mark Leupold of Express Employment Professionals in Appleton Wisconsin describes this business worst practice as “Covering Up Culture With Compensation.”  With qualification, he is profoundly correct. We are not suggesting that you not pay fair or competitive wages, but we are suggesting that there are other methods that not only are more effective but won’t harm your business.  What does that mean?

Being the highest paying business in town pays dividends; until someone else becomes the highest paying business in town.  Over time as wages increase other costs increase.  Costs such as Paid Time Off Balances, Workers Compensation Premiums, Taxes, FUTA/SUTA, Certain employer-paid benefits, and so on.  This in turn impacts on your cost of production or service providing resulting in you charging more for what you do.  That, in turn, creates another financial issue as you battle with your competitors over pricing.

Organizational Culture is defined as those beliefs, values, and ways of engaging with each other that describe or portray the work environment and employees of an organization.  Organizational culture plays a significant if not primary role in both recruiting and retention.  As my friend said, you can’t hide a poor culture with compensation.

“…you can’t hide a poor culture with compensation.”

The key to developing and possessing a culture that attracts and retains high-quality employees is to plan it.  Establishing a Workforce Plan that ensures high-quality employees are valued means identifying exactly what attributes; the Knowledge, Skills, Abilities, Experiences, and Behaviors (KSAEB’s) that you want your employees to have.  Not all employees are created equal nor are all jobs.  Like it or not reality clearly shows that some jobs contribute more to the business than do others.  Having high performing employees in those jobs is an extremely important part of your business success.  Having a culture that attracts and retains them through appropriate reward and recognition programs helps ensure you successfully have those key roles filled with the right people.

None of this is accomplished quickly.  It takes analysis and thought.  You must be able to clearly define your needs and your key roles.  Not only must you identify but you must decide.  This doesn’t mean you don’t value your other employees either.  It simply means that certain key employees in certain key roles have a greater impact on the business and because of that they are rewarded appropriately.

“Having high performing employees in those jobs is an extremely important part of your business success.”

When all your business does to compete is focus on wages, and sometimes perks, you add little more than a cost to your business.  Costs that may be difficult to take away or adjust later without extensive difficulty.  Focusing on developing and executing a culture that demonstrates the unique value proposition of your employees, while also accepting and recognizing their contributing differences, builds an employment brand THAT CANNOT BE DUPLICATED.  Those last four words are key.  If you are successful in establishing a workforce plan that recognizes and rewards employee excellence, and isn’t just words or pay, you can dominate your market.  Your employee brand will create a unique and highly successful environment that leaves your competition behind and fully sustains your business.

“Your employee brand will create a unique and highly successful environment that leaves your competition behind…”

Good workforce planning takes a variety of skills.  Among these are the skills needed to collect and analyze data.  Not everyday data such as cost and turn over.  You need hard data about performance, outcomes and their impact on business.  The ability to develop appropriate measurements and metrics that accurately provide business answers to business issues.  You may not have these skills available in your business.  The KSAEB’s may not be there.  Fortunately, there are those who can help you with that.

Using pay to attract and retain employees, while maybe providing some success, does not sustain your business.  Continuously adjusting pay because your competitors do is fraught with risk and challenges.  In the long run, no one wins by doing that.  Building a culture that sustainably attracts and retains high-quality employees is the key to success.  If it can’t be sustained, it is more than likely of low value and not worth the effort.  An employer and employee brand that cannot be duplicated is that sustainable differentiator.