It takes a lot of time and effort to integrate new employees in a team, get them acquainted with company policies, procedures and culture. So, it obviously creates difficulties for managers when employees decide to leave just when they were beginning to become productive. Sounds familiar?
Employee retention is a big issue in every organization and managers at all level have to deal with it. I’ve seen all kinds of employee retention schemes in my professional life, like;
Promise of promotion
One time retention bonus
Salary matching, after getting a feel of competitor’s offer
Counter offers, usually bigger compensation
Training and development opportunities
And definitely few others, they all have different success rates with the only goal of retaining key people in the company or better still, keeping them from joining competitors. Besides success rates, I think it is important is to evaluate their impact on employee morale, employee development policies and overall compensation structure of the company too.
Several studies show that, after a certain job level, salary is not the main reasons employees change companies. For example here, here and here. It perfectly fits what Maslow’s hierarchy of needs tell us about human needs. Self esteem and self-actualization needs become far more important for senior executives. They desire autonomy, higher responsibilities and recognition, not just more money. Then why do companies still continue to pay for employee retention? How do they still justify millions of dollars paid to senior executives each year in retention bonuses?
Few years ago, a colleague of mine decided to leave the organization due to personal reasons and some conflict with other team members, but he wouldn’t admit it in public. I advised him to at least speak to his manager and voice his concern, maybe there could be a way to resolve this conflict. He was a very good engineer and losing him would have delayed many projects. The manager offered him a big retention bonus. It’s true, money does solve many problems and my colleague couldn’t refuse this substantial sum. He accepted the money, stayed on for another 6 months and left the company.
You might call his behavior unethical that even after accepting this big bonus he decided to leave the company, but that’s how it is. The manager solved the wrong problem. It is upto a good manager to try to know more about his or her employees, communicate regularly, form a deeper professional bond and try to gauge the group sentiment. Had the manager been more involved in employee issues and not just concerned about project execution, he might have sensed the ongoing conflict.
This is just one example, I don’t know how many employees leave organizations for reasons other than money and managers, instead of trying to understand the real reason, “waste” company’s resources on solving wrong problems. Employee retention bonus does help if made a conscious part of overall compensation and communicated that way. But I doubt it helps stop an employee who has already made up his mind to leave the company. It’s just too late.
What does your company do? Do you often use retention bonuses? How effective are they? I would love to hear your opinions.