UK businesses are losing talented staff because HR directors are failing to keep pace with what motivates ambitious young executives, according to new research.
A study carried out by Innecto Reward Consulting, between April and May 2006, suggests that cultural, economic and technological changes in the past 10 years have made financial reward a greater motivator than challenging work or personal pride.
Nearly three-quarters of the 690 “career orientated” UK executives under 40 years old who were polled said they now expected a pay rise every year. And two-thirds claimed that financial reward is now the number one career motivator.
In contrast, just 15% of 189 HR professionals also surveyed believed financial reward to be a key motivator. Given this mismatch in ideas, it is unsurprising that 75% admitted that their businesses had lost at least five talented staff in 2005. Increasing investment in talent management seems to have done little to retain key individuals.
The study claims that changing business needs, such as outsourcing, offshoring and interim management, have focused the traditional employer-employee relationship far more on the short-term.
In a low unemployment society young executives are marketing their skills more aggressively and can value their worth more easily through the increased transparency of the internet.
One-third of the young executives questioned said they would leave their jobs if they did not receive a promotion they thought they deserved, with 40% expecting an annual pay rise of 10% above the cost of living rise.
“UK businesses must re-consider their strategy to attract and retain their top talent – the cost of recruitment and the knock-on organisational performance dip is often too high a price to pay,” says Deborah Rees, director of reward consultancy Innecto.
All company levels, including HR, should become more proactive and flexible when considering financial reward, Rees adds. Options such as variable pay and bonus schemes should now be considered as central to strategies to recruit and retain key staff.
One of Rees’ main fears is what she terms the “knee-jerk” reaction some companies adopt to ad-hoc pay review demands. Without a fixed plan, talented workers may simply threaten to leave if they feel their salary is insufficient. Issues about equal pay and resentment between staff after one-off pay rises are consequently a real danger.
Clearly, HR departments need to keep tabs on the going market rate for high-fliers. It is equally important, however, to assess whether a hefty salary increase will be backed up by a fitting step-change in performance.
“Identifying top performers and appreciating the upper limit of their worth is central to every business’ success,” agrees Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development.
Cotton is not greatly surprised by the focus on cash revealed by the study, given the cross-section of respondees it represents. He picks up on the one-third who said they would stay in their jobs as long as they consider their work interesting. With such a high value placed on transferable skills, the chance to carry out project work or travel should be highly rated.
The message from the research is clear: talent gravitates to the best employers. Unless you understand what money means to your high-fliers, you run the risk of losing them.