As competition for talent heats up, it can be tempting to increase starting salaries to lure candidates. But, as Nathan Peart writes, this technique may no longer be an effective method for attracting younger talent.
Throwing money at a problem is one of the oldest tricks in the books for a reason – usually it works to some extent.
For those with deep pockets, it can often make things move quicker, prompt a decision faster, and ultimately ensure people feel valued in terms of compensation.
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However, for the younger generations entering the workforce, money isn’t talking so loudly anymore. Instead, organisations that are used to dangling triple-figure carrots are finding that its culture over compensation that’s winning the talent war.
Recently, Bank of America increased junior pay to $100,000. While that figure is double the average salary in the US and the UK in intense industries like banking and law, those increases are not having much of an impact on retention or talent attraction.
The stress and pressure that come with the prestige of working in some of these industries is no longer desirable to everybody in the younger generation, and increasingly, nor is the money. An increase in focus on diversity metrics, work-life balance and working for a good cause is pushing hot talent to look at alternative career options and reject chasing compensation as the key motivator for a move. Now more than ever, they want to break the system.
Money vs. flexibility
Of late, we have seen an increase in the desire for taking a salary cut for a better work-life balance at nearly all levels. Our millennial survey, which covers associate attorneys at top law firms, revealed a third of millennial lawyers would take a salary cut for more time off and flexible working. Furthermore, when looking at the up-and-coming talent in law school classes, consisting largely of Gen-Z talent, a considerable 86% said that in the post-pandemic world they would want some form of remote working. With data increasingly supporting this trend, are companies taking it seriously?
Traditionally, increasing salaries was a way to keep large groups of employees happy – they reduced attrition and increased engagement, at least for the short term while organisations solved staffing issues and reshuffled strategic planning. However it seems large corporations still have progress to make with millennials and Gen-Z.
Salaries and bonuses at the top law firms have been aggressive given the amount of work since the pandemic, but associates are more vocal about burnout and whether the money is “worth it”. By calculating their billable and non-billable hours, some associates feel that their equivalent hourly rate actually pushes them down the earning ladder and hence the money becomes less relevant, particularly if you have no time to spend it.
The shift in work during the pandemic hasn’t helped things either. At the start of the crisis, professional services companies expected a significant dip in work, but as things rapidly got busier, people took to their new home working setups. While some offices are asking people to go back in, there are people who are actively job seeking instead, looking for the flexibility to continue.
Alternative solutions for retaining talent
Middle market organisations have an advantage when it comes to luring and retaining talent, often capitalising on the training of somebody coming from a bigger competitor and offering them flexibility and more work-life balance in return. The trade off in terms of compensation is absorbed in other ways – moving to less expensive areas, reduced commute costs and less stress overall. Leadership teams need to consider these factors when making longer-term decisions around policy and adopt new ideas for this generation to show they understand and engage with them.
After seeing economic and natural disaster as part of the mainstream narrative in their lives, this group seeks more than a shiny company marketing brochure and extra money to persuade them to join.”
Flexible working is the easiest shift – recognising the efforts employees have made during the pandemic and offering self-determined flexibility will send a clear message to employees that the company is forward-thinking and trying to drive change. Arbitrary work in office policies, particularly those with little consultation, are likely to be unpopular.
Diversity and inclusion is also key factor in the decision making process for the younger workforce; how an organisation invests in its people and champions diverse hiring, social mobility and inclusivity in the workplace are how this group judges a company and its values. Expectations around flexibility are high, especially after the pandemic, but this group’s desire to do work with an altruistic angle is also strong, and so offering projects that allow employees to give back will be enticing and popular.
After seeing economic and natural disaster as part of the mainstream narrative in their lives, this group seeks more than a shiny company marketing brochure and extra money to persuade them to join. Actions definitely speak louder than words.
Making real change will be key to the longer-term win. Consider how you can alleviate staffing issues and invest in teams and culture. By increasing headcount and considering alternative staffing models such as job shares and contract hires, you can reduce the pressure points on people, thereby reducing attrition.
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Focus on building a culture that people want to be part of, take into account the ideas of workforce generations to come. Younger generations have options and are not afraid to pursue them. Ultimately, as priorities change with new generations, the best talent will have to be earned, not bought.
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