Stop Turnover: Give Everyone a 20% Annual Increase

Before I make candidates an offer, I ask them if they would really want the job if it weren’t for the compensation. Most say yes, but few have a good answer when I ask, “Why?”

Getting the right answer, which involves a complete understanding of the challenges in the job and why these tap into the person’s strengths, is critical since this is what drives performance, satisfaction and retention. As important, if it’s superior to everything else the candidate is considering the probability the person will accept my client’s offer is much greater.

Ensuring the candidate has the right information to answer the, “Why do you want the job?” question, starts when I first talk with the person. During this call I suggest that no one should accept an offer for another job if it doesn’t provide at least a 30% non-monetary increase. More important, all offers, including not changing jobs or accepting a counteroffer should be compared using this same benchmark. This idea is shown in the graphic and referred to as the 30% Solution.

The 30% non-monetary increase is the combination of these four components:

• Job stretch, meaning a bigger job which also includes learning new skills, handling bigger projects or managing bigger teams.
• Job impact, meaning a more important job.
• Job satisfaction, meaning a mix of more satisfying work or anything affecting this.
• Job growth, assurance the above factors will likely continue as long as the person and the company are mutually successful.

Collectively, the 30% combination of factors is what I tell candidates they should consider as a reasonable career move. As candidates move through the interviewing and selection process it’s important for them to gather this information to fully understand the potential of the role. Unfortunately, in most cases candidates finish up the interviewing process with only a vague understanding of these non-monetary factors and as a result overvalue the compensation package, the job title and its location. The, “Why do you want this job?” question puts these short-term factors aside and forces the candidate to focus on what really matters: Determining if the job represents the best career move among competitive alternatives.

Since this approach works so well for new hires – as long as the company delivers on the promise – there is no reason something similar can’t be used for retaining your existing employees. While the non-monetary increase doesn’t need to be 30% per year it certainly needs to be at least 20% in order to maximize the person’s development and personal satisfaction and to reduce the chance the person will look elsewhere.

This graphic highlights the “Big 5” factors driving candidates to begin looking for new jobs and why they accept new ones. It’s based on a recent survey we conducted of people who just changed jobs, so it’s a good place to start.

How to Motivate and Retain Your Employees by Offering Them a 20-30% Non-monetary Annual Increase

1. Start with the hiring manager. This person affects the company culture, how the person is managed, what assignments the person handles and how the person is trained and developed. If the hiring manager is the problem, not the solution, you’ll need to first figure this out and make the changes necessary.
2. Establish the benchmark. Whether you conduct a survey or via a series of one-on-ones, you need to find out how the person feels about the work itself and his/her current career trajectory, what the person’s intrinsic motivators are and what factors would cause the person to leave. Regardless of how you figure it out, you can be assured that when the annual non-monetary changes are less than 10% people are starting to look. 
3. Determine if the company is the problem. This idea won’t work if your company culture is toxic, if your business is headed south, if your comp structure isn’t competitive or some other underlying problems are permeating your workforce. Regardless, it’s worth the effort to identify the root cause of any excessive turnover and address the company-level issues as much as possible. 
4. Intervene. Assuming the problems are manageable, it’s important to identify some opportunities to increase the current level of satisfaction. This could be in the form of additional training, handling bigger projects or being assigned to more important cross-functional teams.

The idea of giving everyone a 20-30% annual non-monetary increase in some formal way is not as radical as it might seem. Some of your best hiring managers are already doing this, so find out who they are and start doing what they’re doing. As long as you track satisfaction and turnover in real time, you’ll have the beginnings of a worthy process for reducing turnover while improving the performance and job satisfaction of everyone in your company.

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Lou Adler (@LouA) is the CEO of Performance-based Hiring Learning Systems, Inc. His latest book, The Essential Guide for Hiring & Getting Hired (Workbench, 2013) provides hands-on advice for job-seekers, hiring managers and recruiters on how to find the best jobs and hire the best people. Lou's Performance-based Hiring interviewing course is now available on LinkedIn Learning.