Why an increase in your company’s “flight risk” salaries can have the opposite effect

The other day I met a friend I had hardly seen since he started doing a very important job at a big bank.

“Hello!” I blinked, eager to hear about life in a business that, even by investment banking standards, had the ability to make news.

“Oh,” he said. – I left. He had actually left months ago, joining the millions around the world in the Great Resignation, which was supposed to be a temporary, pandemic blow, but it continued and even deepened.

Figures this month show that 4.4 million American workers, or 2.9 percent of the workforce, left in April – of a record 4 millionor 2.8 percent in the same month last year.

Elsewhere it’s not so different. Here in London, it’s starting to feel remarkable to meet someone who still does the same job in the same organization with the same phone number they had before Covid.

Emerging economic uncertainty may change things, but for now employers in many industries are struggling to keep workers in a thriving labor market.

In response, the bosses do what I did in an earlier life, when fate threw me for a short time in the management. They do everything in their power to throw money and promotions at future retirees to persuade them to stay.

But should I? The answer is not as clear as it seems.

The counter-proposal seems obvious to a measurably proven star, especially if they are also stable, kind and leadership, which many stars are not.

As for how much money needs to be offered to people to stay in place, it is worth considering the cost of replacing them.

One Britain study in 2014 showed the cost of finding, interviewing and temporarily replacing a new worker – and bringing them to optimum speed – costs an average of £ 30,600.

If a newcomer joins a company in the same sector, it can take less than four months to reach optimal performance, according to a study by Oxford Economics. But that could take up to eight months for someone from a different industry; 10 months for a new graduate and one year for someone who re-enters the workforce.

Having said that, counter-offers can also have the opposite effect if not treated carefully.

Offering money to someone who has been serially underpaid may have the opposite effect if left to boil over how much pay and recognition they have missed for years.

This highlights a deeper question: are people tempted to leave just for the money? Or due to broader structural problems such as lack of attention to career development; inflexible working models; bad managers or acute shortage of staff and overwork?

If this is the last case, be careful. A counter-offer based on pay, which seems to have worked in January, could fail until April if the recipient receives another offer from a better-managed organization. The bidder will simply set aside money to postpone the problem instead of fixing it.

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It is obviously more intelligent to find out the reason for the departures and, if possible, to anticipate them, for example, to set up a system to warn of the risks from the field for internal job opportunities. Some companies that have tried this claim it reduce the dropout rate and retain valuable staff who might otherwise have left.

Finally, generous counter-offers can infuriate other employees, especially if there is ever a hint that the potential flight risk proposal is not as solid as advertised.

In the past, I think it was probably easier to dismiss this kind of reaction as sour grapes. In a hot job market, however, it is more dangerous. It is very likely that people are already sitting next to new but less experienced job seekers who earn more money for the same job.

In other words, they pay “loyalty taxSays Adam Grant, American organizational psychologist and author. He believes there is reason for employers to offer “increased retention” to reward the commitment. This is by no means an easy option for all companies. But this underscores the need to think very carefully about who is rewarded to stay – and why.

pilita.clark@ft.com

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