Companies tend to see the most attrition at the beginning of the year. That’s why retention is often top of mind for HR leaders in Q1. Keeping top performers is even more important in today’s economy as companies have slowed or frozen hiring and aren’t backfilling roles.
To help HR and people professionals get ahead of retention with end-of-year strategies, we hosted a webinar moderated by OpenComp’s VP of Marketing Caitlin Allen, and featuring expert panelists:
- Ashley Brounstein, head of people, OpenComp
- Jamy Conrad, senior director of people, TrustRadius
- Matthew Toeller, VP global total rewards, Harness
In case you missed the webinar, keep reading to get the key takeaways.
You can also get the full webinar recording here.
Why people often quit in January and February
- The holidays are often a time of goal-setting and reflection.
- Dissatisfied employees may have just claimed bonuses or failed to get raises or promotions.
- Hiring ramps up in Q1, so employees are lured away.
Why retention is critical right now
- Each departure costs about one-third of a worker’s salary, according to the Work Institute.
- 57% of tech workers want new jobs, according to Hired.
- Companies aren’t able to backfill roles after employees quit.
Matthew Toeller of Harness added that the drop in morale and the increase in workload on the employees left behind also affects retention.
The discussion focused on three areas most critical to retention:
- Designing career pathways to show the value of sticking around - Related article
- Building motivation with merit cycles - Related article
- Preparing for pay transparency to meet legislative and/or worker demand - Related article
Join OpenComp's customers in boosting retention to 87% with our compensation software:
Key takeaways: career pathways
Define job levels in your company’s—and employees’— terms
Panelists agreed organizations must keep their unique goals and needs in mind when creating job levels, which define responsibilities and seniority, and are the foundation for career tracks.
“Make them your own,” said OpenComp’s Ashley Brounstein. “What do these roles mean at your organization? I’ve seen leveling fall apart when companies can’t translate levels to what’s tangible.”
TrustRadius’ Jamy Conrad suggested starting with the end in mind. As you develop your job leveling framework, think about how it can support your company’s vision for its culture.
Finally, make it very easy for employees to understand job levels. “You have to give examples so they know what it means, otherwise it’s just words,” said Toeller.
Make criteria for job levels measurable
Don’t make your criteria for job levels too specific, said Toeller. For example, a checklist may not account for all the skills an employee needs to master a role. As a result, an employee might believe they’re ready for a promotion when they’re not. But at the same time, don’t make levels too vague. “Must know how to manage people,” is subject to interpretation. However, “Managing a process with a P&L of over $5M” is quantifiable.
Get managers’ input on job level criteria
As you’re defining job levels, get managers’ input, Conrad said. Since they’re the ones who will see the job levels in action most often, ask them if the criteria align with what they see every day. This also helps managers understand the job leveling process so they’re better able to explain compensation to employees.
Feedback & flexibility help balance the needs of individuals with scalability
Continuous feedback is important as employees progress through their career tracks so you can spot where they might need more help and direction, said Conrad. It’s also important to allow for fluidity and change to a career track, she added. Job trends and goals might change, so be flexible enough to allow those changes.
Think of your job leveling framework as a living document, said Toeller. “What you create when you’re a couple of employees is not going to be the same document you have when you’re at a couple thousand.”
Employees must own their career paths
When it comes to choosing career paths, Brounstein puts employees at the helm. Ask questions like: What can you own? Where are the gaps? What do you need to get to the next level?
“Come with your own suggestions if they don’t know where to start,” she said. “Be prepared to guide them, but really put it on them to go own it.”
Once employees are clear on their must-dos, let them come up with their stretch goals, said Toeller. Steer them in the right direction if the goals are too ambitious or not ambitious enough.
Learn more: 15 best practices for HR leaders to create job levels & career paths that boost retention
See why customers raise retention 87% with OpenComp's compensation software:
Key takeaways: merit cycles
Know your budget for merit increases
Make sure you’re aligned with finance, said Toeller. Don’t just ask for the percent of your budget, ask for the dollar amount and what it’s based on.
Toeller said he holds back a percentage of his total budget for adjustments for employees who are under range and for those who went above and beyond. “By doing that, you have a small budget built and you’re not asking for more money,” he said. “If you don’t use it, it doesn't go away, but goes into another operating expense.”
Get specific on timing and eligibility
Panelists agreed companies must decide on timing, eligibility, and other details before launching a merit cycle. For example:
- Which employees are eligible?
- What’s the schedule?
- Who needs to be part of the planning?
- What’s the performance calendar?
- Do you have time for calibrations?
- What’s the training schedule?
- How many times a year will you run a merit cycle?
Be thoughtful about the cadence of your merit cycles
If you’re only doing a merit cycle once a year, it’s important to have really impactful conversations with your employees during this time, Conrad said. Unlike companies who have multiple merit cycles in a year, you only have one chance to get it right.
Also consider who you’re competing against, said Brounstein. If you’re a small startup competing with FAANG, you may need a merit cycle more than once a year.
Prepare for tough conversations
Average merit increases in 2023 aren’t expected to match inflation. So be prepared to talk with employees who will want to know why. Panelists offered these tips for those challenging conversations:
- Give managers training and talking points about how merit adjustments are decided.
- Take some of the communication load off managers’ shoulders. For example: Get on stage at an all-hands meeting to explain the year’s merit cycle plan and answer questions.
- Be transparent about the state of the business, how you’ve been affected by the economic downturn, and what you’re investing in right now.
- Tie it back to goal-setting and performance and future compensation opportunities.
- Think of other ways to pull in value, such as total compensation, total rewards, or professional development opportunities.
Take time for calibration sessions
Calibration sessions—meetings where managers and/or executives compare and discuss individual contributors’ performance ratings, are important for equitable decisions, said Brounstein. Think of them as checks and balances. Have them before making performance rating or compensation decisions.
Conduct a pay equity analysis
Before making pay adjustments, run a pay equity analysis to uncover pay gaps. If you find one, try to figure out what caused it. If there’s no fair reason, make the adjustment right away or schedule it in phases.
Consider separating performance and merit conversations
Panelists agreed there are pros and cons to separating conversations about performance and the bonus or salary adjustment based on performance.
- You’re able to focus on career development by talking about the money later.
- Budgets may change between the conversations, so employees may end up with less than what the performance conversation led them to expect.
Reduce pay gaps by 75% with OpenComp's compensation software:
Key takeaways: pay transparency
- Before publishing salary bands, run a pay equity analysis or audit. As with the merit cycle process, if you find a pay gap and can’t find a fair and justifiable reason for it, make the adjustment as soon as possible.
- Educate, educate, educate. “Make sure managers and internal teams understand how you’re paying folks,” said Brounstein. This will help them have productive conversations about compensation, especially after you post salary bands. Education will save you the heartache of losing people because of miscommunication.
- Lean on tech. Data can always help you make better decisions, and help you better explain compensation to candidates and employees. “Don’t underestimate the impact of good compensation technology,” said Conrad. “That can make or break some of your decision-making.”
- Be wary of exceptions. When making offers, aim to stay within the band. “Sure you can make exceptions, but make sure it’s a consistent exception,” said Brounstein. “Overall, sticking to your pay bands will save you heartache down the road.”
To close out the webinar, moderator Caitlin Allen, asked panelists for any last advice for HR leaders.
Emphasize rest and make time team bonding
“The holidays can be really stressful. Recognize your team and encourage them to take the time away to reset and care for the whole person,” said Brounstein. “Do some team bonding before the end of the year. You don’t need to be in person for that. Just giving that kind of opportunity to celebrate is really important. And do some goal setting so people are excited to come back on January 1 and work on those goals.”
Have meaningful conversations before the holidays
“As we go into the holidays, people are going to take that time to reflect on their job, where they’re at in their career, and whether they’re happy or on the right track,” said Conrad. “Having at least one meaningful, thoughtful conversation with employees before they head into the holidays is critical, especially if you’re going to follow up with a merit cycle that might not match inflation.”
Listening is never overrated
“Listen to employees. If they want to talk to you about their compensation, great. Talk to them. Be open, be honest,” said Toeller. “Know in the back of your head that, typically, one of the top five reasons somebody leaves is not compensation. Compensation is a short-term motivator. Have a conversation and try to find out what else is going on. Is it workload, is it management? Is it about coworkers? A lot of times the biggest thing that employees want is an ear to talk to.”
Learn more: Retention Tips: 5 Pay Transparency Best Practices for HR Leaders
More retention resources:
If you enjoyed these tips, get more by watching the full webinar recording anytime you want.
You can also download the eBook, An HR Leaders Guide to Retention in 2023.