Hiring (and Retaining) Like it’s 1999

Some of us remember what it was like trying to hire and retain good talent in 1999, when the dot-com boom was driving a race for talent. Employers were scrambling for talent with incredible raises, hiring bonuses, and enticing perks. It felt like a game of musical chairs, with employers competing to keep a seat. Sound familiar?

I recently attended a United Benefit Advisors (UBA) conference, and a consistent theme was concern about the state of the employment market. Employee turnover has spiked as a result of the Great Resignation, and low labor participation rates have set off a mad dash to hire and retain talent at any cost.

But for those of us who lived through 1999—and again in 2007 when the environment was quite similar—we also remember the subsequent lean years. In each case, the hiring environment changed radically in just two years, and employers began to lay off talent. Now it was the employees playing musical chairs to keep a seat. Many who had taken the most recent job offers at the highest compensation levels found themselves the first to be cut—left without a chair when the music stopped.

We humans suffer from recency bias: we tend to favor recent events over historic ones, diminishing the lessons of history over time. Compounding the issue is that much of our labor force today wasn’t around for the dot-com implosion, only have a vague recollection of the Great Recession, and therefore have not lived the experience of the ups and the downs of the labor market.

Why is this important right now? Because employers eager to retain their talent in the current market need to take the long view—and help their employees see it too. You know your talent is aware of those enticing offers out there, but do they recognize the current environment as a harbinger of what may be around the corner?

Communicating this perspective to your workforce honestly could help sow some seeds of loyalty, but it has to be done in the right context and combined with the right set of management and financial tools for maximum effect.

Here are five tactics to optimize retention in the current labor market:

1. Conduct “stay” interviews. Sit down with your key performers and get their honest feedback about what will make them likely to remain at the company. Ask about their feelings of engagement, what they like and dislike about their roles, and what career path opportunities interest them. These conversations can be more beneficial than pulse surveys because they keep people connected to their leaders. Stay interviews should be done by respected managers and create a personal connection, so conduct them in person if it’s feasible and safe. 

2. Provide a supplemental bonus. Credit Johnny C. Taylor, CEO of SHRM, for this one. Recognizing that many employees are being approached with incredible salary offers, make one of your own. Create a supplemental compensation layer that yields a 5-10% increase for staff, but is layered in for a 6 or 12 month period. This supplemental bonus should be a separate line item on the payroll stub, and will be revisited companywide in 6 or 12 months. This gives you the flexibility to respond to further changes in the labor market in the future.

3. Educate and engage. Keep employees in touch with company’s core values and mission, but go further—educate them on the metrics. Share the business picture: profit, loss, key initiatives, and making payroll. Educating them on management issues can create a sense of belonging, overcome the “What’s in it for me?” attitude, and give you a chance to demonstrate the historical trends of the labor market. 

4. Know when it’s time to let go. If you have a bad apple holding you hostage over increased pay or outsized demands, maybe it’s time to part ways, even if it will be painful to backfill that role. Your team knows who’s good and who’s bad for the company—often before management does—so listen to their feedback. Taking action to ensure everyone’s pulling their weight and being treated fairly will likely improve morale, even if it means a slightly increased workload in the short term.

5. Align your compensation. A supplemental bonus can be a valuable retention tool, but only if you’re already at market with your compensation targets. If you haven’t done a compensation study in a while, or are finding increased turnover in certain areas of the business, you could be out of line with the market. In this environment, your competitors can exploit this weakness all day long—now’s not the time to be complacent. While you’re at it, make sure your benefits, PTO, parental leave, and flexible work policies are meeting your employees’ needs; sometimes it’s not just about salary, but about the whole package that employees need to feel satisfied and fulfilled. 

There isn’t one arrow in the quiver that will solve all the problems today, but with a concentrated mix of management and financial tools at our disposal, we can adeptly maneuver through this stage of the employment cycle. We all hope that history doesn’t repeat itself this time—but taking the long view will help both you and your employees thrive now and into the unknown future.

Information is provided by Relational Advisors and written by Mike Rankin, a non-affiliate of Cetera Advisor Networks LLC.