The Linkage Of Pay Practices And Competitiveness

When a company begins to lose its competitive edge, there are multiple symptoms or warning signs.

The first is when independent market analysis shows a rival company grabbing market share… at your company ‘s expense.

The second is when managers inside your organisation notice – rather regularly – that employees’ morale is lacklustre, their energy level is low and feelings of discontentment are on the rise.

The third is exposed when good people – including some of your best performers and so-called ‘high potential’ development employees – leave to join other organisations, often citing a “better opportunity”, “higher pay”, and a clearer view of “career advancement” in the future.

This last point is particularly noteworthy for global business executives today because the movement of top talent out of your organisation signals your employer value proposition may be more imagined than real in the eyes of your own people.

When your company begins to lose its attractiveness to employees and potential recruits in the global talent market, there are no bells or alarms that sound. Sometimes, human resources leaders see the change happening, but often they are unwilling to confront their superiors with the reality or lack the internal authority and political savvy to do so.

In fact, this shift most often goes unnoticed until some executive with the vision and courage to say the company isn’t competing effectively is given a mandate to shake up the entire corporate culture.

What all of this points to is the need for global executives to carefully watch the in-flow and outflow of talent from their organisations. If good people are leaving, citing better opportunities with other companies – perhaps including your direct competitors – you have to get to the reason, displeasing as it may be to your budget minders.

The simple fact may be that your company’s value proposition – considering things like its mission, its compensation packages, its culture and its future prospects for growth – may have outlived its relevancy to employees and potential recruits alike.

Your company may be paying too little to keep its stars. It may also be paying too little to attract them in the first place. If either of these things is true, it will require executive leadership to take action. If both of them are true, you might want to start testing the waters of the global talent market yourself if you are not convinced your company has the leadership to, A: recognise the problem, and, B: fix it.

If your company doesn’t know how its value proposition for customers, employees and prospective new recruits lines up competitively in the markets you serve, that’s a huge information gap and one that business rivals will exploit.

The action required must come from leaders across business functions and departments. Odds are, it may not come from human resources, which is often buried tackling a mountain of tactical priorities.

The next time you see the company lose one of its top people, use the exit interview to learn what you can about why they’re leaving and why. You may just learn – by piecing the evidence and organisational symptoms together – what your company must do to compete, and why paying people better may be part of the equation. 

Copyright © TRANSEARCH International 2015


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