The Employee Reward Philosophy That Equals Higher Retention
Congratulations! That great new person has been hired to your team - and they are eager to start adding a ton of value. As a highly-engaged leader, you understand how to create an upward spiral of performance very well: define performance standards, spell out expectations, collaborate on next steps and benchmarks, follow up and adjust. That structure and support goes a long way toward engaging and developing today's best talent. You just hope that great new hire decides to stick around for a while.
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Strong Leadership Is the Foundation of Employee Retention
The foundation of any successful retention strategy today is this: build a strong leadership culture. Without leaders who are engaged enough to help people develop skills and grow their careers there will be no hope of retaining even the most dedicated employees.
But what if you are already a strong, highly-engaged leader? You are a master of the management fundamentals: you have regular 1:1 meetings with each direct report, spell out expectations and guidelines, track performance, hold people accountable, and help them solve problems every step of the way. Perhaps you've even gotten turnover to skyrocket among the chronic low performers hiding out on your team.
But unless you want that turnover trend to affect your high performers, too, you must take your employee retention skills to the next level. The way to do that is focus on how you recognize and reward top performance.
Don't Fall for "Fairness" - Use Differential Rewards
One of the most pernicious management myths holding leaders back is what I call the Myth of Fairness, that is, that the way to treat people fairly as a manager is to treat everyone the same regardless of their demonstrated performance. If you take a step back it is easy to see why this is absurd: when there are limited resources with which to reward people it only makes sense to do more for some people and less for others, based on what they deserve.
Of course, if the manager is failing to support employees from the start, differential rewards will never be fair, either. The key is providing the guidance, direction, support, and coaching necessary for everyone on the team to first do their best and then have opportunities to go above and beyond to earn more. A solid process for tracking and documenting employee performance is invaluable in this process!
The Philosophy of Control, Timing, and Customization
Once you've embraced a system for providing differential rewards, it's time to make those rewards even more valuable by making use of this simple philosophy: control, timing, and customization.
Control. Put people in control of their own rewards by spelling out exactly what they must do in order to earn them. The classic example is this: say you have an employee who doesn't want to work on Thursdays anymore. You, the manager, must tell that employee exactly what you need from them by each Wednesday at midnight in order to have Thursday off.
Timing. The closer in proximity the reward is to the performance in question, the more powerful the reward will be. Of course, it's rare that a manager will be able to provide any reward immediately. But even if you are only waiting a few days to reward someone, make the connection between their performance and the reward you are giving clear. Be explicit - reiterate exactly what they did in order to earn that reward.
Customization. The more you can identify non-financial rewards that matter to each individual employee, the greater a value proposition you can make to them in exchange for their best performance. The most common and effective non-financial rewards I have identified are: changes in schedule, options for working relationships, choices for tasks and responsibilities, learning opportunities, and choices for work location or workspace.
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