America’s employers believe they are in a War for Talent, and their strategy for winning depends, in large measure, on financial incentives. While never on the same scale as that used with their senior executives, corporations have now begun to invest much more money to recruit and retain people of talent. Often these sums are substantial and significantly greater than what they are willing to pay to other employees. In effect, organizations have replaced their historically egalitarian approach to compensation—where “A” level performers received raises that were only marginally better than “C” level performers—with an approach that is decidedly more meritocratic and market-based.
The baseline for this adjustment was, from the corporate perspective at least, felicitously low. Over the past twenty-five years, the compensation of most workers barely kept up with the pace of inflation. In fact, for the first time since the U.S. Government began tracking such figures, the household income of working Americans actually declined in the decade between 1999 and 2009.
Over the first five years of the 21st Century, the total remuneration of America’s working men and women—their take home pay and benefits—plummeted to just 56 percent of the country’s gross domestic product. That level is just 7 percent better than it was in 1929, when the country entered the Great Depression.
Even as this compensation catastrophe was unfolding, however, the situation was very different for those workers who were deemed to have talent. As shown below, these individuals saw employers increase the financial incentives they offered both to recruit them—by paying hiring bonuses and above market salaries—and to retain them—by making market adjustments to their pay to keep it competitive with their peers and by offering special bonuses to keep them in place. For perhaps the first time ever, American employers began to invest in talent as if it actually were what they had always been calling it—an asset.
Number of Employers Offering Special Pay for Talent
Hiring bonuses: 2004-61% 2008-70%
Market adjustments: 2004-55% 2008-65%
Retention bonuses: 2004-27% 2008-38%
Paying above market: 2004-25% 2008-31%
Today, employers are so desperate for talent—so sure that it is absolutely critical to their organizational preservation and prosperity—that they will pay dearly to acquire even discredited individuals as long as they can deliver results on-the-job. The 2009-10 debacle in the financial services industry is a case in point. Struggling banks, brokerages and insurance companies were convinced that they had no choice but to pay huge salaries and even larger bonuses to the investment gurus who created the credit default swap fiasco in the first place. Ironically, only those individuals had the know-how to undo the mess they had created so their employers were not only willing, but were determined to pay them whatever it took to keep them on-the-job.
Even more dramatic, employers have made this all star staffing a central element of the way they manage all of their human resources. They now operate much like professional sports clubs. Those organizations may brand themselves as teams, but they have long operated as businesses. They are constantly adjusting their mix of talent—by hiring, trading and firing of players—in order to enhance their ability to compete. They owe it to their fans, they argue, to upgrade their roster each and every year because that’s the only way to ensure victory on the field.
In a case of life imitating sports, corporate employers are now doing exactly the same thing. They are quietly, sometimes even surreptitiously, using the recession to trade up for workers who have stronger skill sets and/or better track records of performance. They have ditched the normal distribution of talent in their workforce and are now trying to field their own brand of a dream team.
Thanks for reading,
Note: The above post was drawn in part from my new book, The Career Activist Republic. To read more, get the book at Amazon.com, in many bookstores and on Weddles.com.