Problem Statement Recruitment and retention of Chief Executive Officers has been at the heart of businesses since the sass’s according to Fuller. However escalating executive compensation has limited the abilities of some businesses to recruit and retain employees. According to Fuller the problem began over time with companies willing to hire from outside the company which in turn creates “greater demand for external hires to more Job opportunities for sitting executives” (Fuller 2009).
With companies ring externally the market exploded and the search for the extremely talented dramatically increased the executive pay, but that is Just the beginning of the problem. A side effect to the massive increase in executive pay is less money for the rest of the company. The shareholders are going to get their money; otherwise the executives will be replaced. The company has to raise the money to pay the executives from somewhere. The area that has been diminished must come from the rest of the company: benefits and pay of the rest of the company.
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With escalating CEO compensation, companies must find new creative ways to retain and recruit talented employees. Alternatives Now that the executives are receiving the massive retention bonuses, companies are turning to alternative ways to retain the talented executives. “Stock options have become an integral component of Chief executive officer (CEO) compensation packages. Corporate boards increasingly rely on stock options as a compensation tool and as a device for incentive alignment and managerial retention (Gallantly 2009).
With stock options an executives pay is directly tied to how the company fairs in the arrest. If the price goes up the executive earns more, however if the company’s stock declines the compensation does too. For the employees in the company as a whole, stock options are not a solution to the problem. However, future opportunities are. “As the global economy improves, organizations that are looking to grow or restock their ranks are expected to compete aggressively for those hard-to-find, top-notch employees, which is why retention-not just hiring- has become top-of-mind among senior managers” (Haggle 2012).
With this growth companies need to ensure they keep, at the very minimal, the core talent thin their entity. One solution to retain the employees is to pay-to-stay tactic. Pay- to-stay requires an organization to offer a contract or agreement to an employee in exchange for money for a set period of time (Chain and Gunny 2012). “87% [of businesses] indicated they had retained all or most of their targeted population through the end of the retention period” (Clan and Gunny 2012). Another way to keep employees in the fold for future opportunities is to allow lateral moves to new roles.
According to Chain and Gunny, “[Employee] retention is not Just bout money’ (2012). Allowing employees the flexibility to work within different fields of the company can be both beneficial to the employee and company, so long as the company has the flexibility the employee desires. “Develop a consistent retention strategy, but recognize that one size does not fit all, and that there will be employee- by-employee variations” (Chain and Gunny 2012). Benefits are another aspect of employee recruiting and retention. As the global economy declined, businesses reduced benefits and 401 (k) packages.
Expanding lath benefits to cover not only the employee and the spouse but domestic partners as well. “More organizations, for instance, are expanding the concept of who constitutes an employee’s family when they make accommodations for international assignments and are increasingly including unmarried domestic partners in such mobility benefits” (Haggle 2012). With such flexibility to keep family and relationships together, employees are willing to stay with a corporation longer because they trust the foundation of the company.
There are only so many positions in any given corporation but one strong factor mains available to the top talent within a company at all levels: promotion. Keeping the future of an employee in line with the future of the company builds the psychological contract between the two. “Psychological contracts have been defined as the beliefs about what employees owe the organization and what the organization owes them” (Hackneys, Road, and Howard 2009). Employees want to improve their skills and position within the company, and if necessary, outside of the company. Promotion achieve these goals and aid in Job satisfaction (Hackneys, Road, and
Howard 2009). Evaluation Stock options Pro: easily obtainable, cornerstone of CEO deals in the current time, pay increases if stock increases in price Stock options Con: Focus is on the now, not the future of the company; pay decreases with the stock Pay-to-Stay Pro: high retention rate (87%) Pay-to-Stay Con: Cost, employees leave shortly after set period of time (Cantina and Gunny 2012) Lateral moves within the company Pro: retain talent, build on psychological contract Lateral moves within the company Con: risky, need talent in their current work specialty, costs for training
Benefits Pro: happy employees, retain/recruitment levels rise, healthier employees Benefits Con: Cost Promotion Pro: Employee Moral rises, easier to retain talent Promotion Con: Cost, only so many positions available for promotion Recommendation My recommendation is to exercise the stock options for Coos, pay-to-stay during high business times/markets, increase benefits to the employees, and only use promotions sparingly on the right people. With the CEO stock options, stock option reprising are able to be used to keep the CEO compensated and focused on the direction of the many for the long haul, not Just the short term stock market.
Only using the Pay- to-stay options for key employees during high yield times allows the company to also work on extending the psychological contract to the employee over the term but also retains their talent and skill for the work ahead. HARM need to keep tabs on the future work in order to prepare for any expected busy work time frames. Benefits are the reasons people look for better Job fit with other companies. Benefit packages need to be competitive but not outlandishly expensive, HARM need to shop for the best deals o keep employees content and satisfied.
Using promotions to retain talent can be tricky, but HARM need to identify the top talent and move them into roles to be molded into the future. The psychological contract will help keep the employee in the loop and understand they have a future with the company.