Posts
I haven't written here for quite a while. There are a number of reasons, some of them probably not so good, but I'm not going to go into them today. But, let's get started.
It was almost five years ago that I wrote about the talent crunch with a focus on hospitals. Little did I know that that was just the beginning. For a while, if you asked a hospital CHRO or VP-HR what their biggest challenge was, they would far more likely than not have told you it was talent -- recruiting and retaining talent.
Today, however, you don't have to keep it to hospitals or to the Human Resources side of the house. Go to almost any industry and find a CFO -- that's right, a Finance Chief -- and it's very likely that even that side of the house will tell you that along with cybersecurity and supply chain, recruiting and retention is a top issue.
If you haven't studied talent management a whole lot, this probably comes as a great surprise. So, let me toss out some data and rather than linking to a whole bunch of sources, let me say that what I am about to state is based on an amalgam of recent studies. The cost to replace unwanted skilled talent (below the level of high management is estimated anywhere from about 1.25 to 2.25 times cash compensation. For top management, up to and including the CEO, those same studies say that the cost varies anywhere from about 2.5 to 4 times cash compensation.
Impossible? No.
Those numbers include recruiting costs, transition costs, transition of knowledge costs, potential other turnover, costs of having to hire more than one person when the first one doesn't work out and many more items. In fact, when you lose a well-liked, high-performing CEO without an obvious successor, the disruption caused by that loss might be as big as the numbers cited in even the studies that indicate such loss is more expensive.
How do you keep these people? Sometimes you just can't. Sometimes somebody throws money or some perquisite at them that you just can't compete with. It could be that the allure of Hawaii is just too much.
But, let's assume that it wasn't anything like that. Let's assume you just didn't have anything to keep them. Then, we might say the loss was avoidable. But, sometimes proverbial handcuffs work.
Often times, long-term compensation with long vesting periods is enough to keep people around, but long-term compensation is usually limited to pretty high up people. And, a company that really wants that person might buy out the non-vested portion anyway.
The trickier part is pensions. Pensions are a form of deferred compensation. The deferral period is often long and the time at which the benefit pays out is often far in the future. In fact, it pays out during the period of time -- retirement -- during which that person might not be able to replace it.
For a time, that wasn't a big deal. But, in 2022, other surveys indicate that there are a tremendous number of workers who say they will never be able to retire. Of course, those are not workers with pensions. Those are workers who are not sure where their lifetime income is coming from.
This is not to say that pensions are somehow nirvana. But, they do serve as recruiting and retention device when communicated properly that very little else does. Someone can always pay you more currently. But, are they willing to pay you more after you have left their company? The companies that will certainly seem to be having a little less trouble recruiting and retaining.
