Look Beyond Raises to Retain and Engage Talent

With salaries in 2013 expected to rise sharply in emerging markets yet remain flat in developed countries, talent managers are faced with two distinct roles to play in helping the company engage and retain talent. They must take into account local pay realities if they are going to be effective. What works in Europe may not address the challenges of China.

According to a December 2012 study by global management consultancy Hay Group on global salary increase expectations, there will be a clear disparity between developed and emerging economies in 2013. The study, which drew on data from reward professionals in more than 20,000 organizations worldwide, showed that almost no countries in Western Europe or North America were expecting increases of more than 3 percent. In Ireland and Greece, no increases are expected. By contrast, in emerging markets, expectations for salary increases are consistently above 5 percent, reaching 9.5 percent and 10.5 percent in China and India, respectively.

These clear differences in pay strategy suggest that talent management priorities should be adjusted depending on location — a particularly important insight for organizations with a large international footprint.

Emerging Markets: Help Employees Move Up the Ladder
Emerging markets have seen consistently high pay increases for most of the last decade. Turnover has also been high. Significant economic growth has translated into substantial increases in employment opportunities, allowing employees to easily secure alternative employment. In developing nations, average tenure is often only 18 months, compared to about four or five years in many European countries. This competitive economic climate has led to fears of an expensive “arms race” for talent in markets like China, as salaries for many management levels approach those in the U.S.

Given their adverse effect on turnover, these levels of pay increases are unsustainable in the medium- to long term. To compensate, talent managers will play an integral role in helping companies attract and retain talent without merely relying on cash. Helping people move up the ladder quickly is critical. If employees don’t get the career moves they want, competitors will soon be offering a better and, most likely, better-paid position.

To be effective, talent managers will need to foster a more efficient promotional structure. Unlike in many Western countries, there isn’t the time to go through a three- to five-year process to prepare employees for their next big move. Talent managers should consider adjusting training programs, collaboration and other growth measures to make sure employees can rapidly gain the experience they need to have success at a higher level.

Developed Economies: Motivate Using Non-Financial Incentives
The task for talent management in developed markets is different. Here, pay increases are low, in many cases below inflation. In a few countries there are no increases at all. Employees are now asking, “If not financial reward, what do I get out of coming to work?” What’s more, because job markets are slow, most employees aren’t going anywhere for a while. As a result, companies must identify ways to motivate and reward their employees in ways that don’t involve financial incentives.

Additionally, these companies need to improve the way they communicate their overall “offer” to employees. HR executives and talent managers should highlight specific employee benefits and intangible rewards such as flexible working opportunities. In this context, an effective program for developing employees’ skills becomes a stronger selling point for employers.

Knowing that your career is going to broaden your experience and build your skill set while offering additional benefits and perks is motivating for most people. However, many companies could do a more effective job of communicating this message to employees. When pay is uninspiring, employees need other motivations to incentivize them to continue performing at their best.

Benjamin Frost is global product manager at Hay Group. He can be reached at editor@talentmgt.com.