This post by (one of my fave bloggers) Phil Haack keeps coming up in conversation with my co-nerds. Great read, IMO. Here’s a snip:
A recent study showed,
Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more.
Keep in mind that 50% is a conservative number at the lowest end of the spectrum. This is assuming that your career is only going to last 10 years. The longer you work, the greater the difference will become over your lifetime.
Let that sink in.
If your employees act rationally, they’d be stupid to stay at your company for longer than two years watching their pay drop over the years in comparison to the market for their skills. And if they wise up and leave every two years, the turnover is very costly. The total cost of turnover can be as high as 150% of an employee’s salary when you factor in lost opportunity costs and the time and expense in hiring a replacement.
So even if you decide to continue on a pay for performance system, market forces necessitate that you adjust pay to market value. Or continue selling your employees a story about how they should stay out of “loyalty”. This story is never bidirectional.
Pay for Performance was originally published on Nick Kirkes