…So this morning I came across a great piece from CMC Compensation Group Principal and Founder Chuck Csizmar. In the piece, Csizmar lays out how managers in some organizations use retention as an excuse to circumvent the annual review system and pay select employees more money. Doing this too often often can have negative consequences, however, disrupting internal equity and undermining the overall rewards structure.

This is a great piece, and you should check it out here. With that said, I’m sharing it today because of a particular section I wanted to write about. In it, Csizmar outlines the two scenarios in which it makes sense to pay out retention bonuses. It says you should consider using a bonus as a retention tool when:

– You’re selling a business or a piece of your organization.  If the performance of the business falters during the sale process the value of that business could be negatively impacted, so you need people in place to maintain proper operations.

– When you’re closing down an operation and laying off the workforce.  Someone has to stick around to make sure that the operation remains as effective as possible for as long as possible, and then to turn off the lights.

Csizmar then says:

How many should be included in the program? Keep it small, only those deemed critical to continued operations.

…The above got me thinking about what defines operational importance. Csizmar says to keep such programs small, but as a practical matter many positions – such as a local payroll/timekeeping person and general administrator – are are likely to be operationally important positions but not included in a program under such a narrow scope. This is because they are in low complexity support roles that likely drive little (if any) revenue for their businesses. Even still, such roles are integral to continued day-to-day business functioning and are often difficult to replace (due to the deep institutional knowledge they frequently possess and a limited bench of prospective replacements). The same is true of many line managers, who may not be high up the org chart but are critical to a businesses success.

Talent in said roles wouldn’t likely fit into a retention bonus pool that made up a quarter (or even 50%) of a workforce (which are the figures cited in Csizmar’s piece). To be sure, there may be good reasons not to include employees occupying such jobs despite the operationally critical nature of their work; talent in these jobs are often less mobile and their work skills are less transferable. There is also a larger supply of comparable labor available in the market. As such, it makes less sense to offer people in these roles retention bonuses as they are by definition lower flight risks. And there is also a compelling argument to be made that – while such positions are less likely to have successors – the jobs themselves also have shorter learning curves and could be more easily back filed.

…As I’ve said before, ultimately the operational importance of most jobs is determined by how effectively an organization has optimized the knowledge management/transfer process. Still… I think the concept itself is something that could use some quantifying/ironing out – at least in my mind.

Tuesday morning thought stream…

As always, please share your thoughts in the comments section below.