While overall retention is a concern, focusing on retaining high-performing employees — a company's top 5% to 10% best performers — will impact a company's results the most. Retaining high performers requires a higher degree of strategy, investment and action. These employees shine in good times and bad. For example, they outpaced their colleagues during uncertain times impacted by COVID-19 and then took on additional work through labor shortages when business improved, making many more inclined to respond to an outside recruiter seeking their talent.

Firms need a holistic retention strategy that helps employees manage the current climate, including competitive compensation, a generous and holistic total rewards package and genuine attention to employees, which can create a more flexible, engaged, and resilient workforce.

Compensation

Given the ongoing uncertainty around us, a different approach to salary increase decision-making is needed today. Continue to use salary data as you plan while comparing salaries to peer groups, geography and industry. In addition, define the competitiveness of your firm's current salary levels and consider your year-end 2021 salary increases and any 2022 midyear adjustments. Expect to pay higher salary increases than in the past, but evaluating your firm's ability to withstand further P&L erosion in 2023 is important.

In addition, new pay disclosure laws in New York City and California are almost certain to spread to additional areas across North America, further complicating matters. Since firms are required to disclose salary ranges for job postings, current employees will see the salary ranges and may demand a salary increase conversation or be silently discouraged.

As you embark on a journey to greater pay transparency and pay equity, a critical factor is ensuring the initiative and results are communicated effectively to leaders, people managers, and employees. Ultimately, your goal is to ensure that strong pay management — including sound pay decisions and effective pay discussions that support both fairness and openness — becomes a sustainable part of your culture and an important talent objective embraced by all people leaders. To get there, you will need a comprehensive communication and education plan to drive commitment and foster better decision-making among leaders and managers and awareness and understanding among employees, with aligned messaging in your external channels and disclosures.

Total rewards

During the interview process, candidates are requesting higher compensation, the flexibility to work 100% remotely and a myriad of perks and benefits. Unfortunately, these requests represent a mismatch between the economy, senior leaders, and candidate expectations, and employers now face vital decisions on how to enable this agile workforce.

Before adding new perks and as a strategy to manage expenses, start by surveying employees to see if they are aware of existing rewards. Next, learn what rewards and perks they value the most. Then determine if the current rewards have an ROI; if not, eliminate them and replace them with those that matter.

Belonging

While it's vital to listen to all employees, perhaps the most important action businesses can take is to listen to feedback from their best performers. If 10% of your employees are considered your highest performers, employers must prioritize their feedback. What do they want? What's going to make them the most motivated? What's going to make them engaged? What will incentivize them the most? While the answer is most always compensation, other aspects of their job matter, too, such as culture, flexibility, mission, philanthropic endeavors, and ESG-related initiatives. An employee's exposure to interesting work and their potential career trajectory also plays a role. 

The risk of waiting it out

Companies can retain their best performers in this difficult time, but the two main pressures on talent attraction and retention — inflation and recessionary fears — jeopardize that.

Companies that choose to "wait it out" risk losing talent, which oftentimes causes a ripple effect across the company and the economy. Aon's Salary Increase and Turnover Study found a 41% spike in voluntary employee departures in 2021.

Company leaders are putting their businesses at risk by not understanding what their employees are running from and what they are gravitating to. Furthermore, as inflation continues and recession fears continue to mount, it will become increasingly difficult for businesses to manage the increased costs needed to attract and retain talent.

Related: C-suite confident in their ability to achieve near-term growth during recession

When it comes to people risk, organizations should double down on their best people. If top performers leave an organization, that often affects profitability and employee resiliency. Organizations must focus on a comprehensive employee value proposition for its best people, learn underlying root causes and not merely treat the symptoms. They will need to review total rewards strategies and look at resilience, wellbeing and purpose to retain, attract and engage top talent. A tight labor market will continue to challenge employers in the near term.

Employees are an organization's most important asset. They also represent the biggest risk. How are you mitigating your organization's people risk?

Allison Genovese serves as a Global Relationship Executive and Commercial Execution leader at Aon.