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Many decades have passed since American employees expected to spend their entire careers at a single company. Much of the dialog around this shift has focused on the benefits individuals see in working for multiple employers. But there has also been a quieter, yet equally pervasive, institutional shift as organizations no longer expecting long term loyalty from their workforce move away from pension plans and other incentives designed to reward longer-term employment. In parallel, compensation structures are evolving to emphasize fairness and transparency while benefits plans are moving towards “unlimited” vacation policies. These changes may be net positives for both companies and employees but they continue to erode the remaining privileges of tenure. As attitudes and structures alike collapse into short term, high turnover defaults, companies may be overlooking the value of longer tenured employees. Finding, motivating, and rewarding the balance between renewal and experience is a challenge but it is a challenge that companies behoove themselves to address.
An increasing number of employers are jumping on the transparent compensation bandwagon and formulaic pay scales are growing in popularity. In some cases, these policies completely decouple individual performance from annual salary adjustments but, as unheard of as such a concept may have been only a few years ago, there may be strong arguments in favor of the change. Compensation, research shows, is only a short term motivator for job performance and was nowhere to be seen in the top reasons that people left companies during the bull market that followed recovery from the Great Recession. It is therefore unsurprising that some companies, such as Credit Karma, are removing the link between individual performance and compensation, leveraging instead role-based policies that allocate compensation solely on the basis of position / job title. Studies and data showing that compensation is a poor motivator for long term success suggest that removing the spectre of compensation from performance reviews may enable more focused and effective performance discussions between managers and their team members. Rather than feeling that their salary is threatened, employees can listen to feedback with the understanding that, barring extreme underperformance and a path leading out of the company entirely, the only reason to discuss performance is to align expectations and raise the bar.
But corporate tenure and overall years of experience has long been tied to compensation with the associated perks expanding far beyond salaries alone. In the modern era, the highest paid employees are often those with the least tenure as the largest raises tend to result from moving between companies rather than promotions or moves between teams within the same employer. To adjust for these misaligned salaries, many organizations have offered other benefits to employees who stay with the company. A few employers still reward longevity with pension programs but pensions have fallen out of favor, due as much to mismanagement as changing cultural norms. For the rest, vacation policies that calculate days off based on years with the company had become common but the recent trend towards unlimited vacation policies is threatening the most popular remaining corporate reward for longevity. Unlimited vacation policies, or discretionary time off as they are often called, offer an advantage to employers who no longer have to consider the fiscal liability of unpaid vacation days. There is strong debate around the benefits of such policies for employees but the inarguable point, as far as this article is concerned, is that they remove a traditional incentive for an employee to stay with their employer: retaining access to their earned leisure days.
All of which raises the question of whether longevity should be rewarded at all. Long-tenured employees can become fountains of knowledge that are difficult to replace with documentation in even the most rigorously record-oriented cultures. Many ideas cycle in and out of popularity and an employee who witnessed the last incarnation of today’s lightning bolt of inspiration can offer insights into what may have undermined the previous attempts. Circumstances may have changed sufficiently to enable success but understanding where the pitfalls were, previous lessons that may have been learned, and where any earlier efforts were successful can all be hugely valuable when beginning a new endeavor. This is to say nothing of the basic value of tribal knowledge, or the return on investment for education and training. Most companies encourage their employees to take classes, attend workshops, and otherwise expand their knowledge and skills, gaining valuable experience, but high turnover rates mean that these investments often benefit someone else.
Furthermore, in some situations, when the value of a long-tenured employee is predominantly reflected in their retained knowledge or individual efficiencies gained over time, these traits may be misaligned with promotion criteria. These individuals often come under scrutiny when they have reached the top of their salary bands and the pressure in American culture to rise or leave can lead many employers to assume that tenure without promotion has no value at all. Applying artificial pressure on employees to climb a corporate ladder leads directly to an increase in instances of the Peter Principle, and perpetuates the notion that longevity is detrimental to organizational health. This attitude can also be dangerous for organizations that focus exclusively on the value of “new blood” and “fresh ideas”, leaving them trapped in Groundhog Day-like cycles of new initiatives that repeatedly run into the same roadblocks. Said differently, this perspective is short sighted. Long-tenured employees collect a wealth of knowledge and experience that can benefit their employers if only the employers choose to capitalize upon the opportunity. Companies would be wise to recognize and reward this value.
In a world where salaries are determined by role, pension plans are becoming obsolete, and vacation plans are uniform across employees, rewarding longevity becomes more complicated than ever before. Fortunately, there are still plenty of options. If compensation remains the preferred recognition mechanism for an organization, even a completely formulaic salary model can add a multiplier for years at the company or years in a given role. A company could even go so far as to establish, or re-establish, a pension plan despite the passe nature of the institution. However, since alignment between individual and corporate values is a top factor in job satisfaction, more creative solutions may be preferable. Rather than directing money to an individual who has stayed in a company, funding celebrations and team building events in honor of an employee’s work anniversary may be more in keeping with a particular organization’s values. Or perhaps tenure determines small honors such as selecting internal code names for new features or determining a snack option in pantries or vending machines. Regardless of form, a key focus for these systems should be to find a balance that offers promotion opportunities where appropriate and enabling employees to feel equally valued when they remain in the positions best suited to their skills and contributions. Of course, customized rewards are likely to appeal only to a certain subset of a given workforce, a reality that actually further serves organizations by filtering the individuals who are motivated by the unique opportunities offered. What truly matters is creating institutions that recognize and honor those who have chosen to cycle the knowledge they gain back into the organization that provided it.
Companies such as ExxonMobile, Lockheed Martin, and other long lived institutions are able to retain talent, experience, and training, at least in part, through pension programs but many modern organizations must find new ways to inspire and reward longevity. Although there are advantages to some degree of turnover in an organization, including fresh ideas, balancing experience the bright eyed and bushy tailed enthusiasm of most new employees (regardless of age) is often the best path. There should be little doubt that the knowledge and experience accrued over several years with a single company represent a collection of value for that organization and so some effort should also be taken to improve retention. There are many ways to celebrate and reward longevity, from increases in monetary compensation to completely intangible but emotionally fulfilling perks. Regardless of the exact approach, leaders should be aware that the traditional methods for rewarding an employee’s tenure with an organization are slipping away. Creativity is now required, offering an opportunity to further leverage rewards and recognitions to particularly appeal to those same employees a company most wishes to retain. These solutions create virtuous cycles with long term benefits for employees and employers alike.
Postscript: For more on the intersection of benefits, such as vacation policies and personal autonomy, and corporate culture check out Lisa Levesque’s latest article!