Career development tops the list of perks employers say they plan to increase this year, according to a new survey from Korn Ferry Hay Group that examined forms of compensation beyond base salary, benefits and bonuses.
Asked which alternative rewards they planned to increase in the next 12 months, two-thirds of the 242 employers polled named career development or training programs for managers and professionals or clerical, technical and skilled trades. Spot cash bonus programs were the next most popular, with just under half of respondents saying they planned to increase their use.
Tom McMullen, rewards practice leader at Hay Group, said he was surprised that career development was tops even for executives, at 57 percent, suggesting they are concerned about remaining relevant at a time of rapid change.
Alternative forms of compensation grew during the recession when money was tight, raises faltered and some companies froze or cut pay. The median annual base salary increase fell to 1.5 percent during the depths of the recession, from 3.5 to 4 percent pre-2008, McMullen said.
As the economy improves and pay raises, now tracking at about 3 percent, stage a comeback, many companies, still reluctant to raise fixed costs, are continuing to invest in alternative rewards that don’t cost much relative to their perceived value.
Career development is particularly relevant for retention, as about 70 percent of employees say they are dissatisfied with growth opportunities at their companies, according to CEB.
That frustration stems in part from the influx of millennials to the workplace, as they value varied experiences, Kropp said.
But the chance for promotion has also declined as companies cut layers of middle management to save costs, flattening traditionally hierarchical structures and leaving employees with nowhere to ascend. The average tenure in a position in 2014 was 30 percent longer than it was in 2010, according to CEB.
“Being able to have an upward, predictable, fairly linear career path doesn’t exist anymore,” Kropp said. Employers have been slow to catch up, and the vast majority still model careers on promotions, but some are shifting their focus to career growth, he said.
When Trading Technologies underwent a reorganization a few years ago, it did away with many title hierarchies and several layers of middle management for the sake of efficiency and flexibility, said Katie Burgoon, executive vice president of human resources at the Chicago-based company, which makes electronic trading platforms.
To keep employees motivated, the company increased its budget for employee requests to attend professional conferences or take career-related classes. It offers full tuition reimbursement to employees who wish to pursue higher degrees. Several employees already have transferred to different departments in diagonal moves.
The company, which has 378 employees globally, including 272 in Chicago, is now rolling out an internal career development program that will offer, for example, introductory technical training for employees who aren’t in technical jobs, courses for new managers, and improvisation classes to help teams and employees build communication skills and confidence.
“If we want to retain the smartest and most curious minds, we have to keep those people excited and feeling like they’re moving,” Burgoon said.
Rather than reward employees through title progression, Kropp said some employers are cultivating employees’ “employability” through new skill sets to position them for jobs elsewhere at the company — and beyond.
Counterintuitively, that doesn’t increase the chances that they’ll leave, CEB’s research shows. Companies that improve the career growth environment can see turnover decrease by a third, Kropp said. With turnover costing organizations about $25,000 per professional employee, that could result in savings of $7.5 million for companies with at least 10,000 employees, he said.
In another shift, companies are becoming more proactive about pushing internal jobs to their employees, to make passive candidates more aware of what’s available.