Yesterday, we got some insights from Laura Fries, managing director and executive vice president at Baker Tilly, on pay strategies to retain up-and-coming Gen Xers. Today, her thoughts on short-term versus long-term pay for different generations.
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Boomers Looking at the Short Term
“Baby Boomers tend to focus on base salary and short-term bonus compensation. Why is that? Because they’re close to retirement and they want to have cash to put away,” Fries explains.
“But the trend overall—and the Hay Group did a study on this—is that compensation is leaning much more toward long-term incentive compensation. There are good reasons for that, including that it really focuses more on the goals of the company. It also acts as a retention tool for employees, in that it isn’t an every year bonus where someone can just wait for the bonus then leave for the next opportunity.”
If the senior executives, who are overwhelmingly Baby Boomers, prefer cash compensation, changing the structure could be an effective way to keep them in the workforce to mentor the next generation, at fewer hours and a lower rate of pay. “On paper, this is a great idea,” she continues. “Having people move into this mentor/coach situation really seems like a great concept.”
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The Nitty-Gritty Details Remain Largely Untested
But she admits she hasn’t been asked directly about changing a pay structure based on this concept. “I’ve had a lot of questions that are right around it,” she says. “I think we’ve gone past the point of wanting to create a culture that motivates people of different generations within the workplace, but really getting down into the nitty-gritty of finding out if they actually respond to financial incentives differently is sort of new.
“In my opinion, right now we are being driven more by legal changes and other constraints that affect compensation,” Fries says. “But I think we are not very far away, as more and more Baby Boomers retire, until we will go beyond that. We will need to really answer the question of how to retain the best talent.
“We’ve talked for years about the war for talent, and there have been times when it has been very tight. But the Baby Boomers were always a part of the talent pool. Now, it’s only about 15 years until most of them will be in retirement. So the war for talent is going to define the future in terms of how companies and their management will look, much more than ever before.”
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Different structures for different generations–makes some sense, but … argh! One more comp headache!