It was a sign of the times.
Late last year, The New York Times published a fascinating article that examined Amazon’s decision to end its stock option program for employees.
For many years, all employees of the online retailing giant received a limited number of shares when they were hired and then annual stock options after that. Going forward, there will be no awarded shares; Amazon employees will have a direct stock purchase plan starting sometime in 2019.
The new Amazon policy does not represent a new trend in employee relations. Rather, it is a confirmation that the relationship between employers and their employees has officially and irreversibly changed.
As the article noted, there was a time in the United States when all the largest employers in the country—Procter & Gamble, S.C. Johnson, Hallmark Cards, U.S. Steel and Sears among others—provided stock options to all employees regardless of rank, sometimes along with defined benefit pension plans. These perks allowed employees to assume a vested interest in the financial performance of the companies they worked for. It also provided an important source of financial security for employees in their retirement years.
Today, the relationship between employer and employee is more complex and not so easily sustained by something like a stock option.
Amazon’s decision on stock options signals that the paternalistic relationship between a company and its workers is more or less officially dead. In many ways, this is a reality that was arrived at mutually between employers and employees.
Our data seems to suggest that employees who get career management opportunities are the ones who stay, not the ones who leave.Employers are fully aware that today, in this age of transformation, the kind of talent they need to compete is constantly changing, and they simply cannot retain everyone in perpetuity. Even top performers can sometimes become redundant when the nature of the job changes dramatically.
The same holds true for employees.
Today, it seems that employees value mobility, opportunities to advance their careers and take on new challenges, and working conditions that provide the best opportunities for a work-life balance. Few seek lifelong connections to a single company. More than ever before, the average worker is prepared to quit and seek a better job if they don’t like their current gig.
From an employer’s point of view, however, this new relationship can be a challenge. Without stock options, profit sharing and defined retirement savings programs to build meaningful relationships with your employees, loyalty, productivity and engagement can suffer.
A disengaged workforce rarely demonstrates top-drawer productivity. The resulting environment drives away your best people and triggers excessive separation and severance payouts. A lack of employee loyalty can damage your company’s brand and make it difficult to recruit top talent in the future.
All of these problems have one thing in common: they will ultimately show up on the bottom line of your company’s financial statements. You simply cannot drive superior business results with low productivity, high separation and severance costs and a damaged brand.
Our responses to this dilemma have seen mixed results.
Some employers have tried to make work “fun” by creating open workplaces and offering employees free food or indoor basketball courts and foosball tables. When they were first introduced, these things may have seemed cool and progressive. But as the hard reality of the global talent shortage has set in, it’s obvious these gimmicks had a relatively short shelf life. They simply did not build productive relationships between employer and employee.
To build more stable and fruitful relationships, some big companies have looked to basic wages as the key connector with their employees. In the United States, companies such as Walmart and McDonald’s made significant efforts to raise starting wages to get closer to what activists believe is a basic living income. However, a higher hourly wage is not the only thing they are doing.
Family benefits—including enhanced time off to care for sick family members or to start a family—are part of an array of new tools employers are using to connect to their employees. There is solid logic behind these strategies. Money alone has a limited impact on the long-term relationship between employers and employees; but other non-monetary benefits like enhanced, paid leave and flexible work terms can make someone’s life better.
However, there is another avenue for employers to examine in their pursuit of a stable, productive relationship with their employees: showing a genuine interest in developing their careers.
Career management and programs that promote reskilling or upskilling (re-/upskilling), can help drive higher retention, productivity and engagement, and it can also profoundly reduce the amount of money employers spend on giving redundant workers a soft landing after a layoff. This is about embracing strategies such as redeployment to keep good people while helping them acquire the most in-demand skills.
Through research, LHH has conclusively established the relationship between career management and talent engagement and retention. A 2016 study showed that 63 percent of employees believed a lack of career management opportunities caused them to look at changing jobs.
Unfortunately, it seems that too few organizations realize the potential of career management. The survey found that an alarming 36 percent of managers did not know anything about the career goals of their direct reports.
That data certainly calls into question the major reason why organizations claim they do not offer career management.
Business leaders often say they are reluctant to invest in their employees’ careers because they will only leave and take their new skills to another employer. Our data seems to suggest that employees who get career management opportunities are the ones who stay, not the ones who leave.
Now, it’s important to realize that one size will not fit all. Salespeople, for example, will likely demand commissions as their principal form of payment, because it is the reward that motivates them and ensures they drive results. In this case, it makes sense to offer these employees the types of benefits and rewards that inspire them to excel. But for many others, cash bonuses are not as important as a better overall working experience, as well as opportunities to grow and evolve along with their employers.
The bottom line: invest in the development of your employees’ careers, and you will reap multiple, meaningful benefits that go way beyond a more robust engagement.
Career development will yield a workforce that is loyal, engaged and productive, and you will avoid the vicious cycle of firing-and-hiring new talent to meet new skill needs. Instead, you will find yourself in a virtuous circle where employers do more to meet the needs of their employees, now and in the future.