There are many components of an effective retention program, with compensation being one of the most important.  Many companies believe they set their compensation structures, while in fact the marketplace sets compensation standards and your top performers stay on top of those.  This is why it’s crucial for you to stay on top of current compensation in your field, as well.

 

Now, if you’re doing everything else necessary to retain these superstars and your compensation is on par, then there’s an excellent chance they’ll stay right where they are.  But if your compensation is below what they could be earning elsewhere, they might start to speculate about whether the grass is really greener on the other side (even if it isn’t).

 

If it’s substantially below . . . well, we don’t even want to think about that scenario.

 

First, the good news that I’m sure most of you already know—the Manufacturing industry in the United States is not dead.  In fact, current economic conditions, namely the weak dollar, have actually contributed to the industry in a positive fashion.  How’s that for irony?  Not only that, due to continued globalization and the emergence of developing markets overseas, the cost of off-shoring is more expensive than it’s been in recent years.  American exports are becoming a hot commodity these days.

 

That’s not to suggest that the industry isn’t facing its own unique set of challenges and obstacles.  Of course it is, and that’s why companies within Manufacturing need to continue recruiting, retaining, and compensating the best and the brightest.  According to IndustryWeek’s 2008 Salary Survey, although compensation levels overall are relatively the same this year as they were last year, managers in some areas of Manufacturing benefited from a noticeable increase.

 

At the top of that list are those in the Pharmaceuticals/Healthcare sector, with an average salary of $137,010.  The rest of the top five include Consulting/Education ($132,235), Apparel/Textiles ($130,954), Chemicals ($122,023) and Construction/Building Equipment ($114,998).  And as far as which parts of the country experienced the biggest increase in compensation, those would be the South Atlantic states ($96,842 to $113,128) and the Pacific states ($114,987 to $116,035).

 

In the survey, there were four major factors affecting the level of compensation (outside of sector and geographical region).  They were education, experience, job responsibility, and seniority.  Below are the top levels of each factor, along with the average salary associated with that specific level:

 

Doctorate degree—$147,121
26+ years of experience—$115,523
Corporate/executive management—$156,123
26+ years of seniority—$114,720

 

Here’s perhaps the most interesting information unearthed by the IndustryWeek survey: there are not many younger people in the Manufacturing workforce.  Only 3% of survey respondents are in their twenties, only 18% are under the age of 40, and just 7% have been in the industry for less than five years.  These numbers are a valid cause for concern.  They mean that many companies may be facing an imminent shortage of talent.

 

The IndustryWeek survey was taken by nearly 1,350 Manufacturing professionals across the country.  The average age of those professionals is between 50 and 59 years (nearly half the respondents were 50 or older).  In addition, the average amount of experience that those professionals possess is 26 years.  That means in just a few years, many of these people will be leaving the workforce . . . and they’ll be taking a lot of knowledge and experience with them.  That’s why it’s absolutely crucial that your company has a strategic succession program in place, one that will account for these challenging demographics and ensure that productivity doesn’t suffer as a result of what appears to be a considerable generation gap.

 

In addition, that succession program should be part of a larger workforce plan.  In order to compete in today’s market, it’s more imperative than ever to manage your human assets as skillfully and judiciously as possible.  Compensate your superstar employees based upon the criteria you deem to be most important, recruit the best talent available, and then ensure that valuable knowledge is being dispersed through a structured mentoring program.
 

 

With the end of 2008 on the horizon, this is a good time to evaluate the compensation of your employees.  Use the information provided above to ensure that this compensation is in line with industry standards, and if it’s merited, make sure that it exceeds those standards.

 

The cost of losing one of your top employees far outweighs the cost of providing that employee with more compensation.  In fact, it’s not even a cost, it’s an investment.  That employee, through their skills, talent, and experience, will continue contributing in a positive fashion to the company’s bottom line.  In all likelihood, the return on your investment will increase in accordance with the employee’s increase in compensation.

 

So . . . what are your employees worth?  Are you expressing that worth through the compensation you’re providing?  Your answers to those questions will ultimately have a profound impact on the success of your company through the rest of this year and into 2009.

 

If you would like a review of your current compensation structure on a consultative basis, contact us for more information.