The priority for HR in 2023 is less about finding the right people so much as keeping people onboard.
While this applies to HR teams in general, it’s especially true for the professional services sector, “an industry where your people are your product,” to quote a 2022 webinar from Harvard Business Review.
In our 2023 State of People Strategy report, we found that the share of professional services firms who say they exceed departmental goals is notably higher than the average (17% as compared to 10%). However, the fact remains that around half of the professional services firms we surveyed are not yet meeting all their HR goals.
We’ve identified three key statistics from our report that professional service firms and their HR leaders need to know when adapting their people programs that could have a significant impact on their talent retention, performance, and compensation strategy.
1. Nearly 80% of professional services firms will increase their investment in talent retention in 2023.
Over the last year, organizations have tended to shy away from recruitment in favor of retention. In our analysis, we found that this trend is reflected in professional services firms too, with 79% of companies in this sector indicating that they intend to invest more heavily in retention this year.
Retaining staff and encouraging high performance amid a volatile economy, a tight labor market, and a dynamic workforce means that it’s vital to offer an engaging employee experience. Supporting high retention in the professional services sector comes down to supporting employee growth, keeping goals aligned, and creating a great feedback culture:
- Support career development. Employees of professional service firms tend to be highly-qualified, ambitious, and keen to get ahead. They want — and need — to continually grow and adapt their skill sets to meet the evolving needs of their clients. According to the University of Phoenix’s 2022 Career Optimism Index, 68% of employees are more likely to stay with an organization that helps them to upskill. Depending on the services your firm offers, consider what options will best support your employees’ particular career paths. Tech consultants might be driven by the opportunity to develop cutting-edge skills, while business or legal consultants may value mentorship programs or clear progression paths.
- Align your goals. Goal-setting frameworks like OKRs can be effective in aligning individual, team, and company objectives, making it clear what is expected of employees, and tying their own achievements to company success. When employees are clear on their objectives, they’re more likely to be engaged to reach them.
- Give ongoing feedback…Supportive, constructive feedback is crucial for engaging your employees. Not only does it provide employees with the guidance and tools they need to develop, it also demonstrates that you value their development. Recognize and reward your high performers. And, when employees don’t perform as well as you’d like, work with them to figure out how they can improve.
- …And listen to it. Feedback works both ways. Don’t just give feedback, request it too. Actively seeking feedback from employees cultivates a sense of ownership and accountability. This in turn supercharges organizational commitment. Thorough engagement surveys and quick, specific pulse surveys don’t just give you actionable input, they also help your employees feel like their opinion matters. Make sure to develop and communicate action plans to show how you’ll implement their suggestions.
2. 84% of professional service firms pay for performance (but only 16% do it really well).
For many professional services firms, performance-related pay can offer that additional motivation and marker of affirmation. Lattice’s 2022 State of the Employee Experience survey found that employees expected salaries to be tied to performance more than any other metric, including tenure, education, or cost of living.
This fits in with what HR teams at professional services firms are experiencing this year. According to our report, 84% of HR leaders in professional services told us that they believe that pay-for-performance structures can deliver real business impact.
But getting performance-related compensation right is challenging. In fact, just 16% of respondents in our analysis believed their firms were doing an excellent job of connecting pay and performance, telling us that there’s still significant room for improvement.
Professional services can maximize their pay-for-performance strategy in a few key ways:
- Align your pay strategy to your performance management system. If compensation is to drive better performance, employees will need clarity on pay structures and eligibility criteria. Analyze the positions you intend to offer performance-related pay for. Are they positions that will clearly benefit? Make sure that the link between compensation and your performance metrics, KPIs, or OKRs, is clear.
- Get the mechanism right. Consider what type of compensation will get the best from your people. While commission is common in sales-based businesses, professional service firms might find that merit increases, bonuses or profit-sharing mechanisms are more appropriate for recognizing and rewarding performance. Download our ebook, How to Reward Top Talent with Pay-for-Performance, to learn more.
- Back it up with data. Strong analytics and data management is important for informing fair and equitable pay decisions, as well as demonstrating impact. For instance, you can use Lattice to align salary bands with performance reviews and budget for merit increases.
3. More than 50% of professional service firms have no pay transparency for employees.
This is a significant oversight if you’re aiming to increase your retention rates. LinkedIn’s 2022 Global Talent Trends Report found that companies who are transparent about pay experience 56% less attrition.
In fact, a Lattice employee survey found that half of US employees think their company should declare how much everyone at the company is paid. Two-thirds say organizations should be more transparent with pay policies.
Businesses are often reluctant to be totally open about who gets paid what. But this reluctance can be the result of misconceptions about what compensation transparency really means.
Pay transparency does not have to be all-or-nothing. Many firms take a more limited approach than divulging everything to everyone. They might provide employees with pay information for their specific role or roles they might aspire to. In fact, simply being open about how compensation decisions are made can boost your employees’ trust and confidence in the organization.
Transparency has some major benefits for businesses. It can make achieving pay equity easier by making salary rationale clearer. Understanding the hows and whys of pay structures can not only reduce the possibility of conflict, but also be a major motivator. It helps employees understand how they can improve performance to increase their pay, and supports a sense of career development and progression — both of which are vital for engagement and retention.
To increase your professional services firm’s transparency around compensation, try these strategies:
- Choose your transparency level wisely. When creating a compensation transparency strategy, think about what your objective is in being transparent. Then decide on the right approach and level of transparency for your company and your people. Analyze your existing salary bands, increases, bonus, and benefit offerings and determine what information can be shared, and on what basis.
- Involve your employees. Take a people-centered approach to transparency decisions. Actively seeking feedback from employees in decisions that affect them cultivates ownership as well as a sense of trust. Be prepared to justify your decisions, answer questions, address misconceptions, and alleviate concerns.
- Implement a compensation management system. A compensation management platform like Lattice Compensation not only helps you stay on budget, but it can also help you manage your compensation transparency more effectively. By aligning performance and engagement data with benchmarking and salary data in a centralized platform, HR teams can support pay equity and help reach DEIB goals.
As we brace against macroeconomic forces, our 2023 State of People Strategy Report found the highest-performing professional service firms are shifting from crisis-reaction mode to adaptation mode.
From improving their employee experiences to leveraging pay-for-performance, they are driving excellence for their business, their people, and their clients by making changes that put their people at the heart of what, how, and why they do what they do. To see how Lattice can improve engagement, performance, and transparency for your firm, request a demo.