What are Turbocharged Tech Companies Doing—and You’re Not?

Turbocharged companies are more likely than others to use a variety of tools within their HR programmes to drive employee behaviour and allocate the right resources to the right talent. How can these practices apply to your own organisation?

What are Turbocharged Tech Companies Doing—and You’re Not?

5 Jan 2018 by  Brooke Green, Cindy Edwards & Tyler Tokarsky

It’s a well-known fact that talent and rewards practices have a direct effect on the financial performance of a company. In fact, the Radford Global Technology survey proved that high-performing companies are high-growth, generate exceptional returns for their shareholders, and are known as innovators in their industry (not just growing through acquisition). We call them “turbocharged companies”.

While we had expected many turbocharged companies to share the same workforce and pay practices that contributed to their success, we also learnt that the practices of these companies were in stark contrast to the rest of the tech industry.

What are the characteristics of a turbocharged company?

Turbocharged companies are more likely than others to use a variety of tools within their HR programmes, which can be categorised in three ways:

1. They are obsessive about culture.

They worry about preserving their strong and unique culture as their organisation grows, hire based on cultural fit as much as skills-based qualifications, and are more likely to think of their employees as drivers of culture. They provide perks that make a difference and are highly-valued, such as company-provided work shuttles that increase worker productivity and job satisfaction. They also create culture of ownership by offering broad equity participation as well as rich employee stock purchase plan discounts that result in high participation.

2. They focus on high-impact talent, and aren’t afraid to pay for it.


Turbocharged companies will pay a premium for high-potential and high-performing employees, as well as for in-demand jobs. For the US in 2017, they reported an overall salary budget of 4.6% and a merit budget of 3.5%—which were 31% and 13% higher respectively than the rest of the tech industry. To make this budget work most productively, they limited the number of employees who got an annual increase—72% compared to the 85% to 90% industry average. This practice enables turbocharged companies to offer significant merit or promotional increases to the highest impact performers, instead of the peanut-butter approach to spreading out rewards. They make better hiring choices (with a 17% reduction in overall turnover compared to market) and make big bets on the right people (with larger sign-on bonuses and ‘walking away’ grants).

3. They attract the best talent through a magnetic employee value proposition.

Turbocharged companies bring talent and rewards programmes under one umbrella and offer a truly amazing work environment. While rewards remain a crucial piece of the employee value proposition, the workplace environment is evolving in profound ways—by offering high-impact work, great managers, a strong culture with values people buy into, recognition from respected colleagues, and a broader mission-based purpose that gets them out of bed in the morning. Companies that effectively create this type of atmosphere typically integrate their talent and rewards programmes in a way that creates a much stronger employee value proposition than their competition.

Prevalence of Rewards Practices

 

All Companies

Turbocharged Companies

Retention bonuses offered to employees in specific positions or hard-to-fill jobs

78.8%

100%

Provide a promotion grant at, or soon after, the time of promotion

26.5%

57.1%

Benchmark equity guidelines against a set of peer companies

52.8%

86.7%

Differentiate equity guidelines and/or practices by US geography

30.1%

66.7%

Particpation for ongoing equity grant for engineers

32%

82%

Provided unlimited paid time-off

24%

43%

Salary is determined on a case-by-case basis within a broadband system

5.2%

25%

A lateral job change can result in a salary increase of a similar size to a promotional increase

11%

24%

Prevalence of Talent Practices

 

All Companies

Turbocharged Companies

Publish values statement to drive culture

76.9%

81.3%

Make diversity and inclusion a formal part of talent strategy

46.3%

75%

Use cash for employee recognition programme (can be in addition to other award types)

46.3%

75%

Formally measure employee engagement

53.7%

68.8%

List general workforce as most important driver of culture

39%

56.3%

Have executive-level council to focus on diversity and inclusion

17.1%

43.8%

Sources: Radford "Global Technology Survey"; Radford "2016 Perquisites Practices Survey"; Radford "2016 Talent Pulse Survey".

What can you do to emulate these practices in your organisation?

The good news is, many of these practices can be adapted to meet each company’s unique circumstances.

  • Don’t throw your money around. Turbocharged companies actually give fewer employees an annual salary increase than the market. When you keep your compensation budget targeted, you can lower equity participation among the broader employee base (which includes average performers) and focus on raising grant levels for your high-impact employees.

  • Keep employees energised in creative ways, even if you can’t afford to pay above market. Culture is a powerful driver of employee engagement—and we don’t just mean trendy perks such as foosball tables, free meals, and pets at work. A healthy culture includes transparency at all levels of the company (particularly from top leaders), and a commitment to continuous listening by managers, peer-to-peer recognition programmes, and widespread company ownership among employees.

  • Performance management goes beyond ratings. Whether or not you have performance ratings isn’t the debate anymore. Think about how you’re identifying high-potential employees—they are the future of the company and should be made aware of their value. They deserve differentiated pay, curated development programmes, and regular career conversations about their growth. Employees who know someone is looking out for their careers are also more likely to stick around and strive harder.

On average, turbocharged companies researched in the Radford Global Technology Survey delivered an 86% increase in net-income growth on a 12-month trailing basis and a one-year total shareholder return of 36%. We strongly believe there is a connection between the talent and rewards programmes they utilise and their financial performance. And while not every company can, or should, adopt all of these practices, they provide important insights into what drives employee behaviour and where leaders may want to allocate their resources to maximise their people investment.

Start a conversation with us

Need help implementing the best practices of turbocharged tech companies in your own organisation? Get in touch with us.

Brooke Green, Cindy Edwards & Tyler Tokarsky

Radford partners with technology and life sciences companies to reimagine their approach to rewards, empowering them to achieve superior levels of people and business performance. Radford is part of Aon plc (NYSE: AON).

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