I got a call from one of my clients with a situation many companies face. Three key people had quit their organisation and were going at nearly twice the salary to other organisations. The client wanted to know what they could do immediately to stop this outflow. His options, hike salary, give some extra bonus to bridge the gap and try to stop them anyhow.
I have come across this situation once too often and am always amazed at organisations looking at compensation as the sole cause of attrition. In fact I also sometimes wonder why organisations panic when there is attrition.
In my opinion around 15% attrition is good for any organisation which is not growing its business more than 25% YoY. I say this because a company will never be able to create enough jobs for its good people in the organisation if they are not growing sufficiently enough. I also think that only your good people will leave because they will feel stifled by the lack of growth and the monotony of work as there is nothing new that they can keep doing in a static organisation. It is good to let them go as the organisation can't use their potential and it will seriously cut down internal conflicts and politics by letting go of people. The most popular way of accomodating such talent otherwise is to create job roles with no clear accountabilities and with overlaps with other jobs, this creates a lot of confusion in the organisation and a lot of fighting for turf.
On the compensation front, I ask a simple question to all my clients, tell me if you double your compensation will that stop others from poaching from you. To that the answer is always no. No one will normally move from a job unless offered significantly higher compensation, so its a given that people will always move at much higher salaries. There are obviously various other things which drive a person to look out. I think compensation should definitely be at a comfortable level (hygiene level if I may call it) beyond that people will stick to organisations which provide better future career prospects, better work content, better employability in future and a good working environment or culture.
Hence my simple thought is that when you have attrition look at it as a positive sign, especially if you are not growing. Look at the reasons why people moved on and get to the right reasons, other than compensation alone. This will help the organisation focus on the right things and the right people