"What do you want to be when you grow up?" I recently asked my 6-year-old cousin. Without skipping a beat, she replied, "A fairy princess doctor who writes!" I laughed, not because that sounded absurd, but rather because that's exactly the refrain I've heard from some of the most talented people I've met recently. No one wants to do just one thing anymore. They want to start something, make something, take a year to travel, and write their novel. The age-old question, "What do you want to be when you grow up?" is shifting to, "What do you want to do when you grow up?" and there's no longer one answer, but many. So it's no great surprise that turnover rate is 20.6 percent and rising.
We now live in an economy driven by talent; the number of creative jobs has doubled in the past 50 years. In the 1960s, the most successful companies were in the business of natural resources--steel, oil, and manufacturing. By 2013, over half of the top 50 companies were dependent instead on intellectual capital, including three of the biggest: Apple, Microsoft, and Google. Yet turnover at these companies is staggering: average tenure at Amazon and Google is just one year. Talent strategy, as a result, has become critical to leading innovation in business. According to PwC's Annual Global CEO Survey, 31 percent of CEOs said talent constraints had already hampered innovation at their organizations.
In an economy fueled by talent, incentivizing your employees means aligning your goals with theirs. So with the rise of the talent economy came an historic shift in compensation models. In the 1970s, thought leaders argued it was "essential to motivate people financially to exercise their talent." If your goal and the employee's goal are both to make money, then it follows that incentives should be financial. But what if making money is no longer your primary goal or your employees'?
Companies with a mission that transcends financial objectives are now leading us forward. At my company, co:collective, we call this a quest. Financial gains become the dividends rather than the objective of the quest: Studies have shown that companies that put society and their employees first have a 25 percent higher stock value than their peers. "The more they focus on something beyond money, the more money they make," Robert Safian explains in a recent article. Having a quest has become pivotal to commercial success.
In turn, employees are now more focused on purpose than ever before. "Millennials want to work for companies that do good," MIT professor Thomas Kochan says. Gen Z, Millennials' younger siblings, are even more purpose-oriented: 60 percent of them want jobs that have social impact. But most importantly, they would take less pay to do work in line with their beliefs: "Millennials even say they'd take a 15 percent pay cut to obtain a job where they 'can make an impact,'" Fast Company reports. Less driven by financial motivation, the new work force is open to compensation that isn't just about money. They value experiences over things, and access over ownership. They're less interested in becoming rich than in the experiences that will help them lead a life that is richer.
As we shift to commercial growth fueled by mission, it's time to shift compensation models in kind. To incentivize and retain our most valuable asset in a talent economy--our intellectual capital--we need to realign compensation with what drives both them and the company forward. We need to be radically transparent about employees' long-term goals and reimagine compensation in terms of time, flexibility, education, access, and experience. We need to identify the intersection of the individual's quest and the company's quest and compensate accordingly.
Some companies have started to experiment in this direction. PwC has an initiative called Flexibility2 Talent Network which lets people work during PwC's busiest months but gives them the rest of their time off to pursue other interests. Bain has externships that enable top performers to rotate out of the company to other organizations. LinkedIn founder Reid Hoffman argues for "tours of duty" in his new book The Alliance--mission-oriented rotations within the business designed to mutually benefit both the company and the employee. But none of these more progressive models are directly tied to compensation at the outset.
Let's take a hypothetical example: Taylor is a project lead on a large tech company's education team. Her dream is to eventually open a progressive school. What if, instead of offering Taylor a generous base salary with a performance-based bonus, we offered her the opportunity to continue on her quest on the job: a slightly lower salary plus an all-expenses-paid trip to SXSWedu, four courses at Columbia on the future of education, and one paid month off each winter, in addition to normal vacation, to shadow leadership at different progressive schools. There's a mutually beneficial contract: Taylor brings her learning back to the education group, the company retains Taylor for much longer than they would have otherwise, the cost to the company goes down, and everyone wins. Maybe there's an even longer-term benefit as well if said tech company eventually agrees to invest in Taylor's school.
It's at the intersection of a company's purpose and an individual's that talent-centric business will ultimately thrive. In a hyper-connected world, work isn't just work anymore, it's life. The path to sustaining innovative businesses today is not about making people rich, but rather about letting people do rich: a life rich with experiences and meaning. Finding the space where the company and the individual share purpose, and compensating them in kind. So let's find out what quest our employees are really on and help them do their story. It will only help us do ours.