This Week's Herman Trend Alert

HR in Normal 2.0

  The Herman Trend Alert

December 24, 2003

Bounties Coming as Competition Intensifies

Employers are checking their bank accounts to see how much money they have for hiring and retention bonuses. The bidding wars will soon move into a more aggressive mode.

A shortage of available workers with particular skills creates competitive markets where employers feel forced into dangling bonuses and special benefits to attract and hold top talent. We saw this practice in the late 1990s as technology companies, fed by venture capitalists, offered cars, vacations, college loan payoffs, and other non-payroll lures.

These extras disappeared when the economy slowed a few years ago---except in healthcare. Hospitals, already under fire for high charges that drive up the cost of health insurance, must employ an adequate supply of professionals to care for the patients or they are unable to provide needed services. Extra benefits make employment more attractive for healthcare professionals who have been overwhelmed by increased patient loads and frequent, forced overtime. The job still has to be done, so now hospitals compete against each other, buying out contracts, and paying high bounties to current employees who capture someone working for a competing institution.

When they have vacancies they can not fill, these employers offer tempting cash packages to attract the employees they need. While experts argue against the practice, asserting that extra cash is only a temporary solution, 41 percent of hospitals now offer signing bonuses. We call this practice "Mercenary Darwinism.," and urge employers to consider alternate solutions.

What we have seen in healthcare---cars ,trips, expensive cameras, massages, tuition for employees and their children, and thousands of dollars of cash (we've heard amounts ranging from $5000 to $50,000)---will soon become the standard practice in a number of occupations where skilled workers are in short supply.

Obviously, this practice is expensive (to consumers) and unhealthy. The core issues of building a culture that attracts and retains good workers demand more attention. Driven by effective leadership, employee-centered policies can become a greater competitive advantage than cash.

The competition---and strategies---seen in healthcare will soon be more universal. The cash prize trap will threaten many employers.

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