Culture, mission, and compensation: how companies are disconnected from employees
By Claire Davis | January 27, 2022
Insights from our new series on the Future of Work
Defining the “future of work” and implementing it in sustainable ways is quickly becoming a strategic priority for organizations. In the last couple years, job titles referencing the future of work and hybrid work have increased dramatically.1 Similarly, research from ICONIQ Growth’s Leadership Advisory team shows SaaS companies are hiring their first head of people—the leader most often responsible for employee and workplace policy—earlier than ever before in their growth journey.²
As companies prioritize the transition to a new era of work, understanding employee preferences and priorities will be critical in driving effective employee engagement and retention. Even more critical will be understanding how, and to what degree, preferences align with actual behavior.
Insights from our new Future of Work study show employers generally have a strong understanding of what their employees want, and why their employees leave. However, this is less true when it comes to the variables of team culture, company mission, and compensation.
Explore these findings below and, for more on this topic, please tune in to our January 25th Webinar on “Hiring in 2022: Attracting and Retaining the Future Workforce.”
As part of our research on the “Great Resignation” in tech, we fielded two surveys: one to heads of people at tech companies, and another to tech company employees. We asked heads of people about the relevance of certain variables to the resignation of their company’s employees, and tech employees about the relevance of those same variables to their resignation decisions.
While 71% of employers think team and company culture are relevant to employee resignations, only 24% of employees reported so.³
Team and company culture seems to be a priority for both companies and their employees. Positive Glassdoor reviews often include some mention of culture, and companies report trying to emphasize workplace culture during recruiting cycles to help attract top talent.³
However, our research shows employers overestimate the importance of culture to employee retention. While 71% of employers reported culture was relevant to employee resignations in the last two years, only 24% of employees reported so.
Though culture was only relevant to 24% of resignation decisions, we also asked employees why they stayed at a company over the last two years. Of those who stayed, 90% reported culture as relevant to their decision, with 32% identifying it as a primary reason for staying.
This discrepancy may signal a shift in employee sentiment: though culture will still be a contributing factor to retention, the rise of remote work may lead employees to re-categorize culture as a “nice to have,” while things like career advancement, compensation, and flexibility become higher priority.
While only 15% of employers think belief in company mission was relevant to employee resignations, 62% of employees reported so.³
A growing body of research suggests company mission is becoming more important to the workforce: alignment with company values is more important to younger generations (60-70% of Millennials and Gen Z vs. 40-45% of Boomers and Gen X)⁴, and mission-driven companies have 40% higher employee retention compared to non-mission-driven competitors⁵.
However, employers still underestimate the importance of company mission to employee retention. While only 15% of employers reported company mission was relevant to employee resignations in the last two years, 62% of employees reported so. This represents the largest disconnect in employer versus employee sentiment reported in our study.
Missions can look very different across companies, and don’t always have to bear altruistic or global obligations. However, commitment to a mission and clear communication of that mission, no matter how specific or niche, will help companies attract and retain the right talent.
Employers thought compensation was relevant to all resignations, but it was most relevant for employees who were within cohorts that are, on aggregate, paid less than their peers.³
While employer versus employee sentiment differed notably on the importance of culture and company mission, there was better alignment when it came to compensation. One hundred percent of employers and 76% of employees reported compensation was relevant to employee resignations.
At a glance, this suggests employers have a high-level understanding of how important fair compensation is to their employees. However, employees reported a nuance that, while intuitive, may not be fully appreciated by employers based on persisting trends. As reported by employees, the relevance of compensation to one’s resignation decision varied primarily based on the employee’s role, seniority, and gender. The important nuance to this was that within each category, compensation was more important to employees who, on average, are paid less than the others in their category.
Perhaps the most potent example of this nuance is within gender. Of females that resigned in the last two years, 100% reported compensation was relevant to their decision—versus 64% of males—with 44% of females reporting compensation as their primary resignation reason versus 21% of males.
In tandem, Hired’s “Impact Report – Wage Inequality in the Workplace” showed a strong gender wage gap persisting in 2021. For the same job at the same company, males were offered a higher salary than females 59% of the time, with 2.5% more salary offered on average. The research found the gender wage gap to be especially potent for technical roles: male software engineers were offered 4.1% more salary than female software engineers⁶.
While our research showed these trends applied to role, seniority, and gender categories, they also likely apply to new hires versus existing employees.
The current wage market heavily favors job switchers, especially in technology jobs. In Q3 2021, job switchers in the information sector—which includes technology companies, among others—were awarded with 10.5% year-over-year wage growth versus only 5.3% for job holders⁷. Lack of wage equity between current employees and new hires is likely another variable pushing employees to search for new jobs.
With wage equity—and equality in general—becoming more important to the workforce, employees are increasingly demanding transparency into their compensation and that of their peers⁸.
As companies establish new policies and reimagine how they define work, it will be critical to success for leaders to understand how employees value things like culture, mission, and compensation. Some companies are using people analytics to monitor employee engagement, sentiment, resignation reasons, and more to ensure a data-driven approach to the future of work.
Footnotes & Disclosures:
ICONIQ Growth Leadership Advisory: HR Leadership Trends from Company Inception to IPO. The analysis includes 59 SaaS companies that went public between 2015 and 2020.