10/17/2008 05:12 am ET Updated Nov 17, 2011

Generation Y: Keeping Them Happy With Less Pay, More Perks

Dear Christine,
I am a Gen X'er running a business where the majority of my employees are Gen Y. Unlike many other managers who complain about Gen Y's sense of entitlement, I have been very impressed with my young employees' innovative ideas and dedication. Many of them are truly doing outstanding work and deserve to be paid more. I value my young employees and want to retain them; however, I run a small start-up and I'm not in the position to give raises - the money is simply not there. But when young people come to me with all the stats and reasons they deserve a raise, and I actually agree with them, I don't know how to respond - any tips?
-Empty Pockets, 36, Los Angeles

Dear Empty Pockets,

Among all the trials and tribulations of a start-up, you definitely have an upscale problem: you have Gen Y (defined as people born between 1978 and 2000) employees you actually want to pay more because they are doing great work. Do anything and everything you can to retain them! Gen Y gets a bad rap for believing themselves entitled and demanding raises, promotions, and other perks by their second day in the office. But there is another side to Gen Y; they are innovative, creative, global-minded, socially conscious, and extremely committed to doing meaningful work. Count your lucky stars that you have found employees who embody the great qualities of this young generation.

There are many ways you can engage and retain your young employees that don't involve dollar signs. You just need to up your Gen Y IQ a bit. First, understand that they grew up during a very kid-centric time. Their parents gave them a lot of attention and coddling (think "baby-on-board" signs on the windows of mini-vans). They were told they were special their whole lives and got trophies for everything Thus, they crave validation - and not just every now and then, but everyday. Find ways to praise them, acknowledge their work, and give them specific feedback about how they are doing.

Second, this is a generation that values work-life balance. They saw their parents slaving away at jobs and had it explained to them that "quality" time was more important than "quantity." This generation is opting out of the 55+ hour work week that the Baby Boomer generation subscribed to. So if you can't reward them with money, reward them with time. If they complete a task or do a great job on a project, give them the rest of the day off. Allow them to work remotely on Fridays. As long as they are getting their work done, be flexible about their hours. Remember, time is a currency to Gen Y.

Gen Y'ers also value meaningful work and the opportunity to make a difference. The majority of the thousands of twenty-somethings I've interviewed have all said they'd choose a job where they felt like they are really contributing to something over a higher paying job with more menial responsibilities. Talk to them about their role in the company and map out their career path with them. At smaller start-ups, young people have more opportunities to do more. How can they get their hands dirtier? What additional responsibilities could you give them that feel more "valuable" than what they are doing now? What type of busy work could you take off their plate? Explain that their work at your company has a tremendous upside for learning and growing. Make them feel like part of something great. That said, you have to be 100% committed and believe in your business as well. Gen Y'ers have been consumers their entire lives and they can sniff an up-sell from a mile away.

Another thing Gen Y values is transparency and a boss with integrity. Gen Y'ers like to feel respected, so level with them about the bottom line and your plans for the future. Share with your young employees how they fit into the picture and invite their ideas into all conversations about the growth of your business. Cam Marston, Founder and President of Generational Insight, is a consultant, author, and speaker who has worked with Fortune 500 companies and small businesses throughout the world to improve multigenerational relations. He advises the following: "First and foremost be up front and honest with your Gen Y employees - tell them you know they deserve a raise and that their data to prove it is accurate. However, there is no money and that is one of the challenges of working in a start up. You should be able to list the uniquenesses of being in a start up and how this will help the employees in the future, regardless of where they are employed. Also, as the boss, be darn sure you are not showcasing some lavish lifestyle while telling your staff that you can't afford raises. The hypocrisy will be too much for the employees to bear and they'll be gone in short order."

It boils down to motivating your employees, providing meaningful work, and showing them that you are as invested in them as they are in you. People who like going to work and like the work they do tend to stick around. That said, it's incumbent upon you to give them some kind of a financial forecast or bonus structure. If you want to retain your staff, you will need to match competitive salaries at some point. Until then, do everything you can to give your Gen Y employees a reason to call home and brag to mom and dad about their really cool job.


Please send me your questions by posting them in the comments section below. You can also email me at christine AT