One of the biggest challenges facing businesses today is the talent shortage.

No one can hire enough employees to meet their needs. And the more qualifications you need for a position, the harder it is to fill.

The challenge goes beyond hiring too. Most businesses are struggling with higher turnover, which puts them in a vicious cycle of losing talent they can’t easily replace.

The first solution most people think of is a simple one – offering more money and perks. After all, every candidate wants to earn more money and enjoy more perks, right?

It sounds good on paper…but it’s never going to be a long-term solution. Here’s why.

Someone Else Will Always Offer More

Offering more money or perks may give you an advantage in the short term. It will probably increase your offer-acceptance rate, and certainly won’t hurt your efforts to hire and retain quality talent. Everyone wants to earn a great salary and enjoy perks like remote work and flex hours.

The problem is that you’ve now entered an arms race. With talent in such short supply, there’s always someone who will offer more money or more perks. It’s a race to the bottom, and oftentimes, you’ll find yourself outbid even as you push compensation to the limit of what you can afford.

If someone joins your company primarily because of a competitive salary, they’ll leave as soon as someone else offers them more.

Besides, money and perks aren’t the only factor on candidates minds…

Money Isn’t Everything

We’re currently seeing a lot of candidates jump ship for pay raises. Meanwhile, a lot of remote workers are quitting or considering quitting if they are asked to return to the office.

Money and perks are clearly important to all candidates. But they are certainly not the only things people care about in a job!

Whether they’ll admit it or not, candidates also want to work in a place where they fit in, mesh with the culture, and have a leader who cares about them and supports their success. And that’s just scratching the surface.

We’ve talked to several candidates who were willing to accept pay cuts (even in today’s job market) so that they could switch to a position with less stress, for example.

It goes to show that while even candidates put an outsized emphasis on compensation, it’s rarely the only factor someone makes in whether to stay at a job or accept a new opportunity.

If You Want to Boost Retention and Hiring, Focus on Leadership and Employee Experience

So if money and perks won’t work, how do you win the talent war?

One of the best places to start is focusing on improving leadership and the employee experience as a whole.

Few things have a greater impact on someone’s experience at a company than their relationship with their direct leader.

If you want to retain your people and attract top talent, invest in your leadership. Educate your leaders on the importance of truly getting to know their people, fostering strong relationships with their reports, and leading everyone differently according to their unique personality, goals and needs.

If you’ve been in the workforce long enough, you know how frustrating and stressful it is to work for a bad boss. In contrast, working for a leader who you really click with and who supports your development and career is better than any perk someone can offer you!

Additionally, your culture is determined in large part by your organization’s leadership. Effective leaders create stronger, healthier cultures and happier teams.

Think Bigger

The talent shortage is a big challenge. It’s not a problem you can solve by simply throwing money at it. A big part of the issue is employee burnout and dissatisfaction, and that is a more complex challenge than remote work and higher salaries.

If you want to holistically address the problem and retain high-quality people long-term, it starts with your leaders!