Look at it this way. Giving employees more of what they want (within reason) yields employer benefits, too -- higher productivity and performance, and increased employee devotion. That’s the icing on the commitment cake.
The bottom line on comp: Share the wealth, but pay alone won’t cut it.
If you think money still talks, listen closely: It doesn’t. Employee commitment can no longer be bought -- if it ever could. Studies confirm that while financial rewards are still vital to employee commitment and performance, money alone won’t energize your workers or boost performance. People want more than money. They want to be needed, valued and appreciated -- something a paycheck alone can’t do anymore.
But don’t misunderstand -- compensation is still a critical element to employee commitment. People still want a fat paycheck. This belief is confirmed by the “Shell Poll,” a new quarterly opinion poll of 1,123 Americans sponsored by Shell Oil Co. and conducted by Peter D. Hart Research Associates based in Washington, D.C. In Shell’s study, 36 percent of respondents cited salary as the number one area of job dissatisfaction.
According to the Aon Consulting Workforce Commitment Index, pay and benefits are the top two reasons why candidates accept a job. “But the [attractive] power of pay and benefits is only [strong] during the recruitment stage,” says David L. Stum, president of The Loyalty Institute (TM), an Aon Consulting Worldwide division based in Ann Arbor, Michigan. After employees take the job, pay and benefits become entitlements to them. They think: “Now that I work here, you owe me that.”
However, pay and benefits aren’t powerful motivators when it comes to retaining those same people. Stum says it’s clear from Aon’s workforce commitment study that other factors tend to keep people once they’re hired: feeling that compensation is equitable and fair throughout the workforce, that benefits are clearly communicated and explained, and that benefits are comparable to other companies’ benefits programs. In fact, employees are now smarter about compensation than ever -- thanks in large part to how HR has dramatically changed the pay game over the past several years. Bonuses, stock ownership, variable compensation, broadbanding and a host of new-fangled compensation plans have been introduced into the employee consciousness.
HR has been able to get employees to buy into the notion of success sharing, but they want to see reciprocality in action by saying: “I’ll commit to you to the extent that you commit to me.” Workers have heard the new message, and now they want a stake in the good performance of their companies, according to Stephen M. Bookbinder, a principal with Boston-based Towers Perrin, an international management consulting firm, and author of the “1997 Towers Perrin Workplace Index” study.
Indeed, Towers Perrin’s newest study indicates that employees feel there’s a strong decline in how their employers are holding up their part of the pay-for-performance bargain. Most employees feel they survived the cutbacks and anxiety, and were key in turning things around. Now, not unreasonably, they expect to share in the results of the turnaround. But the fact that real sharing hasn’t yet materialized, at least not in ways meaningful to employees, is beginning to erode their faith in management and their belief that the workplace is a genuine meritocracy.
As an example, Bookbinder refers to the recent UPS strike, in which workers were demanding more full-time jobs, not higher wages -- the usual reason why workers go on strike. “In this case, it was a group of people who struck over the desire for more full-time jobs because that was their measure of success sharing,” observes Bookbinder. “And it was a surprise to management that people would go on strike because they weren’t full-time workers, as opposed to not being satisfied with their salaries.”
Towers Perrin’s study shows that employees understand and accept what it means to work in an environment without job security, and that the nature and pace of work has clearly changed, requiring more and more of employees. But the quid pro quo (this for that) from employers hasn’t kept up with the pace. If employers don’t deliver on their promises, they risk losing the very people -- their top performers -- who’ve helped get them where they are today. Without these people, employers may not be able to sustain that success into the future.
“Companies must radically change their reward systems under the new deal,” says Marc Wallace Jr., a partner with the Northbrook, Illinois-based Center for Workforce Effectiveness and one of the nation’s leading authorities on work and reward systems. According to Wallace, traditional pay systems, which have become nothing more than entitlements, are being replaced with programs that provide teams of workers with significant pay at risk, based on performance with customers. He says base pay and variable pay must relate more than ever to Economic Value Added (EVA). Work expended must always contain an EVA justification, or it will disappear.
That’s an idea Michael Wolfe, vice president for corporate human resources at a company called TLC, introduced through the company’s new “Career Growth and Pay Program” last year. The program, as described in You magazine’s April 1997 issue, represents a radical change from the firm’s former development programs, giving employees a chance to increase their base salaries when they demonstrate new or enhanced competencies. Workers can also earn lump-sum bonuses with superior performance.
The new program is comprehensive, with every TLC employee going through a full day of training and managers going through two days of training. “The real focus of this program is developing people’s capabilities and paying them for it,” Wolfe explains. “If you expand your skills in ways that serve the needs of your business unit, you should be recognized and rewarded.”
Employees expect good benefits -- at a minimum.
In another nationwide survey of 612 employed persons conducted in September by In Touch (R), a Minneapolis-based consulting firm that works with companies to monitor employee opinions and improve communications between management and employees, when asked to rank the importance of workplace changes they felt were needed, employees cited improvements in salaries and benefits as “very important” (48.6 percent) and 23.6 percent called them “somewhat important.”
And in Aon Consulting’s 1998 America @ Work (SM) Survey, when asked about the importance of specific benefit plans, employees responded that they like medical plans, retirement plans, vacation, sick leave and short-term disability plans -- in that order. But when the availability of various benefits plans is correlated with commitment, some new trends emerge. The benefits plans that correlate best with employee commitment are stock purchase/ownership plans, profit sharing/cash bonus plans and defined-benefit pension plans such as 401(k)s. Allowing employees to choose their own benefits has increased in importance and correlates significantly with commitment. It’s interesting to note that all these programs give employees a stake in the future success of an organization.
“People today expect regular benefits ... health, insurance and retirement plans. Now you have to go beyond those to build loyalty,” says Susan Glover, director of human resource operations at Bentley College in Waltham, Massachusetts. One of the programs that Bentley has developed to move beyond the usual array of employee benefits is a child-care and elder-care resource and referral program. In 1996, this program helped the company win a spot on the “Working Women Count Honor Roll” by the Commonwealth of Massachusetts for improving the working environment for women.
And at Shipley Corp., a chemical manufacturing company in Marlboro, Massachusetts, known for its excellent employee benefits, efforts are made to provide additional amenities. Examples include allowing employees to bring their children to work so they can see and experience what their parents do, and having an onsite fitness center and a walking trail. The company also has plans to install an onsite ATM to save employees from running out to the bank. To augment the feelings of goodwill, the company sends a gift to an employee when a new child is born, sends flowers when there’s a death in an employee’s family, and makes contributions in support of family activities from sports to schools and charitable causes.
Recognition -- you can’t get away without a thank you.
There’s an interesting quotation made by Mary Kay Ash, founder of Mary Kay Cosmetics Inc. based in Dallas: “There are two things people want more than sex and money ... recognition and praise.” Considering the company she founded has sales totaling more than $1 billion last year and is listed on Fortune magazine’s list of “The 100 Best Companies to Work For in America” this year, she knows whereof she speaks. What do workers want from their jobs besides a paycheck? Praise for a job well done.
This isn’t a new idea, but it is an enduring one that still makes sense for today’s workforce. A series of studies originally done by Lawrence Lindahl in the 1940s and repeated with similar findings in 1980 by Ken Kovach and 1991 by Bob Nelson, founder and president of Nelson Motivation, Inc. in San Diego, found that what managers perceived as being most important to employees was in sharp contrast to what the employees themselves reported as being most desirable. In his booklet “Motivating Today’s Employees,” Nelson describes that managers thought the traditional incentives, such as “good wages,” “job security” and “promotion/growth opportunities” were what employees wanted.
However, employees ranked “full appreciation for work done,” “feeling ‘in’ on things” and “sympathy to personal problems” highest in their rankings. Ironically, these are items which have little, if any, financial cost and require only awareness, thoughtfulness and time from their managers. This gap in perceptions persists today.
Edwin Richard Rigsbee, author of The Art of Partnering (Kendall/Hunt Publishing Co., 1994) and president of Rigsbee Enterpises Inc. in Village, California, says: “I believe most executives, owners and managers secretly yearn for employees who have an emotional ownership in their company. Yet, few managers do what it takes to cultivate this emotional ownership.”
Managers of enlightened companies do. ShopLink Inc., a personal services company (home food delivery) based in Westwood, Massachusetts, has a multifaceted communication plan to keep staff involved. For example, it uses global e-mails to share recognition of employee efforts and acknowledge their appreciation. People are informed of the company’s plans, goals and objectives and where they as individuals fit into the big picture.
Gary Beisaw, director of ShopLink, says: “Companies who only demonstrate recognition on the group level, without recognizing what each individual did to contribute, run the risk of discouraging loyalty. Unfortunately, managers are so stretched for time that it’s easier to recognize the group than to take time for each individual.”
As Rosabeth Moss Kanter, the famous author and social scientist, once said: “Compensation is a right. Recognition is a gift.” Employees are demanding to know that their hard work means something. If it doesn’t mean something at your firm, people will find another employer with whom their work does mean something beyond a paycheck.
Don’t assume making an effort is enough.
If you’ve put benefits and rewards programs in place with the goal of increasing loyalty, check with your employees to make sure that the benefits do impact loyalty. Don’t make assumptions. You may find the innovative benefits you’ve put in place are simply fulfilling the basic expectations of today’s employees. You need high-impact benefits to sustain commitment. Be aware of individual contributions, and recognize people for their efforts.
As Michael Romoser, a senior management consultant for Adams Publishing of the Pacific Northwest LLP based in Seattle puts it: “People can love their jobs all they want, but they have to pay the mortgage.” So you need to put first things first. Pay people fairly. Then create a culture people want to be part of. He adds: “Get into people’s hearts. And create a culture that employees want to be part of that’s greater than the almighty dollar.”
Workforce, November 1998, Vol. 77, No. 11, pp. 40-43.