There can’t be many more emotive issues in organisational life than Reward. Yet studies over the years (since Herzberg 1966) have shown that when it comes to motivation, pay is fairly far down the list. Imagine our surprise then; when in recent client studies using our proprietary tools, pay came out as one of the top three issues affecting recruitment, motivation, and retention.
This alignment with motivation seemed counter-intuitive given the body of research on the subject. In an environment where people are judged largely on hard financial numbers, for example trading, direct sales; where these numbers are the main means of keeping the score, knowing how one is doing, and triggering pay level, it is perhaps understandable how earnings themselves become motivational. What’s interesting though is that while a relatively small number are motivated by cash; for most it is perhaps not the pay levels themselves that are the motivators; it is the ability to see exactly how one is doing and how that compares with colleagues.
Knowing what one has to do to get to the next level, or to overtake another person or team and the impact that will have on pay seems critical. We venture to suggest that the real motivator is not pay; it is achievement, recognition, and status – pay is how they keep score. What are the key issues? Digging deeper on this issue from the studies, we found that pay itself was not the real issue. People were generally happy with levels of pay, what they were unhappy about was their inability to track their pay levels with the market. Neither did people know how they were doing internally, what they could do to influence their total reward, or how to progress to the next level – if indeed they knew what that was.
We also found tenuous links to the performance management system, where people knew what was expected of them, but not how what they achieved might influence reward. In some cases where bonuses were paid, people didn’t know how bonus amounts were calculated or what they could do in future to trigger or increase them. While there was adequate provision for benefits, training, development, and career progression, in many cases they were not well known or were thought to be out of line with employee needs.
Maybe we can learn something from the “hard numbers” model in terms of focus and transparency. But where that system perhaps falls down, is in having employees believe erroneously that they are motivated by the prospect of high pay rather than achievement, recognition, or status. They may be inclined to seek alternative employment with a firm promising bigger pay, eschewing intrinsic benefits such as training, work/life balance, working on sexy projects; and for the employer there is the cost of attrition.
And so what was originally a reward issue really became an issue of awareness, transparency, and communication. How often do we put reward and benefits packages together and then “market” them to employees? How much better would it be to engage them before the design stage so that we understand the needs, motivations, and aspirations of the different stakeholder groups? Through a process of involvement and consultation, we could provide total reward solutions focused on stakeholders’ needs and aspirations, as well as ensuring that that provision is understood and acted upon in a transparently fair way. Ensuring that your approach to reward is focused on employee need as well as supporting the business strategy, may well be cost neutral in the short term, but it will certainly help drive value in the medium to long term.