It’s Not Enough to Pay Your Employees More

John Rau’s recent Forbes article suggests we need to make our employees jobs more interesting. What do you think? How are you sustaining high performance with your employees?

John Rau I write on successful leadership cultures, patterns, and practices.

Paying your employees more in a tight labor market with rising prices is worth considering, but that’s not the only thing that employers should do to attract and retain the best talent.

The most successful leaders understand that getting these factors right is not the end of the job; it is only the beginning. Without a competitive, fair, and logical compensation structure, you’ll end up with a dissatisfied workforce. However, targeting that source of dissatisfaction and reducing negative sentiment are not the same as shaping an engaged, productive, and positive team. That’s a lot harder to do, but ultimately much more impactful.

Experienced leaders know that nailing compensation, in addition to amenities, benefits, and work-life balance, only ends up reducing current levels of employee dissatisfaction. But the value-add of that approach hits a hard upper limit. The better approach is to focus on workplace culture more holistically, knowing that doing the hard work on culture will achieve the greater goal of positive job satisfaction, motivation, and commitment on the part of employees.

Employers need to see the whole picture. This understanding first developed with clarity—backed by underlying research—in the 1960s. Yet, in the search for “magic solutions” (think: “the one-minute manager”), the fundamental recognition of workplace culture’s primary importance tends to get lost in the shuffle. It’s also relegated to secondary importance because workplace culture is so difficult to ace.

The most influential thinker on this duality—reducing dissatisfaction versus increasing satisfaction—was Frederick Herzberg, who published Work and the Nature of Man in 1966. He explained the differences between “necessary factors” like compensation and those which are truly sufficient for motivation. Herzberg argued that it is crucial to identify and differentiate between the factors “extrinsic” to the job, such as compensation, and those that are “intrinsic” to work within the context of organizational culture. As a four-time CEO, I agree with Herzberg on his assessment that only intrinsic factors are capable of moving a team beyond minimized dissatisfaction into the realm of creativity, engagement, productivity, and other truly transformative outcomes.

A summary of Herzberg’s work ultimately became one of the most influential, sought-after Harvard Business Review essays of all time: “One More Time: How Do You Motivate Employees?” And the conclusion was unambiguous: Once you’ve dealt with the dissatisfaction associated with extrinsic details, positive satisfaction only comes from:

  • Having a sense of accomplishment inherent in the job
  • Having the opportunity to achieve and advance
  • Being supported and challenged for excellence
  • Being empowered to participate and broaden your role
  • Understanding and respecting the utility that your employer’s products or services provide, warranting profit and growth

In Herzberg’s words: “Forget praise. Forget punishment. Forget cash. You need to make their jobs more interesting.”

But that begs the question: “Is this just a theory, like so many of the recipes du jour for management success? Or is it backed up by data?” The answer is a clear and resounding “yes,” and in many ways.

Included in Herzberg’s “One More Time” summary is a study of 3,500 experiences of events on the job. These were then rated by employees as either leading to extreme satisfaction or leading to extreme dissatisfaction.

All of the intrinsic factors were exponentially more likely to result in extreme satisfaction. At the top of the list (ranked by numbers of mentions) were responsibility five times, achievement four times, recognition three times, and work itself 2.5 times. Conversely, the extrinsic factors all received dissatisfaction mentions with even larger multiples of their satisfaction ratings. Company policy and administration led to 7x dissatisfaction and supervision yielded 4x dissatisfaction, while working conditions and personal life were also 4x. Salary was the least mentioned factor, with a negative ratio of 1.5x.

Over the two decades since the Herzberg summary, comprehensive studies have identified a tiny subset of companies that deliver high performance over long periods and multiple business cycles. What do you think led to their sustained high performance?

Simple: The high performers got the intrinsic factors right. Those factors are the foundational building blocks. Moreover, the leaders that build successful workplace cultures know that, and they attend to the intrinsic factors constantly—it’s a daily process. Over time, the most successful leaders produce an outcome that is successful, but only because they trust the process of producing it in the first place.

Getting compensation right is a necessary, but insufficient, part of a leader’s job. It is only the beginning of a long process. What comes after is well-understood and hard to do, but integral to success—and satisfaction to boot.

https://www.forbes.com/sites/johnrau/2023/01/11/in-todays-economy-getting-employee-compensation-right-is-necessary-but-insufficient/?sh=a68fabc24ae7

Published by edstillman

I grew up in Carlsbad, north San Diego County, lost my dad as a teenager, went into the USAF for four years and hired on with 3M in 1969. Received my AA from Santa Barbara City College, BA and Masters from Redlands University and after 33 plus years, I retired from 3M in 2002. As I look back on my life, I have been creating myself and developing my skill sets to be a business coach and a Vistage Chair. I am president of SEOT, a "personal improvement" consulting firm spending most of my time working with Central Texas executives running small to medium size for-profit companies who are focusing on improving their profitability greater than their competition. My area of interest is assisting senior executives in creating a better balance between business commitments and personal relationships. I also facilatate three leadership labs each consisting of a dozen owners, presidents and CEOs. We meet monthly both in a group setting as well as in a 1-to-1 coaching session. Our focus is to sharpen each others' skills in becoming better leaders, making better decisions and taking ourselves and companies to that next level. Who are we? My members are experienced top executives who recognize that they don’t have all the answers and who actively seek the company of successful peers—both to give and receive insights and ideas. My members mine the 200 plus years of chief executive experience that comes together in our monthly meetings and members are eager to offer their own experience and insights in the process. As a group, we spend our time exploring topics members can't discuss anywhere else. My members have many other places where they can engage in idle, "cocktail party" chatter. Our mission is to provide the setting for discussing the "undiscussable." Where or who can you go to for confidential, honest feedback to assist you in minimizing your personal "Worry List"?