The Salary Factor: Increasing Employee Engagement

Employee engagement is a buzzword in management circles. Creating and sustaining high levels of engagement is a result of a symbiotic relationship between employers and employees. Engaged employees are more likely to act in ways that are beneficial to the organization. In turn, employers who are committed to enhancing the well-being of their employees will foster employee engagement and successful organizations.

There are many engagement strategies and most of them focus on the softer issues of management. These include things such as leadership development programs, creating opportunities for staff to provide feedback, training and meaningful annual evaluation processes. Thus far, organizational engagement strategies have largely avoided the issue of salary. However, recent research indicates that we should add salary to our engagement strategy bucket.  “After all, a person’s primary reason for being employed is getting paid!” (Smith).

PayScale, a compensation software company surveyed 71,000 employees to study the relationship between pay and employee engagement. “The study results revealed that one of the top predictors of employee sentiment, including ‘satisfaction’ and ‘intent to leave,’ was a company’s ability to communicate clearly about compensation”. They discovered that salary has direct correlation to engagement levels (Smith).

However, the correlation wasn’t related to the amount of salary an employee received. Instead, the research revealed that the important factor is pay awareness – helping employees understand whether their pay is fair or not. In other words, the conventional wisdom of ‘pay more to keep them engaged’ was debunked. Here is a summary of what the research revealed:

What we believe about pay

This research clearly shows that most employees do not understand market salary norms. As a result, this misunderstanding becomes a means by which we become disillusioned about our work. “Pay is a crucial component of engagement because it’s not just a number; it’s an emotional measure reflecting how valued an employee feels by their employer. And it turns out, how people feel about their salary plays a huge role in how engaged they are in their work” (Smith). This study revealed that, “it is more effective for employers to compensate top talent at market value and discuss how pay was determined than to pay them more than market value and keep company compensation practices shrouded in secrecy” (Smith). Clear communication is critical!

This research teaches us that employers need to:

  1. Equip themselves (and their managers) with accurate data about the fair market price for their jobs
  2. Communicate this information to their employees. In the absence of communication, people will generally assume the worst.
  3. “Remember that how their employees feel about compensation matters just as much as what they’re actually being paid” (Smith).

I believe there is also a dark side to salary transparency for for some employers. While you may provide fair salaries to your middle or lower level staff, what about your C-Suite? If executive salaries are above market value then you have created an expectation that this should be true at all organizational levels.

“When it comes to having a more engaged workforce, you can’t assume that an employee’s perception about pay matches reality” (Smith). How effectively does your organization understand and communicate compensation?

Head ShotDr. Jeff Suderman is an underpaid professor, fairly paid consultant and overpaid pracademic who works in the field of organizational development. He partners with clients to improve culture, leadership, teamwork, organizational alignment, strategy and organizational future-readiness. He resides in Palm Desert, California. Twitter: @jlsuderman


Dave Smith (Oct. 5, 2015). Most People Have No Idea Whether They’re Paid Fairly. HBR online.

Why We Hate Work: Issues of Engagement

What percentage of Americans feel engaged when they are at work? 40%? 50% 65%?

Recent research reveals that only 30% say that their work engages them (Gallup, 2013). The global version of this research reveals that only 13% of people around the world answer ‘yes’ to this question. This issue is being called an organizational crisis and reveals both tremendous problems and opportunities in our workplaces.

So how can you personally ensure that you are increasing your level of engagement? Here are four ideas:

  1. Know thyself: Socrates is given credit for this simple advice. The better we know ourselves, the better we understand what we are good at and what we are not good at. This knowledge will guide you into work which you find engaging.
  2. Know thy organization: Tim recently told me about the biggest mistake he made. A headhunter promised to double his salary if he took a job they had been enticing him with for months. While the money was good, the organizational culture was not a good fit for him. He took the offer and as a result, discovered that he also gave up a great work-life balance, strong relationships with colleagues and a salary that was ‘enough’. The ability to assess what you have at your current organization as well as the realities of new organizations is critical. Failure to do this simply leads to a life of ‘the grass is always greener…’.
  3. Experiment: Einstein defined insanity as doing the same thing and expecting different results. If you are not engaged, try something new. This doesn’t mean that you need to quit and find a new job. If you love leading but don’t have people who report to you can coach little league. Try a new hobby. Take a class. Look for a different locale to meet new people (and ideas!). I did not realize how much I enjoyed writing until I began blogging! Don’t complain – experiment!
  4. Be realistic: Work does not need to engage you 100% of the time. There are many people who expect work to make up for deficiencies of their own making. Work cannot make up for a lack of engagement in your marriage, with your children or in your community.

In addition to what we need to do individually, the engagement problem also requires employers and managers to act. A study by the New York Times and the Harvard Business Review revealed that employee engagement increases as their workplace address four core needs:

  • Physically – opportunities to regularly renew and recharge at work,
  • Emotionally – feeling valued and appreciated for their contributions,
  • Mentally – opportunity to focus on their most important tasks and to define when and where they get their work done, and
  • Spiritually – doing more of what they do best and enjoy most, and by feeling connected to a higher purpose at work (NY Times).

The things noted above are not revolutionary. We know most, if not all of the things on this list. However, there is a gap between what we know and what we do. Until we learn to practice these things, we have to oversee a workforce of many people who would rather not be there. To me, this is indeed a crisis, a crisis in need of bold and fresh leadership.

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