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

Reference

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

Avoiding Analysis Paralysis

“The best leaders know how to keep moving forward in ambiguous situations” (Johnson).

If you play board games you may have heard the term ‘analysis-paralysis’. It refers to people who feel compelled to consider every possible scenario. As a board game enthusiast, I find it painful when I play with people who have analysis-paralysis. They cause the game to drag and often focus on things that are of little significance. This concept also spills over into our work lives and we have all spent time with people who suffer this syndrome.

The heart of this problem relates to how we deal with ambiguity. Patti Johnson notes that, “Any leader facing high levels of ambiguity needs to do two apparently paradoxical things: First, get comfortable with the idea of not having all the answers, and second, take steps to reduce the uncertainty”.

  1. Develop comfort with the unknown: Life in the information age means that we have access to more data than we have ever had. Therefore, wise leaders develop a means to wisely respond to a glut of information. Research has dubbed this skill ‘ambiguity organization‘, the ability to contextualize the things which are important and quickly adapt when the results show that you are wrong. Leaders must possess the soft skill of being comfortable enough to act when operating in these grey areas. As access to information continues to increase, I project that people who possess this skill are going to be regarded as gifted leaders in the decades ahead.
  2. Reduce uncertainty: Conversely, there are things we can do which can help minimize uncertainty. Brian Cornell, the CEO of Target, had to determine what to do with their financially troubled Canadian chain of stores (Johnson). Studies revealed that they would not be profitable until the year 2021. As a result, he made a decision to close all Canadian operations. Did he understand every implication of this huge decision? Not at all! Rather, he used the information he could to reduce the uncertainty and then bravely made a decision.

An individual’s ability to work amidst ambiguity is also affected by their environment. Personality tests sometimes refer to this condition as how we behave under ‘norm’ versus ‘storm’ situations (storm refers to difficult or stressful environments).  Some of us demonstrate consistent behavior whether we are in normal or stormy situations. Others use different styles than they do normally. For example, I have discovered that I slow down decisions during times of high stress. I have observed others who do the opposite and make much quicker decisions in storm situations (e.g. – firefighters). To combat this, leaders must first understand their norm versus storm behaviors (as Socrates once said, ‘know thyself’). Then we must develop a plan to help with this imbalance when necessary. As an example, I try to have an inner circle to help me through storm situations and also set timelines by which decisions need to be made.

A reason I enjoy board games is that I can experiment with strategy. I can try new things and the only consequence is losing. However, the stakes are higher when we apply this to our personal or work lives. It is different when you are moving your family across the country, taking a new promotion or risking budget on a new idea. Therefore, effective leaders can paradoxically manage analysis-paralysis by reducing uncertainty and developing comfort with the unknown.


 

Head ShotJeff Suderman is a futurist, professor and consultant who works in the field of organizational development. He works with clients to improve leadership, teamwork, organizational alignment, strategy and organizational Future-Readiness. He resides in Palm Desert, California. Twitter: @jlsuderman

Patti Johnson (Mar. 11, 2015). Avoiding decision paralysis in the state of uncertainty. Harvard Business Review On-line.