Five Steps to Get What You Pay For

By: markweaver Tuesday March 3, 2015 comments

There is a WHOLE lot more to employee satisfaction and retention than money.  Bosses who think they can solve employee satisfaction, motivation, or engagement by throwing money at it are wrong, in a costly way.  And yet, many people can be motivated by it.  When asked in surveys, about 95% of employees say they like their rewards in the form of hard cold cash.  There may be other forms of reward that are more meaningful, have a bigger impact, and create a lasting sense of satisfaction, but cash is king.
 
There is debate about whether money can really serve as a motivator at all; that at best you might get it right and it won’t be a negative.  Decades ago, Psychologist Frederick Herzberg started this line of thinking with his Motivation – Hygiene Theory.  In his mind, money only serves to demotivate if done wrong, but will only be a neutral if done right.  So how do you get it right?  How do you keep the very thing you may use to reward employees from turning into a big fat negative?  Here are five steps to consider:

1. External competitiveness – It’s just not that hard to figure out what the market value of most jobs is these days.  There is a plethora of salary market data that is easily accessible.  Most jobs aren’t unique enough to warrant deviating from that.  But the reality is that if you are hiring, or have any kind of turnover, you know what the market rate is.  You’ve got to figure out what your competitive position is relative to the market.  Paying more doesn’t necessarily buy you more – other than a higher cost structure.  Get this right and it solves a lot.  If you can’t afford to pay at market, be open about it.  But also tell your story of why working with you is a great opportunity regardless of lower pay.  (Sounds weird, but Not-For-Profits do this all the time.)
2. Internal equity – Don’t ever use these words again.  There is no such thing.  Elaborate systems are developed by HR consultants and professionals that require more HR consultants and professionals.  When it comes down to it, internal equity is in the eyes of the beholder.  It ends up being as nebulous as the word “fair.”  What is fair to one person could be unfair to another.  The market is what it is.  Rely on that instead.
3. Rewards –If your reward system is annual pay raises that are not based on performance, you’ve pretty much got a “butts in chairs” compensation program.  Don’t pay a Controller, a Salesperson, or an HR professional more just because they have been with you another year and are nice; you don’t reward salespeople like that.  Instead, tie rewards to meaningful contributions to the accomplishments of your strategic goals and mission.  That way your strategic plan actually gets done and you reward performance that matters.  Watch out how you design rewards though, because if the reward program emphasizes performance (what they did) over values (how they did it), you could find yourself rewarding behaviors that are contrary to what your clients expect from your marketing materials.
4. Delivery – There are all kinds of pay delivery mechanisms.  And there are some methods that are more effective than cash.  Base pay has to be money.  Rewards don’t have to be.  You want your rewards to have “Trophy Value” and “Residual Value.”  Trophy Value refers to rewards that employees are proud enough of to show others.  That won’t happen with cash, but could happen with a new mobile device, an IPad, or a leather bomber jacket (add a logo and you’ve got free marketing walking around).  Residual Value refers to rewards that create a good memory that sticks.  Cash won’t do that, but a weekend away, a dinner for two at the Melting Pot, or a party might do that.  When you create a shared memory such as the party, you build a team who can look ahead to a shared vision, and can look back to a shared history.
5. Appreciation – Many surveys of employee motivation show that pay isn’t a top motivator.  Appreciation is always high.  People like to be thanked, and you can do with minimal to no cost.  But it also works to make monetary rewards more meaningful.  Herzberg also said that the things that actually motivate are recognition, achievement, growth, and responsibility.  Don’t just hand employees money and make it look like a payoff; make it count by expressing appreciation, recognizing their achievement, and fully appreciating their effort.
    
   

Pay and incentive plans that both reward the sought after performance and reinforce desired behaviors are hard to come by.  But they can do more than just that.  They can also:

• Align with major business initiatives;
• Reinforce business understanding
• Support productivity, quality, business performance, learning, values and desired behaviors;
• Be easily communicated to and accepted by most employees; and
• Work financially all while not requiring a bunch of additional administrative time to administer.

 
When designing pay and rewards systems, it’s not just a numbers game.  The “how” you design is at least as important as the “what” you design.  To be an incentive to employees, it has to be an incentive to employees, and the only way to know if it will, is to engage them and ask.
 

At Open Door HR Solutions, we help organizations create business and people strategies that achieve a different kind of result than what is conventionally thought of as HR.  We engage employees in solutions not only to HR issues, but to the kinds of business problems that keep business owners and leaders awake at night.
 
Mark Weaver, SPHR, SHRM-SCP, QES