We hear frequently,
from business leaders as well as HR leaders, that we should pay more and we
will be able to engage employees. Alternatively we can’t engage employees
because we can’t pay enough.
Let us examine the following
examples and situations:
1. Pay More and Disengage employees: A multinational bank paid its employees significantly higher
than its peers. But it failed to provide challenging work and consequently
could not ensure development and growth.
The employees were disengaged. They could not get jobs with other banks
as their compensation could not be matched. This resulted in a pool of
frustrated employees who did not service customers well. Eventually it translated into accelerated non
performance of business leading to lack of challenging work and development. So
golden hand cuffs created a vicious cycle.
2. Pay Less and Engage Employees: One of the largest
software services companies in India is known to pay the lowest salary amongst
its peers. It always had the lowest attrition and the highest engagement. While
in the short run some of the peers did well, over a larger horizon it
outperformed its peers.
3. ESOP a Golden Hand cuff: A well known player in communication and technology had a serious
challenge in engaging its leadership team. The CEO asked me if they were so
disengaged and that too perennially, why they didn’t leave. The answer was
staring at his face – how can they leave such hefty ESOPs and go? A disengaged leadership team could be
disruptive for business.
4. Can’t afford to pay. So can’t Engage: The research
by almost all consulting firms show that the engagement went up in more than
two thirds of the companies in 2008 and 2009, when companies could not pay
well. Employees did understand the
predicament of employers and responded positively, wherever leadership was
receptive and demonstrated care.
Does this mean we
should pay less or we should not pay more? NO,
please consider the following:
1. 1. Pay Enough:
Dan Pink says that while money or monetary rewards did not result in engagement
or in high performance, pay enough to get the pay discussion off the table and
help people to focus on performance.
2. 2. Pay More and Engage: One of the largest companies in social media pays the highest salary in
the industry. The employees are highly engaged. However, they do not want
people to join them for money. They want people to join them for freedom to
innovate, empowerment and freedom to perform. They take care of their employees
by providing best of the facilities at work, to the extent that the employees
do not miss their homes.
3. 3. Pay as Per Promise: Organizations need to set expectations and pay as per promise. If the
organization does not keep its promise it will surely disengage its employees.
4. 4. Pay Fairly:
Organizations must ensure fairness in compensation both internally and
externally. Within the organization compensation should be fairly paid based on
performance of an individual and her contribution to organization’s success.
Both the performance management and the compensation management should be as
transparent as possible. If we have a robust performance management system
driven by business, as discussed in one of the earlier posts, it would be easy
to be fair and transparent. In the
absence of organizational transparency grapevine takes over.
In a socially connected world, the
compensation should be benchmarked with companies from where the organization
hires talent and with the companies to whom it loses talent. This should also
be transparent to the extent possible.
Transparency will ensure that people understand the fact that they are
paid well and in line with the organizational promise, which will minimize the
impact of misguidance by social network.
5. 5. Take Recourse to Total Rewards: The software company that paid less and retained and engaged
employees in the example above, ensured that they took good care of their
employees and avoided retrenching them during down turn. The total perceived
rewards, therefore, were higher than those due to higher salary paid by
competitors.
Therefore, pay
enough, pay fairly and migrate to total
rewards. And yes, fulfil your promise. This will ensure that you do not
disengage employees.
However,
you will have to do very different things to ensure engagement. We will discuss
how to engage various subsets of employees in subsequent posts over the next
few weeks.
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