’Tis the season for giving raises! Wouldn’t it be great if sitting down to discuss annual salary adjustments were this joyous? Managers may not break into song this year, but we are arming them with more information and a different context to remove some of the anxiety. This is the first installment in a series of posts on adjusting salaries.
Fortunately, there are lots of studies and information about current trends in compensation. Unfortunately, if you’re looking for the magic carrot (monetary incentive) that will yield increases in satisfaction and productivity, it does not exist. Or, as Dr. Paul Marciano, writes, “Carrots and Sticks Don’t Work.”
A classic synopsis of new-school thinking on employee motivation is offered by Daniel Pink. He masterfully summarizes contemporary research on motivation and it is worth every one of the 648 seconds it takes to view it. Of particular importance is his statement at 4:56, “Pay people enough to take the issue of money off the table.” Certainly there are other ways to motivate and incentivize employees if raises are not an option, but these aren't ideal.
I vividly recall when I first saw the video and heard that statement in a management meeting about four years ago. Finally, someone had synthesized the relationship between intrinsic motivators and fair pay. Even the rosiest view of human needs cannot ignore the reality that everyone has bills to be paid. Work is still about money, just not all about money. Love it. I decided to buy his book and join the fan club.
Seconds later, he reiterates, “Pay people enough so they’re not thinking about money, they’re thinking about the work.” Hmm. So we just ask employees how much they need and pay them that amount? Surely not. My newfound idol had skipped over the “how” part of paying enough. Luckily, it isn’t hard or expensive to figure out:
Step 1: Know the work.
Pink says this is what we want the employee focused on, right? It follows that we need great clarity and consistency on what is expected. Last year we reworked all the job descriptions across the organization. Not surprisingly, our Best Places to Work scores jumped in agreement with the statement, “I have a clear understanding of my job role.”
Step 2: Pick a pay strategy.
Are you committed to acquiring the best talent in existence and a reputation for the best pay? Aiming high is simplistic but expensive. Are you dependent on the lowest cost possible? Aiming low may save money on the front end but carries unpredictable costs of turnover and poor performance.
Or are you seeking a competitive cost structure where replacements do not come with sticker shock and you use culture and intrinsic motivators to defend against poachers? This, the let’s-just-aim-at-a-reasonable-target strategy requires more energy and skill than the first two options. It also brings confidence and peace of mind in doing the right thing for employees and the business.