The last year and a half have seen some creative juggling on the part of employers to retain their top talent. With budgets tight, but the threat of the much-hyped “talent shortage” looming, managers began offering non-monetary rewards: flexible scheduling, extra time off, career opportunities within the country, etc.
That seemed to work for a while, especially since many employees felt lucky to still have a job, and in some cases were even willing to take pay cuts or make other sacrifices to help a company get through the hard times.
But times are changing. A new study by Mercer suggests cash-only is making a comeback in the workplace:
Despite past emphasis on non-cash rewards, for 2010 and beyond organizations plan to focus on money as well as career development to retain and engage the right talent. Leading reward elements perceived to have the strongest impact on employee retention and engagement for 2010 are base salary increases (41%), short- and long-term variable pay (36%), and training and career development (35%). Interestingly, approximately one-quarter of organizations report that programs such as work-life initiatives, employee communication campaigns and time-off plans – elements of importance during the past year and a half – will have less impact on employee retention and engagement going forward. “Non-cash programs like career pathing, increased communication to employees and work-life initiatives are important in fostering employee retention and engagement regardless of the economic environment,” said Loree Griffith, a principal with Mercer’s rewards consulting business. “However, as recovery occurs, employers want to revisit pay as a means to staying competitive and retaining top-performing employees.”
The question of “employee engagement” has been a big one since the concept became an HR fixture. But are employees really only in it for the money, or does this new spectrum of “creative engagement” still have a place? Ann Bares at Compensation Force has some good insight into this latest shift. It doesn't necessarily mean that pay is the only way, she argues:
Somebody made the point that cash compensation tends to act as a hygiene factor (ala Herzberg's motivation theory), meaning that it does not necessarily motivate employees if it is increased, but it can be a huge dissatisfier when it is perceived as lacking. So, following this logic, cash rewards may not cause motivation, but they act as a precondition for motivation. This being the case, it is difficult to make headway along the engagement/retention pathway with non-cash and psychic rewards if, in fact, employees believe that the foundational financial contract is not a fair one. I wonder if the results of this Mercer study are really making just this point. It may be that the employers, despite their interest and belief in the power of non-cash rewards, realize that they must first attend to the foundation of the employment relationship by addressing any shortfalls in cash compensation that exist following the cost-cutting moves of the recession.
With that in mind, there are plenty of great examples out there of detailed strategies for employee engagement and retention. But sometimes the best thing to do is break it down to something simple. I like this list of nine basic rules, and I think the suggestion that there is no magical one-size-fits-all solution is important. JoAnna Brandi’s challenge to employers is this: “Reward and recognize employees in ways that are meaningful to them—that's why getting to know your employees is so important.”