Motivation 2010 – choosing to stay is not just about pay

by 10 Feb 2010

Getting your employees back on side after a gruelling 2009 will be an uphill task. And revamping a weary workforce isn’t just about the money – sometimes a pat on the back yields better results. Sarah O’Carroll reports

There was one good thing about 2009 for the HR fraternity – the pressure eased on the recruitment front. The skills shortage was no longer at the forefront of HR’s mind as hiring freezes and slashed budgets took over. Scarcity of jobs meant that employers were back in control and no longer at the beck and call of demanding candidates.

Looking back, during 2009 there was lots of talk and advice given to organisations about the importance of using the slow time wisely to train and nurture their peo ple within the organisation in order to emerge from the downturn stronger than before. We heard it everywhere, we read it everywhere. One example of the myriad reports was PWC’s Managing tomorrow’s people: how the down turn will change the future of work which stated that busi nesses that continued to focus on investment and employee engagement, while staving off the global financial crisis, would emerge as clear leaders. Likewise, businesses that continued to offer their employees new opportunities and invested in their people pipeline would be at a competitive advantage.

The message was clear – focusing on retention and moti vating key talent would be critical for positioning organ isations to capitalise on the inevitable upturn in the economy. As Professor Roger Collins of the University of NSW said in February 2009: “Think of the next 12 months as a workout in the gym to become stronger and ready for the turnaround.”

Let’s sound the alarm bells

And here it is – the turnaround has come. Australia’s econ omy has entered 2010 in a healthier state than most devel oped markets. NAB employment index and ANZ and Seek job ads series tell us job ads are on the up. Employer con fidence has surged. While Australia’s economy was lucky and didn’t technically enter into recession, companies will still feel the effects of the rebound. While it will be a wel come reprieve from downsizing and cost-cutting, what does this mean for HR?

Well, it means people are about to leave – and leave in droves. Some have scoffed at the latest descriptions of a looming “mass exodus” saying there aren’t enough jobs out there for people to go to. But the collective surveys of employee sentiment are nonetheless pointing to something – widespread discontent and dissatisfaction.

In the US for example, only 45 per cent of Americans are satisfied with their jobs, down from 61 per cent in 1987 when the survey was first conducted by The Con ference Board. Here in Australia, according to a study by Chandler Macleod, an astonishing 95 per cent of employ ees are looking for work, of which 73 per cent are actively looking and 22 per cent are passive or open to offers.

But surely if the clear messages and advice given to employers in 2009 were taken up, then companies should be alright and not have to worry about losing their best and most trusted in mass?

Unfortunately not. Despite the reports and the contin ued emphasis on using non-financial incentives to moti vate when cash is tight, companies didn’t do it, says Matthew Guthridge, associate principal with McKinsey & Company in the UK. He says that during the global financial crisis, most companies who could no longer afford financial incentives did nothing to help motivate employ ees in alternative ways.

“It’s sort of counter-intuitive – our initial thought was that if you can’t afford to give pay rises or bonuses any more you would actually increase the frequency of all these other things (non-financial rewards) and that these behaviours would continue into after recession,” he says. “But what seems to be the case is that most companies seem to be wait ing for a return to profitability again so they can start pay ing the bonuses again – so they have learnt nothing.”

Why does everybody want to leave?

Each organisation will have to assess the pulse within their organisation to see if they face a potential high staff turnover in the early part of this year. But, as the indica tors show, a lot of people do want to leave and no doubt the boards will turn to HR and ask why.

A senior consultant from one of the leading management consulting firms in Sydney which lost six of its senior con sultants in the last two months said that the way to keep the best people is to make them feel appreciated and valued.

“It’s not about pay – that would not make me stay,” says the consultant, who asked not to be identified. “I have to know that the work I am doing is being recognised and is of value to the company. This didn’t happen last year. The partners think people are leaving because of the pay freeze and drop in bonus – but that’s not the reason.”

Within the firm turnover was quite low throughout 2009, but in the two months since the economy has picked up, people are gaining confidence and deciding to leave.

“Six of our senior consultants left to go to other consulting firms between December and January,” said the consultant. “It’s one of the greatest insults to a management con sulting firm to lose your best people to the competitors. And not only that, but there’s always the danger that they will take their clients with them.”

According to the consultant, the danger that departing employees will take their clients with them is serious.

“One consultant we lost has looked after a client for years and built up a great relationship with them,” she said. “The client is a pharmaceutical company and I think that when this consultant leaves there’s a good chance that client could go with them. She knows their busi ness inside out.”

The consultant, who said she flagged the issues of a drop in morale with the partners some time ago because people felt they were not being valued because overall profits were down said the partners didn’t seem interested until now.

“It’s only now, when they see people walking out the door, are they sitting up and asking why.”

A pat on the back is all it takes

Is it too late to salvage the down-trodden distrustful work force of 2009? Guthridge believes it’s not, but he empha sises the importance of not relying on financial incentives.

Receiving praise from an immediate manager is one of the best retention tools and is often a more effective moti vator than financial incentives, says Guthridge.

Based on a survey carried out by McKinsey on how to motivate employees, Guthridge said that non-financial incentives are more effective than financial ones and should be used as a retention tool.

The report found that the top three motivators were; praise from the boss, attention from leaders in the form of one-on-one meetings and also the opportunity to lead a project.

However throughout the GFC, research shows that instead of using more non-financial incentives, companies actually used less.

And those employers who rested on their laurels and took their foot off the retention pedal might need to start employing some new tactics quickly to avoid losing their best people.

Some quick-fix solutions are possible, according to Guthridge:

“Hand-pick your top talent and get them to work on two or three of your most critical projects,” he says. “This could bring about a quick turnaround in performance and morale with this critical group,” he says.

“It can be anything from a complete restructure to cost- reduction types of initiatives that are going to deliver results to the bottom line – if you can put your best people on to these kind of projects, the talent find it incredibly moti vating because firstly they get a lot more exposure to sen ior management and secondly they get a ringside seat on all the strategic issues. It’s incredibly motivating and improves performance.”

However not everybody in the organisation can sit up with the top people in the organisation. So how can you motivate people at lower levels in the organisation.

Guthridge says that non-financial incentives can also be used to win these people back. Firstly feeling secure in their job is one thing, and secondly – reflecting what hap pens at higher levels in the organisation – each person should be given individual responsibility for certain tasks and projects – no matter how big or small. The reason for this he says is because it can often be more stressful if you’re not in control of a situation.

“Giving people more responsibility can affect immediate results,” he says.

Guthridge said that it’s one of those no- brainers that companies should invest in this type of effort. It fixes many problems because people are given more responsibil ity, feel valued and staff like it. It also helps to develop your team.

“It has a double-whammy effect,” said Guthridge. “When you talk to executives they often say where they learn the most is through special projects. So it is a learning and development model as well as a moti vational tool,” he says.

Some of the most commonly used moti vational tools are actually the worst the study found and have the least impact in terms of retaining people.

“Less than 30 per cent of people think the town hall meetings where the CEO stands up in front of the whole company is motivating,” he says. “Also, as men tioned, the opportunity to lead a project is a greater motivator than training. How ever, despite this, companies tend to spend a lot more money on training, which is not a huge motivator and, according to the research, is not very developmental.”

But the companies who will be entering 2010 in the best position will be those who didn’t take their eye off the importance of retention throughout the downturn.

“There was a critical period during the crisis when the people who were leaving were the best people because they knew they could get a job anyway and the people you lose are very often the people you want to keep. What happens then during the recovery period is very rapid growth, very sharp improvement in some companies coming out of the reces sion and you see a mass departure at all lev els, it’s a mixed bag,” says Guthridge.

Overall, the employee value proposition is very important when it comes to retention in 2010, says Guthridge, and again money is not the answer.

“If you are a company who simply pays cash, as soon as someone pays more cash you’re going to lose them. However if you’re a company who, as part of your EVP, offers other non-financial motivators including career opportunities etc, your EVP is more difficult to replicate, so your stickiness is much stronger.”

What happens on a great workday?

Although the McKinsey report states that the number one motivator for employees is recognition, a study by the Harvard Business School, reported in the Harvard Business Review, disagrees. It says that the key to motivating and retaining your people in 2010 is through “progress”.

The study invited more than 600 managers from a range of companies to rank the impact on employee motivation of five workplace factors including: recognition, incen tives, interpersonal support, support for making progress, and clear goals. But what the managers ranked as impor tant differed to a previous multiyear study by Harvard which found that on a typical “great workday” 76 per cent of people’s best days were when they made progress in work.

The advice the authors of the report, Teresa M. Ama bile and Steven J. Kramer, offer from this study is: “Scrupu lously avoid impeding progress by changing goals autocratically, being indecisive, or holding up resources.”

One of the ways they advise doing this is through cul tivating a culture of helpfulness. This can be done in a more direct way: “Roll up your sleeves and pitch in. Of course, all these efforts will not only keep people working with gusto but also get the job done faster.”

But the report doesn’t completely dismiss recognition as an important retention tool:

“As for recognition, the diaries revealed that it does indeed motivate workers and lift their moods. So man agers should celebrate progress, even the incremental sort. But there will be nothing to recognise if people aren’t gen uinely moving forward – and, as a practical matter, recog nition can’t happen every day. You can, however, see that progress happens every day.”