Why you must disconnect compensation from employee engagement

9 April, 2019
Employee engagement

When salary ceases to matter, how do you hire and retain the best people?

When considering compensation and employee engagement, employers often place too much emphasis on salary and benefits and not enough on the less tangible factors of employee engagement. However, with low levels of unemployment and a shortage in skilled labour, organisations that focus on providing a positive workplace culture are more likely to attract and retain the best employees.


How are compensation and employee engagement connected?

Of course, money is an engaging factor. If your organisation does not pay the appropriate wage for a position, it is unlikely to attract good-quality candidates. If your compensation package doesn’t keep up with market rates, it is more likely that your best employees will leave for new opportunities. In short, a below-par salary is likely to be a factor of disengagement.

Compensation is what psychologist Frederick Herzberg called a ‘hygiene factor’. Having interviewed many employees to discover what motivated people in their jobs and what made them satisfied and dissatisfied about their work, Herzberg developed his two-factor theory. One of these factors is motivators (or satisfiers), and is linked to intrinsic conditions of the job – such as job satisfaction, achievement, opportunity for advancement, and responsibility. The second factor is hygiene.

Hygiene factors do not motivate employees, but where they are inadequate they will dissatisfy employees. People expect to be paid adequately. When pay is inadequate it becomes a cause for dissatisfaction. An adequate salary makes an employee feel comfortable and secure, but it is not a motivator.


When does compensation and employee engagement become disconnected?

People work so that they can pay their bills, enjoy their free time and steer clear of debt. The less time they spend worrying about their finances, the more time an employee can concentrate on their work – and the more time they have spare to really think about their employer’s big picture.

So, the circle that must be squared by an employer is:

  • Paying their employees enough so they are satisfied and don’t want to leave for higher wages
  • Realising that when money is no longer the overriding factor for working, it is ‘something else’ that compels them to stay (or join)

If your ‘something other’ does not engage the employee, then that employee is likely to look elsewhere for an opportunity that does.


How do organisations take money out of the engagement equation?

In 2014, Gallup conducted in-depth analysis of a qualitative and quantitative nature on the 32 winners of its Great Workplace Awards. These organisations exhibited outstanding employee engagement, and Gallup collected and collated evidence of its effect on business outcomes. Gallup contrasted these with the results from other organisations that were struggling.

The analysis found seven elements that are present in the best-performing organisation, but not in the underperformers. These elements that maintain and improve motivation when compensation and employee engagement are disconnected are:


1.    Leaders who are curious, involved and have the desire to improve

The attitudes, beliefs and behaviours of leaders trickle down and shape an organisation’s culture. Great leaders are role models of organisational culture, signalling that engagement is good for the individual, the team and the organisation.


2.    Have a supportive HR

HR managers who support cultural development as business partners are invaluable. They can coach managers on how to develop themselves and their employees.


3.    The basics of organisational culture that encourage engagement

An organisation’s culture is the foundation on which employee engagement is built. Managers and leaders are integral to ensuring that their people understand their roles, what is expected of them, how they fit into the organisation, and that their managers will support them through tough times. Without these basics, an organisation’s vision will never live long in the mindset of employees.


4.    The economy is never an excuse for poor performance

By shifting blame away from management and onto circumstances and the economy, managers and leadership can inadvertently demonstrate to their people that a blame culture is acceptable and that accountability is not a business requirement.

When poor economic conditions exist, it may be argued that it is even more important for a strong, open and collaborative culture to exist. If hard decisions must be taken (for example, shorter working hours or redundancies), it may become even more difficult to make a link between compensation and employee engagement. Maintaining a positive and supportive culture that provides the environment for employee engagement is one thing that managers and leaders can always influence.


5.    Relentless support of managers and teams in a trusting environment

People become stronger when they are afforded the opportunity to understand problems and create their own solutions. This requires support from the top down, encouraging self-development and supporting people to improve their resilience and become accountable for their actions. Micromanagement is substituted by leadership in the best organisations.


6.    Performance management by recognition and reward

Gallup found that recognition is a powerful incentive. Praise as a reward is a perfect compliment to compensation and employee engagement. As Gallup discovered, “Recognition for good work releases dopamine in the brain, which creates feelings of pride and pleasure”.

When an employee does not receive enough recognition, they begin to ask why they bother to work hard. Irrespective of financial reward, when this happens there is no point in trying to link compensation to employee engagement. If employees think that their managers don’t care how they are performing, they are likely to stop caring themselves.


7.    Have a reason for employee engagement

It is becoming increasingly possible to measure employee engagement. As with any other strategy, an organisation should have a reason for their employee engagement activities and be able to measure its success.

For example, when The Big Picture People worked with EDF Energy, we took on the challenge of helping 15,000 employees to learn more about the company’s direction – and how they could play their part in ‘Leading the Energy Change’ through day-to-day activity.

Together, we created ‘Our Compelling Story’ – a Learning Map that was used to communicate information about EDF Energy, celebrating the past, conveying the present, and painting a picture of a new and inspiring future. The approach helped to encourage discussion and understanding, tapping into the knowledge and opinions of all involved. The survey results taken after the series of workshops showed a significant improvement in outcomes of engagement:

  • ‘I believe strongly in EDF Energy’s ambitions’ (+9%)
  • ‘I believe EDF Energy’s Executive Team has a clear vision for the future’ (+8%)
  • What kind of job is EDF Energy’s Executive Team doing in providing leadership? (+9%)

After the roll-out of a second series of workshops, further improvement was experienced, so much so that overall engagement had increased to 77%, and EDF Energy won several awards for the work it had done with The Big Picture People, including:

  • Winner of the Corporate Engagement Awards 2014
  • #Inside Story Awards Winner 2015

In appraising the success of The Big Picture People, EDF’s CEO said, “We have set clearly the ambitions of the company; the global vision, the global picture – and ‘Our Compelling Story’ has been instrumental in reaching this position.”

In summary, people connect with values, beliefs and vision. They gain a greater feeling of satisfaction when they are rewarded by recognition than they do when their bank receives their monthly salary. Organisations that develop engagement strategies that focus on these factors, without relying on money as an engagement tool, are leading the way in employee engagement.

To discover how our Learning Map could help you to improve your employee engagement strategy by encouraging, initiating and empowering meaningful conversations that disconnect compensation from employee engagement, get in touch with The Big Picture People today.

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