An Employer Crisis
We need to apply a different paradigm.
It is especially employee retention that has emerged as the workplace issue of the decade. In 2006, the Society for Human Resource Management’s Workplace Forecast predicted that the #1 employment trend most likely to have a major impact on the workplace would be: a greater emphasis on...retention strategies. And in a 2007 study by the global employee retention research firm, TalentKeepers, 88% of employers reported turnover had increased or stayed the same … and 45% forecasted a further increase (only 3% predicted a decrease).
You see, our long-held assumptions of an ever-expanding talent pool have been shattered, by such factors as:
- The retirement of aging baby boomers
- Lower birth rates
- Tighter immigration rules
- And an increase in skills demanded for today’s jobs.
And employee loyalty is down. According to a 2005 survey conducted by SHRM, 79% of employees are job searching (actively or passively). In fact, the most frequently asked question put to SHRM is: How can we keep talent from jumping to our competitors?
Fortunately, every crisis contains not only danger, but also opportunity … if you know how to tap into it.
Employers are groping at ways to attack the problem. That 2005 SHRM survey found the techniques being used are: salary adjustments, job promotions, bonuses, more attractive benefits and retirement packages, and stock options.
All of which are expensive and (as found in that TalentKeepers study) not very effective. The reason, as you will see, is that they are misdirected.
Rather than leaping to implement techniques, we maintain that it is important to begin with an understanding of the resource you’re trying to retain. Otherwise, you won’t know whether any technique is effective; and you won’t be that effective in implementing it.
The Human Resource
All too often, organizations have viewed their employees in much the same way as they view their material resources: as a commodity, homogeneous and easily interchangeable. For example, notice the frequent use of such terms as human capital, subordinate, rank and file, and headcount – terms which connote property, servitude or thing-ness.
In fact, employees are not headcount or merely the means to organizational ends. They also are ends in themselves. As a human resource, an employee deserves (and needs) to be viewed differently than the inanimate resources of the organization. A human being needs to be treated with … respect.
The master key to unlocking the full potential of this resource is grasping that fact, not only intellectually, but also in your gut. So that it influences every aspect of how you think about and interact with this invaluable asset – your fellow employees.
Most of us, perhaps, share a similar understanding of this word, respect. But the concept is so important to the authors – and so essential to this topic – that we are elaborating on it.
The American Heritage Dictionary of the English Language defines respect as: the state of being regarded with honor or esteem. As a verb, the definition includes: to avoid violation of.
We think that second definition provides an important clarification. By respect, we do not mean deference to authority or position (e.g., bowing to a king or Yes sir, boss!). Rather the American principle of avoiding violation of an individual’s fundamental rights. Every human being is a sir or ma’am, even when addressing them on an informal first name basis.
And we’ve created an acronym based on the word, which enumerates some of the behaviors associated it:
Refrain from putdowns, criticism, personal attacks
Encourage others to state their views
Support each other … even if you don’t agree
Practice active listening
Express yourself assertively … not aggressively or submissively
Collaborate … not compete or collude
Trust each other … unless and until such trust is violated
What Employees Want
What do you think employees most want from their jobs? Good wages? Job security? That's what most managers have thought, for at least the past 60 years.
But it's not what employees have continued to say! As shown in this table, what employees really want are: appreciation and involvement.
Note the glaring disconnect between manager opinion and employee fact.
Are we saying – or are employees saying – that competitive wages are unimportant? Of course not. Money usually is a necessary, but not sufficient condition to attract, retain and motivate good employees. [By the way, money isn't even always necessary. Notice how energized and enthusiastic unpaid volunteers often are.]
And notice that, while managers rank promotion/growth opportunities in the top three, employees rank this toward the bottom. This is important to some employees (perhaps to you), but overall, not so much.
Lest there is any doubt, these discrepancies between manager opinion and employee fact are good news, for at least two reasons:
- Increased wages and job security (that managers think are most important) are precisely what many organizations cannot provide these days; whereas appreciation and involvement (which employees really want) can be provided anytime, at little or no cost. [As for those promotion/growth opportunities, often you’re not able to provide these to many your employees.]
- Most managers out there don't get it. If you do, your organization can win the battle for the hearts and minds of employees, regardless of budget!
This is all very nice, but you’re trying to run an enterprise. Why should you care what employees want? That is, how does this affect the bottom-line?
Well, in 1998, the Gallup organization studied the impact of employee attitudes on business outcomes. They found that organizations – where employees have above average attitudes toward their work – have:
- 38% higher customer satisfaction scores
- 22% higher productivity
- 22% better employee retention
- 27% higher profits!
A Deeper Look
Employees are the most inscrutable of an organization’s resources. To gain a deeper understanding, we review some classic theory, propose our own 3-Factor Theory, present data from a recent landmark study that supports these theories, and solicit your own insight to confirm it.
The best know motivation theory is probably…
Maslow categorized human needs into 5 sets:
- The most fundamental is Survival. This is our need for food, water and shelter; and, in the modern era, includes medical services, electricity, transportation and phones. All of which are jeopardized by natural disasters. Visualize the aftermath of Hurricane Katrina.
- Next is Safety and Security – for which we look to the military and police, fire-rescue and insurance. All of which were called into play on and since 9/11.
- What then emerges is Social and Belonging – our need for family and friends, coworkers and associations.
- Then comes Self-Esteem* – confidence and respect, appreciation and recognition.
- And the ultimate, Self-Actualization – fulfillment and happiness, which most of us meet through career, marriage and/or parenthood.
But Maslow did more than categorize. He posited that these needs do not have equal force, all the time.
So, when our fundamental needs of survival, safety and security are threatened, e.g., by natural disasters or terrorism, that’s all we care about.
[As South Florida residents, the authors have first-hand knowledge of this. For example, for the first several days after 2005’s Hurricane Wilma, local TV stations had no network programming, not even national news. All they reported was where to get water and ice, and where and when power was being restored.]
However, for most Americans most of the time, these needs are met. They become merely basic expectations (what Frederick Hertzberg called hygiene factors) that we pay little attention to. What we care about, and are motivated by, are the three highest level needs.
Grimme’s 3-Factor Theory
We use Maslow’s Hierarchy as a springboard for our own 3-Factor Theory, which consolidates a few other theories (e.g., Hertzberg’s 2-Factor Theory and the Kano Model of Customer Satisfaction) – from an employer’s perspective:
- Employers satisfy Maslow’s fundamental survival, safety and security needs primarily through a pay check and benefits plan, i.e., “Earnings & Benefits.” That’s how employees buy groceries, put a roof over their heads and ensure against life’s contingencies.
- In the workplace, our highest-level need of self-actualization and much of our self-esteem are met through the work itself, i.e., “Job Quality.”
- Employers can address the center rung of social and belonging needs, as well as self-esteem, with “Workplace Support,” e.g., supervision, teamwork and recognition.
- As Hertzberg maintained, the absence of Earnings & Benefits is demotivating. These are what Kano calls basic needs. If a job’s pay and benefits are inadequate to pay our bills, we won’t even start work. And if we feel unfairly compensated, we'll gripe and complain. But we're not really motivated by overpay or lavish benefits. Not saying we won’t enjoy them, but they’re not truly energizing.
- In contrast, the very presence of Job Quality is motivating – Kano’s excitement needs. The greater our sense of achievement and the more involved we are in our work, the more energized and excited we will be. This really turns us on!
- We maintain that Workplace Support factors are both demotivators and motivators – Kano’s performance needs. A lousy supervisor, coworker frictions and lack of appreciation will drain our energies. But the better our supervisor is, the more cohesive our team and the more appreciated we feel – the more energized we will be.
Well, all that is just theory. Where’s the data that supports it?
In 1997, the National Study of the Changing Workforce, conducted by the Families and Work Institute, examined the impact on work outcomes of four sets of factors: Earnings & Benefits, Job Quality, Workplace Support and Job Demands. [You see where we got the labels for our 3 factors.]
The Study found that, while Earnings & Benefits have only a 2% impact on job satisfaction, Job Quality and Workplace Support have a combined 70% impact. That’s a 35 times greater bang for the buck! Although, in the case of Job Quality and Workplace Support, it’s a symbolic buck, rather than a monetary expense.
And the results were similar for factors impacting organizational loyalty and employee retention. Perhaps you’re curious about that fourth factor, Job Demands. It has a significant impact only on job performance – a negative one, comparable to the positive impact of either Job Quality or Workplace Support. [How to ameliorate this negative impact is the subject of the second chapter of our book.]
Test this out yourself:
Remember a time when you felt energized, fulfilled, and excited about your job or a project; when you couldn't wait to get out of bed and get to work!
If, unfortunately, nothing comes to mind, remember a time when you felt frustrated, bored or dispirited about your job; when you had to force yourself out of bed to go to work!
What were you doing? What was special (or not special) about it?
- Was it the pay? The fringe benefits? Maybe, for the first few days.
- Or, was it the stimulating work, the stretching of your abilities, being an important part of a grand venture, the rapport with coworkers, the recognition from superiors?
Otherwise, the only thing we would add to your insight is the assurance that it is not unique – to you, your profession, job level, generation or socio-economic group.
That is, what use does this theory, data and insight have to you as a workplace leader? Well…
These concepts can become your mental model or paradigm – guiding you as you interact with your employees on a day-to-day and minute-by-minute basis. It’s a very different paradigm from the carrot & stick approach typically used; and is much more effective in getting the bottom-line results you want.
You can think about your own behaviors and your organization’s current policies, practices and programs from what may be a different perspective. Are they working for you? Are they consistent with these principles? What changes can you begin making?
And you can anticipate the efficacy of new initiatives under consideration. For example:
To reduce turnover, does it now make sense to rely on salary increases, promotions, bonuses, benefits, retirement packages and stock options?
We think it make more sense to:
- Pay them fairly.
- Treat them GREAT!