[As stated in my profile and recent self-introduction, I am a professional trainer, speaker and (as of November) author, specializing in what I call "workplace people solutions." The following article is derived from the introduction and first chapter of my wife’s and my forthcoming book, The New Manager's Tool Kit. The target audience for our book and this article is managers in today’s workplace (rather than Objectivists). However its subject matter of human motivation may very well be of interest to OL readers. I welcome your questions, comments and concerns. – Don Grimme]


There is a crisis in America today. The one we’re talking about to has nothing to do with telemarketing, as annoying as that is, or even terrorism. Rather, we’re referring to the diminishing ability of employers in every sector of our society to attract, retain and motivate talented employees, that is: to survive.

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:

1. The retirement of aging baby boomers
2. Lower birth rates
3. Tighter immigration rules
4. And an increase in skills demanded for today’s jobs.

The first three factors explain this quantitatively. But it is the fourth qualitative factor that is the sticking point. More than a shortage of bodies, this is a crisis is of abilities – the talent in ‘talent pool.’

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.

Respect

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

In our training programs, we ask participants to commit to these behaviors. We urge you to do likewise in your workplace.

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!

Why Should We Care?

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!

Satisfying employees is not only a nice thing to do; it also makes good business sense!

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.

Classic Theory

The best know motivation theory is probably…



Maslow categorized human needs into 5 sets:

1. 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.
2. 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.
3. What then emerges is Social and Belonging – our need for family and friends, coworkers and associations.
4. Then comes Self-Esteem* – confidence and respect, appreciation and recognition.
5. And the ultimate, Self-Actualization – fulfillment and happiness, which most of us meet through career, marriage and/or parenthood.

* [NOTE to OL readers: As you know so well, without at least some measure of self-esteem, individuals are unable to satisfy any of their other needs. This is a hierarchy of motivational drives, not the order in which an adult should build his/her character.]

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:

1. 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.
2. 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.”
3. 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 shown in the following graph (derived from the Kano Model), each of these 3 factors is different in nature and effect:

1. 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.
2. 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!
3. 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.

Put another way: We will go to work for a paycheck and a benefits plan. But we won’t really do work (or, at least, our best work) unless something else is present… It is the quality of the work itself and of our relationships with others at work, which draws us to the best organizations and keeps us there – energized and performing at peak effectiveness.

Well, all that is just theory. Where’s the data that supports it?

Data

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.]

Insight

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?

1. Was it the pay? The fringe benefits? Maybe, for the first few days.
2. 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?

If you find that it's the former, please write to us at Solutions@GHR-Training.com or post a reply in this thread. [You’ll be the first to do so; and we’ve been asking this question for years – on our website and in our newsletter, workshops and presentations.]

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.

So what!

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:

1. Pay them fairly.
2. Treat them GREAT!

As for how to treat them great, see our Top Ten Tips to Motivate & Retain Talented Employees ... and covered in much greater depth in the remainder of the first chapter of our book.

Don,

Sorry this took so long to go up. Everything in the "Articles" section automatically goes into an approval queue and I just now saw it.

btw - Very nice article.

Michael

Don,

I really like this article. In my 15 years of serving our armed forces, no subject is more important. This topic is an everyday issue and a driving force regarding retention.

Earlier this year I attended NCO academy. We covered a lot of topics with primary focus on leadership. Management was attributed to tasks, not people. Made tons of sense. In the military, we have the luxury of not worrying about paychecks (provided Congress doesn't cut them) or profit margins. Corporate America has to worry about that at the threat of a collapse of their companies - understandable. I think it gives the services a slight advantage with those 'people skills' because we can devote more time and effort to it. We do have our share of managers, and the civilian sector has its share of leaders. But when I worked the civilian sector, not once did I ever refer to one of my bosses as a leader.

In short - lead people and manage tasks.

~ Shane

I couldn't agree more. Our current paradigms have a hard time with the dynamics of complex systems where there are reciprocal relationships between the parts of a system and the system as a whole. Understanding social dynamics in general, and workplace dynamics in particular, requires that we break out of traditional schemata.

Traditionally, our models are very linear, very cause and effect, very stimulus/response. If the workplace is viewed through the lens of a traditional model of social behaviour, then we predict that a tangible stimulus is required to produce a tangible response such as attracting and retaining employees. That this is not measured to be the most important factor in employee retention tells us there is a mistake in our model.

We need a shift to a complex systems model that is non-linear and includes an understanding of reciprocal relationships between the parts of a system and the system as a whole. Individual employees want to experience themselves as important parts of the whole system. They don't want to just be a cog in the machine. They want more to be a piece of a hologram. They want to have an informed perspective of the company as a whole and they want to know how their role contributes to the well being of the company. They want their perspective to be treated with respect. They want to know how their actions contribute to the overall performance of the company. They want the company, and its representative leaders and managers, keep them informed (information is the new commodity that equals respect) and recognize their contributions.

I run a small specialized renovation business and have a similar approach to my clients:

1. Charge them fairly.
2. Treat them GREAT!

I've always heard that a satisfied client will tell a friend. A dissatisfied client will tell 10. I wondered if it was just a matter of the difference in psychological energy associated with the relation between "satisfied" and "dissatisfied" that determined the number of people they told. With this in mind we set out to not only make clients satisfied, but turn them into enthusiastic advocates of our company. We want our clients to tell 10 people about how satisfied they are. The way we achieve this is to treat clients as part of the project, taking time to listen and understand their perspectives and goals, getting and keeping them informed, and doing what we say we will do. It's a complex systems approach to marketing and running a renovation company that attracts and retains enthusiastic clients. It applies very similar principles to those you advocate to attract and retain enthusiastic employees.

My partner (and wife) currently do most of the work, only bringing in outside contractors occasionally. We will be hiring employees in the near future and will be looking to turn this complex systems/hologram approach inward. I will be sure to keep you work in mind when I do so.

Paul

Good post. I strongly suggest that those interested read some of the work of W. Edwards Deming, Jr.

Books include:

Out of the Crisis
The New Economics

There is a long and established tradition of writing on this, led by Deming and others (coupled by the even longer tradition of ignoring that writing by the overwhelming bulk of companies and executives!).

Bill P (Alfonso)

Thanks Bill. I checked the books out on Amazon. They seem very much in the direction of my interests and vision for my company. I really enjoy the language used about companies viewed as systems, with a focus on meeting client's needs, and the idea that an increased focus on quality translates into increased pride and motivation for employees and increased productivity for the company. This all fits with my experience. I started my own company because I had difficulty finding one in my field that operated by these principles. I look forward to reading more.

Paul

Paul -

You might also check out Wikipedia at:

http://en.wikipedia.org/wiki/W._Edwards_Deming

I am often decidedly unimpressed by the entries in Wikipedia. This one is pretty good at giving the broad outline of Deming's thought at a very high level.

Some specifics for an Objectivist to object to, but I won't spoil the discovery process for you at this time.

Bill P (Alfonso)

Juat a thought.

Compare the Maslow Hierarachy to Aristotle's ordering of what is important in the Nichomachean Ethics. It turns out that Aristotle's highest good just about coincides with the top of the Maslow triangle.

Ba'al Chatzaf

Right on, Shane! This is what we have to say about it in the Preface to our book:

Manager vs. Leader

Many books distinguish between these two terms, stating that management is about authority, whereas leadership is about influence. We don’t. In today’s workplace, anyone with management responsibilities must use leadership to execute those responsibilities. Most of today’s employees won’t stand for an authoritarian style. And even those few who might put up with being ordered around will be less effective under such as taskmaster.

Also, the term manager includes both managing tasks and managing people. This is a book about managing people, a.k.a. leadership.

We use these two terms almost interchangeably, primarily using manager or management to refer to the job responsibility; leader as a generic term for various job titles; and leadership to refer to the means of executing that responsibility, when dealing with people.

Don

This reminds me of the inspiration for our two-point "Secret" (as we call it in our book). Several years ago, I heard a Tom Peters speech, in which he summed up the secret of excellent companies: "They don't sell junk ... and they treat people nice." [I like pithy, and understatement.]

Don

Deming is like most brilliant, creative iconoclasts (Bucky Fuller is another): spinning nuggets of genius, mixed with fallacy. [I believe that there was a 20th century thinker who was an exception, but I can't remember her name. ]

Deming's path of influence was ironic: An American who had to go to Japan to be heard, then the best of U.S. businesses adapted his "Japanese" practices. I spent the better part of my career in HR management at one of those businesses: Motorola, a leader in six sigma quality. In fact, I became quite involved with an aspect of it: QFD (quality function deployment), which translates (or deploys) the "voice of the customer" into product design features and manufacturing processes.

It was through this that I first learned Kano's Model of Customer Satisfaction (which my wife and I adapted to employee motivation). [C2C Solutions has provided a free, online, audio/visual tutorial on the Kano Model of Customer Satisfaction. It’s brief and easy to understand.]

As an HR guy, my favorite of Deming's 14 Points is #8: Drive out fear.

Don

People are programmable. Experiments in solving novel problems have demonstrated that monkeys are original thinkers and humans are robots. Show a human the wrong way to do something and they repeat it mindlessly no matter how poorly it works... or does not work, actually... Think of communism. How long should it have taken to figure that out?

This management malarky is old hat. We know all of this. Few companies do any of it because most people learned in school to sit down, shut up, and do as you are told. We have done that for over 150 years. You reap what you sow. There might be some exceptions. GE is one, perhaps. Hewlett-Packard was another, maybe.

Mostly, the real money in rational management is writing pie-in-the-sky books and delivering pep talks called (ahem) "seminars."

If any of this Maslow-Deming stuff were actually useful -- by practical, I mean moral -- the advocates would be running successful enterprises from steamships to spaceships.

Do not misunderstand: I agree with the Nice Guy Theory of Capitalist Management. However, to get to that, we must first have a generation of nice guy capitalists -- children raised to be independent thinkers who create their own wealth.

Cause and effect cannot be reversed.

Actually, its worse then that.

I saw a blurp in the latest Time magazine on a book about satisfied customers. Basically in our connected lives today, a satisfied customer will tell about 10 people or so, but a dissatisfied customer will tell 4000! With mailing lists, blogs, forums, and such, more people will learn of poor business behaviors, making it even more critical for business to have better customer service policies, procedures and training.

I don't see any of this as either-or in terms of business failure or success.

If you want system X with X characteristics, you will go nice guy way.
If you want system Y with Y characteristics, you will go dehumanize way.
If you want system Z with Z characteristics, you will go the bully big-frog-in-little-pond/reward-suck-ups way.

Each system will allow you to produce products and/or services. (If you want to fail, you will totally ignore reality and it does not matter how you treat your employees.)

I am a strong believer in nice guy, though. This satisfies all parameters (short-medium-long, quality control, improvements and innovations, competitiveness, etc.) when done with high regard for standards and tapping in on employee creativity.

I think the Google enterprise is a stellar organization along those lines. They got it all right. Every bit.

Michael

Michael,

Not sure what you mean by systems X, Y and Z. Are you referring to management theorists, Douglas McGregor's Theory X & Y and William Ouchi's Theory Z? To some other categorization? Or just using those letters arbitrarily to refer to three different ways of management-employee interaction?

I do think that what you call the "nice guy" way is definitely more effective in managing brain workers (i.e., the kind of people that companies like Microsoft or Google employ). For example, would anyone on this Forum work for your system Y or system Z employer (other than as a last resort)?

Carrot & stick might work for awhile with muscle workers, e.g., day laborers. [My nephew is an architectural contractor. He swears by the latter technique for managing his construction workers.]

Don

Don,

I was not referring to those systems. I was thinking more about a very interesting story I read about the chocolate world, the different management styles of Forrest Mars and Milton Hershey.

Mars was the mean mean meany guy and Hershey was the really really nice guy. This difference in temperament resulted in vastly different management styles and went all the way to the end of their lives. Mars even tried to bankrupt his own son at the end while Hershey left his company to an orphanage.

It's a fascinating tale and I once entertained using it as a basis for an opera or musical. There is a book about it called The Emperors of Chocolate: Inside the Secret World of Hershey and Mars by Joël Glenn Brenner (Author).

Michael