Engage Employees Part 2: Pay More and Disengage Employees

We hear frequently, from business leaders as well as HR leaders, that we should pay more and we will be able to engage employees. Alternatively we can’t engage employees because we can’t pay enough.

Let us examine the following examples and situations:

1.      Pay More and Disengage employees: A multinational bank paid its employees significantly higher than its peers. But it failed to provide challenging work and consequently could not ensure development and growth.  The employees were disengaged. They could not get jobs with other banks as their compensation could not be matched. This resulted in a pool of frustrated employees who did not service customers well.  Eventually it translated into accelerated non performance of business leading to lack of challenging work and development. So golden hand cuffs created a vicious cycle.

2.      Pay Less and Engage Employees:  One of the largest software services companies in India is known to pay the lowest salary amongst its peers. It always had the lowest attrition and the highest engagement. While in the short run some of the peers did well, over a larger horizon it outperformed its peers.

3.      ESOP a Golden Hand cuff: A well known player in communication and technology had a serious challenge in engaging its leadership team. The CEO asked me if they were so disengaged and that too perennially, why they didn’t leave. The answer was staring at his face – how can they leave such hefty ESOPs and go?  A disengaged leadership team could be disruptive for business.

4.      Can’t afford to pay. So can’t Engage:  The research by almost all consulting firms show that the engagement went up in more than two thirds of the companies in 2008 and 2009, when companies could not pay well.  Employees did understand the predicament of employers and responded positively, wherever leadership was receptive and demonstrated care.

Does this mean we should pay less or we should not pay more? NO, please consider the following:

1.    1.  Pay Enough:Dan Pink says that while money or monetary rewards did not result in engagement or in high performance, pay enough to get the pay discussion off the table and help people to focus on performance.

2.     2. Pay More and Engage: One of the largest companies in social media pays the highest salary in the industry. The employees are highly engaged. However, they do not want people to join them for money. They want people to join them for freedom to innovate, empowerment and freedom to perform. They take care of their employees by providing best of the facilities at work, to the extent that the employees do not miss their homes.

3.  3. Pay as Per Promise: Organizations need to set expectations and pay as per promise. If the organization does not keep its promise it will surely disengage its employees.

4. 4. Pay Fairly:Organizations must ensure fairness in compensation both internally and externally. Within the organization compensation should be fairly paid based on performance of an individual and her contribution to organization’s success. Both the performance management and the compensation management should be as transparent as possible. If we have a robust performance management system driven by business, as discussed in one of the earlier posts, it would be easy to be fair and transparent.  In the absence of organizational transparency grapevine takes over.

In a socially connected world, the compensation should be benchmarked with companies from where the organization hires talent and with the companies to whom it loses talent. This should also be transparent to the extent possible.  Transparency will ensure that people understand the fact that they are paid well and in line with the organizational promise, which will minimize the impact of misguidance by social network. 

5.     5. Take Recourse to Total Rewards: The software company that paid less and retained and engaged employees in the example above, ensured that they took good care of their employees and avoided retrenching them during down turn. The total perceived rewards, therefore, were higher than those due to higher salary paid by competitors.

Therefore, payenough, pay fairly and migrate to total rewards. And yes, fulfil your promise. This will ensure that you do not disengage employees. 

However, you will have to do very different things to ensure engagement. We will discuss how to engage various subsets of employees in subsequent posts over the next few weeks.