How to Keep Employees Happy and Productive (Without Huge Salaries)

Following up on the theme of last week’s post, we’d like to focus on how employers can keep and engage core talent by keeping employees happy and productive without paying huge salaries. That’s not to say that Gravity Payments’ model, which involved CEO Dan Price taking a major pay cut to boost his employee minimum pay to $70,000, didn’t get Gravity Payments workers pretty excited; however, this model is unlikely to work sustainably for many firms. (That said, paying employees a good living wage is essential, and we are excited to see how Price’s radical experiment goes.)

First off, it’s pretty clear why you want to keep your employees happy.  A major meta-analysis of 225 studies on happiness in the workplace  found that happiness increases productivity by 31% on average, increases sales by 37% and increases creativity threefold. It also found that happy employees were better liked by peers, which can lead to stronger, better-connected work groups (an unliked employee can cause trouble for many teams). Finally, happiness correlates with health – happy employees report fewer illnesses and thus will take fewer sick days. Aside from health and productivity, employees happy with their current jobs are simply less likely to leave.

That leads us to the task at hand: how to keep employees happy at work.  Salary is an obvious motivator for workplace happiness and productivity. However, high pay is not the only motivator, and almost certainly not the best. Studies and surveys of employees return relatively consistent rankings in this respect: pay is important, but it tends to rank significantly below questions of job enjoyment and the ability to fit the job in with the rest of one’s life (work-life balance). Other key motivators include connection with the organization (values alignment), control over aspects of the job, the possibility of growth, good leadership, variable tasks and the opportunity to make a difference. Though none of these are near as simple as giving an employee a 10% raise (or, in the case of some Gravity Payments employees, a 100% raise), developing a corporate culture that focuses on these factors can be a much more sustainable, more effective, and potentially less expensive investment.

 

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Happiness increases productivity in employees by 31%
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Happy employees have 37% better sales
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Happy employees are three times as creative as unhappy employees

Decreasing return on investment for high salaries:

Arbitrarily giving high pay to new employees is an easy way to get a quick boost in loyalty and happiness. But what are its effects on long-term happiness and productivity? Studies, such as this 2010 meta-analysis, suggest that pay is only marginally related to actual job satisfaction, and, as mentioned above, factors like job enjoyment and work-life balance dominate. Having not enough money to live causes unhappiness, poor health and lost productivity. Having a lot of money, however, comes with its own stresses, and doesn’t seem to cause much more happiness (and productivity) than having enough money.  Happiness itself seems to cap out around a $75,000 salary (a number comparable to the $70,000 minimum announced by the CEO of Gravity Payments).

Of course, many employees believe that they would work harder for higher pay, or might leave one job that gives them enough pay for one that gives them a bit more — if their other needs are not being fulfilled. The key is to understand that they will work harder to get higher pay, but once they have attained that higher level of pay they will want something else to work towards and be rewarded for.

To harness this natural desire to achieve and be rewarded, it’s probably best not to just give employees a high salary right from the start. We recommend the use of conditional bonuses and team-performance based raises. Start new hires at a lower (though livable) pay with the opportunity to advance when they meet key, clearly defined performance metrics. People need to feel rewarded for achievements and performance, so any compensation plan needs to take this into consideration. If you are contemplating levelling the salary playing field, you will need to design this into your other systems for managing performance and tapping into the potential of your employees.

What we love about the idea of levelling the salary playing field and relying less on financial rewards to motivate people to perform their best, is that it forces leaders to wrap their heads around the things that truly drive performance, retention, and profits. Drivers like fostering greater alignment between their employees’ passions and the work that they do, building skills and systems at all levels to facilitate career fulfillment, becoming more skilled at giving and receiving feedback, and growing their ability to function as coaches rather than dictators. These types of initiatives move organizations towards a place where the rewards for doing good work will become intrinsic. In other words, doing good work is intrinsically rewarding as it creates more possibilities for creativity, independence, meaningful work and a fulfilling career.

Happy employees work harder and stay in your organization for longer. But how do you get happy employees?

Other key areas to invest in for happy, productive employees:

Past liveable pay, employee happiness is driven more by providing space to learn and grow, fostering trust and transparency and helping employees find a job that they enjoy, when possible. Developing programs to stimulate these areas can be a challenge, but they pay immense dividends in the end.

Here’s what we recommend to get started:

Many employees value a  position that fits in with their lifestyle or has a good boss over a job with a high salary.

Many employees value a position that fits in with their lifestyle or has a good boss over a job with a high salary.

Define company core values:

What does your company stand for? Is that something your workers can get behind? (Hint: if the company’s only core value is to maximize shareholder profit and CEO pay, probably not!). WestJet is a good example of this. Sure, they’re just another airline. However, they execute their core values – which are different from other airlines – on every level. They bring a written copy of core values to every meeting, and employees enact them in their daily work. Through this, they infuse something special (great customer service) into something relatively mundane or even unpleasant (air travel).

Focus on your leaders and managers:

Strong leaders and managers who are aligned with the company’s core values can help align employees in the trenches with the organizational core values. One of the most important aspects of this is having the skills and the courage to weed out toxic employees (those who actively seek to undermine company core values, damage morale and stop up production) by providing coaching and correction when possible and firing them when necessary.

One of the most critical areas to weed out toxic employees is at the leadership and management level. Employee engagement research consistently shows that one of the key drivers of low engagement and turnover in a specific work team is the quality of the manager. In short, employees don’t leave jobs, they leave leaders. Promotions often occur because an employee is good at technical aspects of their job, without regard for whether or not they have the skills to be an effective leader. Replacing toxic bosses can do more for employee happiness than any pay raise. And just in case you leaders out there think that we are talking about someone else, consider the following statistics: 65% of employees would prefer a new boss over a pay raise and three out of 4 employees say that their boss is the most stressful part of their job. In short, even if you aren’t a bad boss, you know one.

Build skills in employee engagement and career development:

The research on the impact employee engagement, well-being, and career fit has on employee performance and the bottom line is so significant that you would be hard-pressed to find any leading company who is not looking at ways to introduce these types of programs to their workforce.  These programs only work if the culture — and the highest levels of leadership — walk the talk.

Even though many organizations are introducing employee engagement assessments, career development coaching, and workplace wellness programs, their effectiveness is limited by whether or not the leadership is implementing these programs to drive profits or because they genuinely believe they are the right thing to do. It is easy to tell what leaders are in which camp based on their actions. If leaders are adding workplace wellness programs to their budgets but drinking two pots of coffee a day, working 80 hours/week, and prioritizing work over family their actions are speaking louder than any words ever could.

Develop a culture of coaching and peer review:

The more values-aligned your employee base is, the better employees and work-teams can self-correct. Maintaining a strong culture that focuses on openness, transparency and core values hits many of the other happiness factors. Give employees the tools and training they need to hold themselves and each other accountable and they will raise each other — and their leaders — up. Rely on top-down performance management systems that give all of the power for maximizing potential to leaders and you will end up with leaders who feel dragged down by the responsibility of it all and employees who feel drained by the lack of control they have over the results they can get in their team.

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