Recent studies have found employee dissatisfaction to be at an all-time high. It makes sense that employees who cannot “leave” a situation might be unhappy – feeling trapped within their circumstances. When we have an inordinate number of good jobs available to competent, reliable workers, however, the prevailing sense of dissatisfaction makes no sense. Surprisingly, a competitive pay package is NOT one of the most critical reasons employees stay with an organization – but a well-defined program that establishes internal equity IS a key factor in employee retention. There are, however, several essential factors to consider when developing a fair and equitable structure with which to compensate employees. These factors would include:
1) Internal equity is much more important than external competitiveness when it comes to creating a satisfied workforce. Some of the best organizations often pay employees slightly below market averages BUT they are consistent and intentional with this philosophy. They communicate their compensation philosophy openly, being transparent in their intent to provide a “fair day’s pay for a fair day’s work. Dissatisfaction (causing high turnover, negative employee relations and difficulty in hiring new employees) almost always results when one group of employees is paid differently in relation to market than another.
2) Strong merit pay systems tend to attract and retain high performers (and over-achievers) while tenure-based systems tend to attract risk-averse employees and provide a safe harbor for mediocre employees. When expectations are communicated to employees (potentially linking additional pay and/or bonus to the accomplishment of goals), employees willing and able to go the extra mile will step forward. Systems that pay all individuals equally, regardless of their result, tend to equalize abilities as well as pay – often to the lowest (rather than the highest) common denominator.
3) Organizations without an objective means to establish a job’s value or worth tend to pay employees more based on who they are (or who they know) than what they contribute. Whenever employers make pay decisions based on who is in the job rather than on what the job does for the organization and how well (or poorly) the job is done, favoritism and inequity (whether real or imagined) can begin to destroy internal employee relations.
4) Consistency is more important than accuracy. When employees see that policies are inconsistently applied they become more a part of the problem than they are a solution. It is important to tell employees what you are going to do and how you are going to work with them – then to do what you say. NEVER say one thing and do another or treat one employee differently than another or you will find that your credibility has been diminished and your effectiveness as a leader destroyed.
5) Communication is the cornerstone of a strong organization. How can employees contribute to the growth of an organization unless they know where the organization wants to go – what it ultimately wants to be? Unless employees know and believe that anything is possible they will never move past “what is” towards “what has not yet been realized.” Engaging employees is more that telling them what to do – it involves identifying how each individual communicates then altering your approach WITHOUT changing or compromising your expectations.
6) Compensation Administration IS NOT a static science. Pay ranges should be updated regularly pay rates adjusted reflect changing market conditions. Pay should be adjusted regularly based on an organization’s ability to pay AND the work that is actually being done. Seek employee input when updating job duties. Utilize reliable sources when establishing competitive pay rates. Reward employee performance in a way that encourages desired behavior while discouraging destructive behavior. Make sure that all employees know that “life is not equal – it is equitable” with what one receives directly proportional to what one contributes.
When employees seeking responsibility, autonomy and advancement find their efforts are not appreciated they often seek “greener pastures” in which to feed. The way people interact with peers, the way they are treated by management, and their overall satisfaction (and engagement) with the job are far more critical than pay (and/or benefits) in regards to employee retention.
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