Survey Says... Engagement = Cash?!

In what seems an interesting reversal from trends over the past 18 months, which showed organizations placing increasing emphasis on broader non-cash rewards, a new Mercer study of more than 320 North American companies suggests that employers have done a bit of an about-face, now reporting that cash is their top engagement and retention tool in the recovering job market.

Specifically, when asked to identify the reward elements perceived to have the strongest impact on employee engagement and retention for 2010 and beyond, the top five elements named were:

Base salary increases - 41%

Short-term and long-term variable pay - 36%

Training and career development - 35%

Health and retirement benefits - 27%

Work-life programs - 26%

So, what gives?  Are we as ideologically fickle as this makes us seem, is cash simply destined to remain "king", or is there something else going on here?

In considering these questions, I come back to the really interesting conversation about cash versus non-cash rewards that I had the chance to join earlier today, along with my Compensation Cafe colleagues, on the Influence Insiders blogtalkradio show (check out the archive if you missed the live show...).  Somebody made the point that cash compensation tends to act as a hygiene factor (ala Herzberg's motivation theory), meaning that it does not necessarily motivate employees if it is increased, but it can be a huge dissatisfier when it is perceived as lacking. 

So, following this logic, cash rewards may not cause motivation, but they act as a precondition for motivation.  This being the case, it is difficult to make headway along the engagement/retention pathway with non-cash and psychic rewards if, in fact, employees believe that the foundational financial contract is not a fair one.

I wonder if the results of this Mercer study are really making just this point.  It may be that the employers, despite their interest and belief in the power of non-cash rewards, realize that they must first attend to the foundation of the employment relationship by addressing any shortfalls in cash compensation that exist following the cost-cutting moves of the recession.

What's your take?  Are you surprised by these findings ... or not? 

Image: Creative Commons photo "Cash" by JMRosenfeld

Comments

[laurie ruettimann]

In plush times, people can be coy about money. Oh no, they say. I'm not motivated by cash [because I can pay my mortgage w/o a problem]. I'm motivated by values.

Then the recession hits and people get real --> fast. Gone are the cultural niceties and the polite [& fake] language of the boom cycle. The bust cycle prompts a more honest dialogue between employees and companies.

Frankly, it's refreshing.

[Ann Bares]

Laurie:

Interesting take. So... tough times hit and people get real. Then, as things begin to turn and the people start considering their (new) options, their employers have to get real in order to retain and engage them.

I think it does, then, come back to cash being the foundation. If people don't believe their base package is fair, it doesn't really matter what other things you layer on top of that. Especially when they have other employment choices.

Good lesson for us in the reward profession. Thanks for sharing your perspective!

[Leanne Chase - LeanneCLC]

Honestly - I think employers are always out of touch with what employees need/want, recession or good times. I saw your list above - was that what employers perceived or what employees said? I think it's employers.

Honestly I'll trust the researchers at MIT on this one - they say not enough money can be a detractor but cash is only a motivator for mechanical/manual skills...not for cognitive skills/knowledge workers.

check out the video:

http://www.ritholtz.com/blog/2010/05/the-surprising-truth-about-what-motivates-us/

[working girl]

I think you're right, Ann - Cash looses it's incremental value at a certain point but after 3 years of no increases (for the lucky folks whose salaries weren't cut) and rising costs, cash is a crowd pleaser again.

[Blair Johanson]

Ann, In our compensation consulting work, we are called to evaluate and recommend revisions for an organization's dated or inequitable base pay system. With many of the additional non-cash rewards being tied to base pay by a percentage or multiple, we have heard employees and employers complain that the total compensation program is out of balance and losing its effectiveness as a motivator when the base pay program is no longer competitive in the market. We are advocates for a fair and competitive base pay system as the foundation in building a rewarding and lasting employer and employee relationship.

[Windsor Lewis]

Ann I agree with your assessment as well as the comment from Blair Johanson. Having started my compensation career on the sales side, I've observed that employee's basic needs need to be met before they can offer mindshare to other things (such as their job). So in addition to Herzberg's hygiene factor I would also invoke Maslow's Hierarchy of Needs, except the hierarchy of needs is not a strictly linear path; people move up and down the hierarchy as circumstances change. Bringing this into the current environment I would say that employees were willing to be flexible given the severity of the recession, but have since become tired of it and long to return to a state of normalcy, hence pay becoming a more prominent factor once again.

[Jamie Davis]

Ann,

In good times, when a rising tide lifts all boats, it's great to have a variable pay package that can lift your total income substantially. In lean times, when even your best efforts may not produce a respectable outcome due to circumstance beyond your control, a solid base pay package is worth more.

Its the classic bird in the hand vs. bird in the bush. The birds in the bush are more prone to take flight these days...

[Ann Bares]

What a great discussion!

Leanne:
You're correct - this is a survey of employers, not employees. Certainly always best to get it from the horse's mouth, so to speak - but still interesting to hear the perspective from the employer side of the table. As for the Drive/Dan Pink link ... I think we've probably said it all (ad nauseum)in earlier posts and comments (on this blog and others), so I'll just let that topic rest.

WG:
Yes. It IS a sign of the times, isn't it?

Blair:
Sounds like we are in agreement. Unless the foundation is a strong one, moving forward to pile on (or link) other programs and rewards to it is not going to be well received.

Windsor:
Good points - no matter the theory, basic needs must be met before frills will be seen as having much "currency".

Jamie:
The birds may indeed be getting itchy ... and perhaps that is what these surveyed employers are acknowledging.

Thanks - all - for your comments and thoughts here!

[Kevin Trokey]

This is a great discussion.

I believe any employer who believes that motivation/rewards can be reduced to any single factor would be, at best, fooling themselves. The most engaged employees are going to be those who understand both current and future paths of the organization and their role along that timeline. Their role has to be identified and rewarded by financial and non-financial terms alike. The financial piece is easy, it's the commodity of reward systems. The employers most successful at driving employee engagement will be those who wrap the commodity of the financial reward with the non-financial, customized incentives most valued by each employee.