Retaining high-performing employees is a critical endeavor for HR leaders. It’s even more high stakes today, considering the cost of turnover carries a price tag many organizations can’t afford right now.
What’s the easiest way to retain your top talent? Salary is an important factor, but it might not move the needle on retention as much as you think.
I’m not here to tell you that pay doesn’t matter and that La Croix-filled fridges and virtual escape rooms can replace a fair wage. Plus, I can’t argue with fact: According to Gallup, pay is the most important credential when jobseekers evaluate job opportunities. The initial allure of a promising pay bump may bring top talent in, but it can’t keep them forever.
Put differently, there’s a limit to what money can buy.
Work for a Paycheck and a Purpose
Compensation is like HR hygiene when it comes to retaining talent. To extend the metaphor, if you don’t bathe or brush your teeth, negative consequences will follow. Good hygiene is seen as table stakes rather than recognition-worthy.
Compensation is similar. There’s a certain level that has to be met to retain employees. People who know their employer isn’t paying them fairly will likely find another job that will. But beyond that critical threshold, more money doesn’t contribute nearly as much as other factors, such as engagement, to increase employee retention.
This idea was developed by behavioral scientist Frank Herzberg. His Two-Factor Theory, introduced in 1959, indicates that pay is necessary but not a strong motivator for employees.
Moreover, pay is a Band-Aid solution that doesn’t get to the root of organizational issues. For example, a dissatisfied, disengaged employee might decide to stay at a toxic company if given a significant pay bump, but their reasons for being unhappy in the first place won’t vanish with a larger paycheck. Moreover, if disengaged employees are paid more to stay, they still might not be reaching their full potential or contributing their best work.
Meanwhile, a recent Gallup analysis found that engaged employees would need a 31% pay increase to consider working at a different company, while unengaged employees want only a 22% pay increase to change jobs. While pay matters, employee engagement plays a crucial role in what pay means to employees.
The Value of Employee Engagement
One of the best ways to increase and sustain retention is to invest in employee engagement.
Engaged employees feel emotionally connected and committed to their organization. As a result, they are more likely to be more productive and perform at a high level. Engaged employees also feel more workplace satisfaction, are inherently more motivated, and feel psychologically safe.
Finally, engaged employees are more likely to stay at their workplace for longer, which reduces turnover and its associated costs. Low-engagement teams experience turnover rates that are 18% to 43% higher than highly engaged teams.
It’s easy to build habits that improve engagement, and you can get started today. Here are some specific examples of how companies can engage employees:
- Provide opportunities for employee feedback. Ask employees for their input on how to improve the workplace. This shows that you value their opinions and are committed to making the company a better place to work.
- Recognize employee successes. When employees do good work, take the time to recognize their efforts and accomplishments. This shows that you see and truly appreciate their contributions.
- Offer flexible work arrangements. Many employees value flexibility in their work arrangements. This could mean allowing them to work from home, adopt a hybrid schedule, or work flexible hours.
- Provide opportunities for professional development. Help employees develop their skills and advance their careers. This could involve providing them with training, mentoring, or tuition reimbursement.
- Create a fun and engaging work environment. This could involve organizing company events or teambuilding activities or simply creating a workplace where employees feel comfortable and welcome.
The Takeaway
If you want to retain your most valued employees, it’s critical that you pay them a fair wage. Then, place your time and effort into creating a workplace where employees feel engaged and valued. The return on investment is more bountiful than you think.
Raphael Crawford-Marks is the Founder and CEO of Bonusly, an enterprise platform that helps companies create high-performance, high-engagement workplaces. He’s passionate about building products that help people connect with their work and each other in meaningful ways.
The post What Money Can’t Buy: The Role Employee Engagement Plays in Retention appeared first on HR Daily Advisor.