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The great retention crisis - a pay rise is not the answer

Written by Stephanie Kelly on Monday, 11 April 2022. Posted in Leadership, HR, People

Many businesses and HR leaders think that increasing pay is the right – and easiest – solution to solve the current job market crisis.

The great retention crisis - a pay rise is not the answer

Many businesses and HR leaders think that increasing pay is the right – and easiest – solution to solve the current job market crisis. However, higher pay and bigger bonuses not only fail to encourage better performance but can also demotivate and reduce productivity. 

HR teams are currently in a HR minefield. Ongoing battles with Covid and now inflation, are massively impacting how employees view the workplace, with many rethinking priorities and jumping ship - a third of UK workers are considering moving to a new job this year. As such, it’s never been more important for HR teams to rethink tactics to help keep their workforce resilient.

Salary isn't everything

This is not to say salary isn’t important, being paid appropriately does matter. But it should not be used as a motivational tool. Not only will this cause escalating costs for the business, it will also demotivate other employees on a lower wage bracket. When money is used as the main motivator to manage people, it is not good management. 

Workers are more productive when they have a purpose. According to McKinsey’s ‘Great Attrition’ findings, more than half of employees who left their job in the past six months did not feel valued by their organisation (or manager) and lacked a sense of belonging. Almost all of those cited a desire to work with people who trust and care for each other as another reason for quitting. 

Put simply, creating a sense of belonging is critical for an organisation’s performance and progress. It’s not enough to give a pay rise because when goals are mainly financial, purpose is often lost. Appreciate and nurture talented people in order for them to stay. 

So, how can businesses actually encourage employees to stay? 

Encourage risk taking - Staff should feel empowered to tell their manager if they make a mistake, without fear of repercussion. It’s vital to create an environment where it is ok to make mistakes, especially if they can be learnt from.

Speak one’s mind - Successful work relationships are built by staff being able to speak their mind, share concerns, raise questions and disagree without fear of judgement, including from management. It’s about motivating people to challenge the status quo, not just go along with it.

Listen to feedback - Staff need regular opportunities for feedback and every team member must be given a voice – even the quiet ones. Managers should encourage everyone to contribute to discussions and there should also be formal feedback vehicles, such as employee surveys.

Have your employees back - Feeling you can count on people drives connection and belonging. Employees need to know their team will help them during times of trouble, both personally and professionally. This sort of team building is a key competency of people managers. 

Share common goals - Relatedness is also about self-identifying with a team. Regular group goal setting and reflection are great ways to ensure everyone has a united sense of purpose and direction. If teams are working remotely, daily group check-ins are a must.

The bigger picture - Everyone should know where their work fits into the bigger picture, so they can recognise the value of their contribution. Make sure those close to the action have input into critical decisions, know people’s strengths and will draw them into company initiatives.

HR and business leaders cannot tell people to be motivated, happy or positive. They can try reaching for a quick fix by giving people a pay rise, but it won’t efficiently address recognition, connectedness, respect and control over workplace environment and meaningful work. 

As Maslow's hierarchy of needs theory suggests, once we feel secure in an environment, we can establish meaningful connections with others, grow in self-esteem and strive to ‘be all that we can be’. By understanding where employees sit on that scale, businesses can have a better understanding of what to do to keep them motivated. The answer isn’t just a pay-rise.

About the Author

Stephanie Kelly

Stephanie Kelly

Stephanie Kelly is the Chief People Officer at IRIS software Group, one of the UK’s largest software companies. Stephanie is responsible for employee experience, including talent, learning and development, benefits, diversity and inclusion, and office environment. She is also a trained executive coach, with a passion for identifying, developing and supporting high potentials and great leaders.

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