In my last post on Compensation Café, I wrote about the necessity of communicating more than just total compensation and total rewards to employees who also are seeking to understand the greater meaning in their work.
A post earlier this month by Café blogger Chuck Csizmar and a couple of posts written by another Café poster Dan Walter have inspired my thinking as well. In his April 4 post, Chuck points out the hazards of focusing rewards on the “favored sons,’ which serves only to demoralize the vast middle percent of employees. Or, as Chuck put it:
“As your bread-and-butter contributors see how the organization's performance-blindness hampers their own career progress, engagement and productivity start to slacken. A natural corollary to lower engagement is higher turnover. The first to go would be those with the most options, those whose performance record would be appreciated elsewhere.”
In a February post, Dan explained what happens when employees are left to their own imaginations to fill in the blanks on compensation:
“When given only their imagination to fill in the blanks, people’s pay is always too low, sales staff always make too much and the executives of the company make more money than is possible. I once spoke to people at a $100 million company who told me that their CEO made “at least” $400 million annually. They came to this conclusion based on the fact that he….oops there were no facts!”
The same is quite true about the value employees feel they are contributing to the success of the organization. Overall, organizations tend to do an excellent job of communicating this to top performers – the top 10% “elite” employees – in a variety of ways including raises, promotions, bonuses, incentive structures, formal recognition. But what about those in the middle? These employees are often left to draw their own conclusions (as reported by HayGroup):
“There is a danger that ‘average’ performers – who make up the bulk of the population – can find themselves ignored in the rush to reward top talent, and weed out poorer performers. But for most companies, shifting performance in this middle category is what will really make a difference to surviving the present recession and performing in the upturn. Organizations should not take their eye off the ball on efforts to keep this critical set of staff motivated, engaged and adequately rewarded for the positive contribution they make.”
Communicating these additional messages of value contributed by the employee and do so in a way that directly recognizes and appreciates their contributions to deliver the company’s strategic objectives is undeniably important. But we must not lose sight of the importance of laying the correct foundation.
In a March post, Dan dug into this more deeply, telling the story of a company in which the employees loved the work they did and the company they worked for, but all were paid below market rate. Though many of these happy, engaged employees were being actively recruited by recruiters, none spoke up, believing company leaders would pay more if they could. However, company leaders assumed, since employees were not complaining, that the general happy atmosphere and work culture were filling the pay gap the leaders were most definitely aware of.
Let me be clear. Strategic employee recognition alone cannot overcome a poor compensation strategy. Employees must be paid appropriate, fair compensation for their work. This is the base of trust and fairness upon which additional efforts for recognition, culture and engagement can be built. As my mother always told me as a child, I could not have dessert until I finished my dinner. Be sure you’re providing an appropriate “dinner” for employees before layering on the “dessert.”
As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin, Montreal and Boston. Follow Derek on Twitter at @globoforce.