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Great read, Jim, and thanks for posting. It stands in stark contrast to another article I read today from an unnamed compensation data provider opining that employee engagement is dropping because not enough workers are "very happy" with their pay (although 57% according to the article feel they are paid "competitively").

There are still some folks out there (many?) with lots of HR and Comp acronyms after their name that believe throwing a lot of money at people is the best, and maybe only, way to have a happy and engaged workforce.

Appreciate the feedback, Scott. Different strokes work for different folks.

No one reward type... cash, plaques, prizes, etc... is universally ideal. Same with atta'boys, even though they should be automatic. Positive reward consequences that have a personalized value are always most effective. Gen Y is particularly sensitive to such features. What creates long lasting memories depends on individual personality and preference.

While I'm not a compensation professional, I read this blog for better insight into how compensation folks think. It seems that more and more companies and HR folks are confusing Recognition for Compensation. To me, the only true form of recognition is my pay and benefits. Full stop. Recognition efforts are only distraction if pay is not in line with the work; first and foremost. Having wellness programs, 3rd party recon programs, etc is great. But if the company doesn't compensate realistically, these come off as a "cheaping out" effort to many employees. I think the problem is the attempt to construe recognition as if it were actual compensation. It is not. I can’t eat recognition. I can’t put recognition in my kid’s college fund. And recognition doesn’t fill the gas tank. The only meaningful recognition is my salary. When all is said and done, the questions I ask myself are; "Is my wage keeping up with cost of living? Are benefit cost increases proportionate with the raise? Is the increase I’ve earned in line with my contribution to the company's performance?" If the answer to any of these questions is 'no,’ recognition efforts are hollow and/or disingenuous. The move to call compensation by the newspeak “Rewards” is evidence of this. It also implies wages and benefits are something the company is “giving”, rather than a natural outgrowth of the value proposition. To me and many, many other Gen Y’ers recognition is not, nor ever will be, a form of compensation. If fact, I think we may be at the point of “peak recognition”. When salaries aren’t done right, the doublespeak of recognition systems that don’t provide employees monetary value only gets louder and louder. After all, communication is everything - but if you’re not keeping up with COLA, it’s time to start being careful with what your employees are saying. Love your posts!

I think all good compensation practitioners realize that pay and benefits need to be "enough" or "competitive" first. That's a basic foundation thing. All the ice cream socials, pats on the back and free soda in the world won't make the employee want to stay if they are struggling to pay the rent. Jim is not suggesting that non-jingling rewards can replace adequate pay. Rather, they are a necessary supplement to adequate pay for employee retention.

Assuming that pay is in alignment, recognition becomes important to employee retention. How many people quit jobs because their boss is a jerk, their coworkers are backstabbing snakes, and/or they never ever hear anything good about what they do - in short, pay is fine but they feel unappreciated or hate the work environment? The answer is, a lot of people. They leave the bad environment for a new employer with similar and sometimes more pay, and almost always cite "a better opportunity" or "more pay" as the reason for leaving when the reality is things had gotten so bad that no amount of money would make them want to stay.

More pay can't override a horrible work environment and lack of appreciation for long, just like you can't put gas in your car with a pat on the back. The two things - pay and recognition - are both important "rewards" and one cannot replace or override the other. Of course, you're never going to be able to make every employee happy all the time and not all employers put these ideals into practice. But if you find an employer that pays fairly and does recognition well, I bet you'll stay awhile.

Thanks to both Carefully and Scott for their completely valid comments! An old article called "Pay is a Leaker" expanded on that basic subject. Remember Maslow's Pyramid. Soft rewards of all kinds have unique advantages but must complement adequate pay to be effective.

If people only changed jobs due to money alone, everyone would quit as soon as they discovered another that paid more. Pay is like oxygen: essential but not necessarily sufficient for life. You can't survive without the right mixture, but you need more than air... and each such additional supplemental expectation can be different, just as personal preferences and opinions vary.

"Assuming that pay is in alignment, recognition becomes important to employee retention."

Here's the main issue. Without transparency, how can an employee be confident of this? For example, my company has been 'gaming' gallup and market surveys for years. This is done by making individual managers 'accountable' for pay & bene satisfaction(even tho they're capped to a max raise of 2%) and not incorporating competitive salary data if that is for a unionized competitor. And now they can't figure out why there's a retention problem.

Scott was right and so are you. Confidence is a different issue, requiring a different article.

Transparency is frequently discussed here where most of us are strong proponents of openness... partly because it forces management to satisfy itself that the pay rates can and will be properly defended. That said, it remains an uphill battle for us comp folks because the C-suite execs tend to have very superficial knowledge of the details the HR/comp people feel prove the pay right. Long story short, the supervisors can't win in that lose-lose situation.

See Brennan's Laws for the shortest answers ;-)

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