I saw a post recently on Blanchard LeaderChat about the reasons employees join and stay with organizations. It’s a very enlightening list – you can check it out here. The number one reason was money. I was really surprised.
As HR pros, we’re often quick to say that money isn’t a motivator or a top reason for employees when it comes to career decisions. But maybe after a few years of corporate belt-tightening…the trend is changing.
That’s why, when my friends at the Hay Group sent me their latest study on employee pay increases, I decided to ask a few questions. If you’re not familiar with them, the Hay Group is a global consulting firm that develops talent to be more effective and motivates them to perform at their best. They have 85 offices in 48 countries and work with over 7,000 clients worldwide.
I spoke with Tom McMullen, vice president and North American reward practice leader, and Jeff Blair, U.S. productized services leader about the Hay Group’s latest survey on U.S. employee pay increases.
Tom/Jeff: Hay Group’s forecast results are based on the latest data available from Hay Group’s U.S. database, provided by 350 U.S. organizations from March through June 2012. This is Hay Group’s 33rd year of conducting the survey. Typical respondents to the survey include compensation professionals in the human resources departments of small to large size U.S. organizations across a wide range of industries. Hay Group’s U.S. database represents compensation practices for almost 2,900 companies and over 6.7 million employees.
The survey mentioned that employees can expect a median increase of 3% next year. Frankly, that doesn’t sound like a lot. Then I read the news about rising food and clothing prices. How are pay increases stacking up with the cost of goods and services?
Tom/Jeff: After factoring in annualized consumer price index growth at 2.2 percent, the resulting pay movement for 2013 is a net gain of 0.8 percent, after employees saw an estimated 0.6 percent net loss in 2012.
So, if an employee decides they want to approach their boss about pay, what can they do to prepare for the conversation? In my opinion, this is one of those conversations that employees need to prepare for and often they don’t.
Tom/Jeff: The employee should show they are serious about this conversation by setting up a meeting to discuss this with the manager rather than by doing it in an informal setting. The employee should be able to articulate the contribution they are providing to the organization and how this relates to the performance expectations of the role. If there is a belief that performance is strong and contributions exceed the expectations of the role then the employee should make their case dispassionately using specific examples.
Also consider asking the manager what needs to be achieved to be able to advance to the next level of work. This should send a loud signal that the employee believes that his performance is strong and he is motivated to advance in his career. It is often quite helpful to have this type of meeting prior to a formal compensation review meeting to allow the manager advance notice of the employee’s thinking.
On the flip side, when employees do talk with managers about pay, sometimes the manager is caught off guard and can say the wrong thing. If I’m a manager and one of my employees comes asking for more money, what are 1-2 tips I should keep in mind?
Tom/Jeff: The manager should have a good understanding of what is driving the employee’s request about pay. Is it a comparison to the external market, comparison to pay levels internally, comparison relative to perceived performance contribution or something else? Often requests for increased pay can be signals that the employee feels they are being disadvantaged and not treated fairly within the workplace – the real issue could be concerns around career development, job design, coaching and feedback or recognition.
The key thing is for the manager to engage the employee in a discussion to get to the root cause of their concerns and to consider how this can be addressed – by monetary means or otherwise.
Last question, are you seeing any trends in compensation that business pros should start paying attention to?
Tom/Jeff: With constraints on financial rewards such as base salary increases and bonuses, organizations are increasingly focused on the range of total rewards with an increasing focus on non-financial rewards such as the ones listed above, with a particular focus on developing and fine-tuning their career development programs – as we have found that this is the primary work environment dimension that drives retention within the organization.
Again, my thanks to Tom, Jeff and the Hay Group for sharing their expertise. If you’d like to read more about their latest survey, you can check it out here. You can also follow their blog or Twitter account.
I’ve been noticing the same trend toward training and career development in lieu of monetary rewards for a while. I’m glad to see I’m not the only one. What are you seeing where pay and increases are concerned? Let us know in the comments.
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Matthew Harrington says
Thank you Sharlyn for this eye-opening finding. As a professional that focuses on motivation of employees, I know money is only a temporary fix, but I think your finding does cause concern. Are our professionals (especially Gen X and Y) becoming more transfixed on the salary rather than the usual intrinsic motivators?
From my perspective (as young professional that studies young professionals) I’d add some of these somewhat blunt reasons for the possible change in the motivation and retention paradigm:
1) The need to build safety and security especially with the current economy.
2) Gen X and Gen Y focus social acceptance and success around materialistic possession (need money to buy things); our culture encourages this with the Real Housewives of…, Urban music culture, and celebrity ideology.
3) Gen Y want a work life balance, but in order to enjoy the “experience” (travel, city living, excursions) you need money. This is sensationalized with social media, especially Facebook as there can be a tendency for “one-up-manship” in my generation as pictures and check-ins show who is on the move and who is “successfully having a good time.”
4) The collective millennial college debt is currently $1 trillion according to a Wall Street Journal Study and we (young professionals) are trying to pay this off.
5) We are defined by our mobility and our ability to be current, especially in the acquisition of the next tech product (we will sacrifice eating lunch and paying for the laundry mat in order to have a Macbook pro or flatscreen). Because of these two things, we are defined by our bank account (unfortunately).
Thanks again for your post and your reference to the Blanchard site.
Matt
Marisa says
Matt,
That’s really interesting feedback. I think you’re on to something.
Sharlyn Lauby says
Thanks for the comments!
This conversation about money reminds me of Maslow’s hierarchy. We need a few basic things to feel safe and secure – money is one of them. We don’t have to make a million dollars but we do need to be comfortable that our rent is paid and we can eat. Then we can start to focus on engagement and higher levels of performance.
Doug Muhle says
Sharlyn,
Great post! As a small business owner of over 20 years, I’ve seen over numerous people come and go, and sometimes even become my opponets.
Learning how to manage people who are asking for a raise is often a hard and grueling task, thanks for the report and heads-up!
Sharlyn Lauby says
Thanks for the comment Doug!
PM Hut says
The trick is to only ask for a pay increase if you think you will get it (whether you deserve it or not is purely subjective and is irrelevant). If you ask for a pay increase and you don’t get it, then most likely it’ll backfire on you and your manager will be skeptic of your next action (are you going to search for another job? are you going to talk to your manager’s manager)
One thing is for sure though, if you don’t ask, you don’t get. And the 3% increase every year is optional for many employers nowadays.
Sharlyn Lauby says
Thanks for the comment! I’m a big fan of the “don’t ask, don’t get” philosophy. But as you mentioned, asking at the right time always helps.
David Atkins says
I’ve always thought, those who say ‘money isn’t a motivator’, either already have money or have already earned it.
I remember taking an organizational behavior class in college, and remember vehemently disagreeing with my professor, while discussing if money motivated employees. I still believe that it can, and is the strongest possible motivator. I don’t understand those that disagree? Although, I’ve not made a lot of money, so when I do I may better understand why it’s not a motivator. But, I’m married, I have three children, and I ALMOST would do anything for the right amount of money.
Thanks for the great article.
Sharlyn Lauby says
Hi David. Thanks for the comment. I’m not sure I think of money as a motivator as much as the lack of money can be a demotivator. That might sound crazy but I believe we all need to have a certain amount of money to survive – I’m not talking millions but enough to pay the rent and put food on the table. Until that is achieved money is a primary motivation. Once it is achieved, then money is still a factor but not the only factor.