When It Comes to Employee Engagement Strategies, Keep It Simple
The whole workforce will be engaged and satisfied when the CEO adopts this pay philosophy
Employee engagement is a ubiquitous business topic. Everyone pursues it and no one feels they succeed at it — at least not to the extent they expect to.
We initiate a host of efforts to elicit passionate commitment from our workforce members:
- Conduct surveys
- Implement employer brand strategies
- Organize special employee events
- Offer incentivizing perks
So why aren’t more companies seeing the results of that effort? Is it possible that most business leaders make the engagement issue too complicated?
In consulting for other businesses, I’ve seen how complicated approaches to increase engagement leave everyone feeling unsuccessful.
I’m Adopting This 15-Word Philosophy
Eric J. McNulty, director of research at the National Preparedness Leadership Initiative, wrote about this issue a few years ago. In his article, McNulty describes the barraging information era we live in: the plethora of business books that come out every year on how to improve engagement, build trust, and employ mindfulness — not to mention the flood of Twitter and other social media feeds offering tips, steps, and secrets on these subjects.
And yet, surveys continue to reveal that employees aren’t feeling any better led and employers aren’t feeling their people are any more engaged. In that context, McNulty offers this insight:
“I was stopped cold recently by a simple formula for effective leadership. In the book The Leadership Challenge, by James M. Kouzes and Barry Z. Posner, first published in 1983, a CEO offers this straightforward philosophy: Grow the company profitably. Share the wealth with employees. Ensure that everyone is having fun.”
When I read this direct and open prescription, I had a similar experience to McNulty. I wondered why anyone has ever felt the need to write anything else about running an organization! These 15 words encapsulate an intensely prudent yet humane approach to business.
The Philosophy Explained
Grow the company profitably.
Obviously, every business is shooting for profits. But the purpose is more than profits for profits’ sake: financial growth satisfies investors and provides funds to increase internal rewards, sustain training, and fuel ongoing innovation.
Share the wealth with employees.
Sharing the wealth reflects consideration for the full range of stakeholders: shareholder, employer, and employee. My company (VisionLink) calls this approach of sharing wealth with the employees who help create it value sharing.
Ensure that everyone is having fun.
What better way to measure employee engagement than by people enjoying what they do?
So, the three areas of emphasis are profit, value sharing, and fun. If a business can pull off all three segments of this advice, I’m convinced that organization will thrive.
I won’t claim to be an expert on profit or fun, but I have 20+ years experience in the field of employee pay and value sharing.
Expert Advice on Pay Practices to Avoid
Most organizations struggle to find a pay approach that helps instead of hinders engagement and performance. Here are the four most common mistakes I see business leaders make when it comes to pay:
1. A Wrong or Incomplete Blend of Compensation Elements
In our experience at VisionLink, the biggest compensation mistake of growth-oriented private companies is striking an ineffective balance between short-term and long-term value sharing. Organizations are almost always too focused on short-term pay strategies.
Many companies ignore or dilute rewards that promote sustained performance. I know this because a few years ago, VisionLink completed a study of 139 companies with revenues between $250 million and $1 billion, and we made the following observations:
- Top quartile companies placed a greater amount of compensation “at risk” — 66% vs. 52%.
- Top quartile companies placed greater emphasis on long-term awards — 42% vs. 33%.
In addition to striking the right balance between short- and long-term awards, companies must also make sure they have an effective and diversified blend of the following plan components: salary, bonus, long-term cash incentives, equity or phantom equity, retirement, core benefits, and executive benefits. Those components, when properly employed in an organization’s compensation strategy, have a similar effect as asset classes used to develop a balanced investment portfolio.
Why is this important to consider? The right blend of compensation elements is essential to impacting three key outcomes that most growth-oriented companies need to achieve:
- Increased performance
- Meeting the “satisfaction quotient” that fulfills both owner and employee objectives
- Attracting and retaining premier talent
2. Value Sharing Opportunities That Don’t Result in Meaningful Payouts
Business leaders need to have a “sense” for what their employees, and their key performers in particular, will consider meaningful when it comes to the amount of value they should have a stake in.
With that sense in mind, organizations must determine how much value-sharing is possible at various company and department performance levels — at VisionLink, we set three performance levels, which we call base, target, and superior. Each performance level must equate to a different payout quantity.
The payouts for each performance level can also be broken down by salary tier. Since junior employees with lower salaries will rate payout quantities at a different caliber than senior managers who enjoy higher salaries, organizations can tier their payouts.
The balance is to have compensation opportunities that are meaningful and motivational to all participants while being aligned with shareholder goals and expectations. Certainly, market pay data can provide some guidance here, but chief executives make a mistake when they assume such data alone should drive their decision-making on incentive pay levels.
3. Performance Requirements That Are Out of Reach or Too Complicated
For compensation to have a positive impact on engagement, employees need to be able to say, “I can see precisely how my performance aligns with my pay!”
Employees become frustrated or indifferent if they feel detached from the results that control their rewards package, or if the metrics associated with those results are too complicated to understand.
This is usually where CEO frustration comes in as well. The chief executive feels as though employees don’t “get it” — and don’t have the same passion for the company vision that he or she does.
Ultimately, if employees don’t feel they can actually impact the performance that determines their compensation, there will be no positive return on the pay investment the company is making.
4. Ineffective Rewards Communication and Reinforcement
Communication and reinforcement are keys to creating long-term focus and commitment in an organization. In this context, rewards remind employees what is expected — and, more importantly, why it’s worth it to strive to meet those expectations.
Each rewards program is like a promise between employer and employee. It’s a nonverbal way for the employer to say, “If you own these outcomes, here’s what it will mean to you.”
A business leader’s success at communicating their desired performance outcomes and promoting the associated rewards will, in large measure, determine whether or not the performance is attained.
Ultimately, CEOs should insist on a rewards reinforcement strategy that consistently helps employees understand the relationship between the company vision, its business model and strategy, the employees’ roles, and how those employees will be rewarded for fulfilling those expectations.
This is what is known as creating “line of sight” in an organization — and without it, there is no engagement.
Conclusion
Building a compensation strategy is not complicated, but it is nuanced. It requires attention to the principles and details described above if it’s going to have a positive influence on employee commitment and passion. CEOs who put these principles into practice will see multiple outcomes:
- The quality of talent they can attract and retain will improve.
- Employee engagement will increase.
- Performance will magnify.
- Business growth will accelerate.
- Shareholder value will increase.
Doesn’t sound too bad.
Originally published at https://visionlink.co.
