Incentives for Employee Retention in 2022 and Beyond
“Building incentives that reinforce purpose in the employee experience is the key to realizing true engagement and employee longevity.”
It’s easy to fall into the trap of thinking your best employees are leaving because of money, but it’s not that simple. According to an article in The Washington Post, companies are planning to give pretty substantial raises in 2022. With an average overall increase of 3.9 percent — nearly 8 percent in some sectors — it’s the biggest wage jump we’ve seen in more than a decade. It has never (quite literally) paid to switch jobs more than now.
So, is it any wonder why people are leaving their current companies en masse?
If 2021 taught us anything, it’s that our expectations are rarely met and what appears to be the easiest answer usually isn’t. Living in a pandemic has made us question what’s around every corner while also reexamining our priorities and what’s important to us. We are now permanently changing the way we work, whether it be hybrid, fully remote, or whatever comes next.
However, while adaptability has become a more dominant trait in most businesses, how we are incentivized for our work hasn’t really changed at all.
Companies are twisting the Rubik’s Cube of retention to identify how they can keep their best people while simultaneously witnessing other companies poach their top employees with a dramatic salary increase. But is salary the only leverage we have?
The short answer is: no. If your goal is to retain great people and build a strong, employee-first culture, it’s not even the best option.
As stated in GWI’s Pursuit of Purpose study, “Professionals have been sheltering in their jobs and a lookout for new opportunities is inevitable as economies recover.” Whether they’ll take that leap depends on a combination of how well new operational challenges are managed and how well businesses adjust to the growing demand for a more purpose-driven career.
So, it stands to reason that by understanding what employees really want from their work, we can design incentives that help support a healthier, more productive, and happier workplace.
Why traditional incentives won’t work as well in 2022
Traditional incentives such as bonuses and performance-based pay have been the staple for many years because they work…for a limited period of time. However, the main reason people are leaving their jobs since mid-2021 isn’t because of pay. As stated in the Harvard Business Review, people may receive a higher pay at a new job, but that doesn’t imply it was the reason for their departure. Engagement, peer relationships, and opportunities for advancement are just a few incentives that influence an employer’s value proposition. While pay may be part of the equation, it’s more of a deal sealer than the primary attraction.
According to the Pursuit of Purpose study by GWI, the new “YOLO” mentality that’s common amongst consumers often manifests as a search for purpose in the workplace. This suggests that employee happiness and loyalty actually stem from connection to colleagues, the work they’re doing, and — most importantly — a purpose.
Without a sense of purpose, employees are going to be less productive, less likely to feel connected, and more likely to leave. This is especially true today as we see employees who are emerging from a two-year holding pattern explore opportunities that connect them more closely to their purpose. As mentioned in the GWI report, this means allowing employees the freedom to blend their passions with their work, regardless of seniority.
Rethinking incentives to drive greater connection
While compensation is still critical to attracting new talent, employee incentives don’t have to be monetary to be impactful. Incentives that drive engagement and connectedness versus specific behaviors typically aren’t monetary. While money can influence behavior in the short term, decades of research tells us that it doesn’t affect long-term connection or purpose. Building incentives that reinforce purpose in the employee experience is the key to realizing true engagement and employee longevity.
It starts with simply understanding how our brains work. Neuroscience tells us that motivation is driven by status (how we perceive our position in relation to others), certainty (how sure we feel about situations that affect us), autonomy (how much control we have over the decisions that affect us), relatedness (our sense of belonging or quality of relationships with others), and fairness (our sense of justice and right and wrong). When people feel they have these things, there is a natural reward response that deepens connection.
Growth and purpose-based incentives provide the greatest foundation for employee engagement and loyalty. Let’s take a look at some examples based on the tenets of motivation:
- Providing ways for junior or mid-level career employees to engage more with senior leadership.
Whether in one-on-ones or on projects, creating opportunities for everyone to be involved or contribute to leadership checks the box for status, certainty, relatedness, and fairness. - Highlighting employee contributions and achievements across the company. Giving regular kudos and sharing employee wins checks the box for status, relatedness, and fairness.
- Sharing strategic plans with employees and providing opportunities for them to drive highly visible initiatives. By sharing goals and allowing for these types of development opportunities, you’re checking the box for status, certainty, autonomy, and fairness.
- Engaging employees in co-creation efforts to drive the hybrid workplace experience. Allowing for employee involvement in the development of these work processes checks the box on certainty, autonomy, relatedness, and fairness.
- Defining clear career paths that provide multiple tracks for growth. Rather than up or out, offering clear learning opportunities that align to these career paths checks the box on status, certainty, autonomy, and fairness.
- Providing opportunities for employees to find belonging in communities. Whether for work or personal interest, prioritizing gatherings that foster inspiration, collaboration, and community checks the box on relatedness and fairness.
- Designing hybrid work systems and clarity of processes that promote autonomy and connection. This type of intentionality checks the box on certainty, autonomy, and relatedness.
- Offering democratized leadership training opportunities. Allowing for leadership opportunities at all levels checks the box on status, certainty, autonomy, relatedness, and fairness.
- Providing unexpected autonomy. Whether it be extra PTO days for employees to spend how they want or surprising them with gift cards they can use to take care of themselves and others, this checks the box on status, autonomy, relatedness, and fairness.
- Set business outcome goals while providing teams with the latitude to determine how they achieve them. This challenges people but also allows for initiative checks the box for status, certainty, autonomy, and relatedness.
- Minimizing organizational noise. Reducing transactional processes that may keep employees from focusing on the work they find most meaningful can check the box for status, autonomy, certainty, and fairness.
Why focusing on employee experience pays off
If there ever was a time to focus on the employee experience, it is undoubtedly now. Not only to attract new and retain existing talent, but also to ground your organization in human-centered ways of working that encourage long-term engagement and retention.
In the next three to five years, we are likely to see unprecedented levels of employee movement with clear winners and losers. Those that “win” will be the ones who retain (and gain) top talent because they focus on building a great employee experience that acknowledges the motivations of their employees. These companies will likely see conversations about money become less frequent while also seeing productivity and performance levels increase.
Want to be in the winning column? Tap into your employees to better understand their motivations. Co-create growth or purpose-based incentives that check the boxes for your employees and achieve your organization’s desired business outcomes. Research tells us it’s more than likely to pay off.
Slalom is a global consulting firm focused on strategy, technology, and business transformation. Learn more and reach out today.
