Can good employees be retained with high salaries?

Introduction: The shortage of talents has always been one of the important factors that plagues the rapid development of companies. In order to obtain high-quality talents, many bosses are willing to spend a lot of money. However, the increasing investment in rewards and compensation has not eliminated the trouble of talent shortage, especially the failure to retain those employees with key skills or outstanding performance. Can good employees be retained with high salaries? Let’s talk about it in detail below.

In large companies, the impact of the resignation of a core employee may not be that great. In a startup team, there may only be one or two people responsible for the core business. When one person leaves, it means that the salary is drained from the bottom of the cauldron.

When describing the effectiveness of the team, Mark Zuckerberg once said, "It's not about the amount of money. For me and my colleagues, the most important thing is that we create value together." As a manager, what exactly do you rely on to retain outstanding employees?

The limitations of using money to retain talents

Monetary incentives are the most common method for motivating employees in most companies. The logic is simple and clear: stimulate employees to achieve the goals that managers hope to achieve through salary increases.

Money can indeed effectively attract, motivate and retain employees, and cultivate high performance. Monetary incentives tend to be most effective when there is a direct and clear cause-and-effect relationship between an individual's behavior and the desired outcome, and when the desired outcome is easily measurable.

How to understand this sentence? Xiao Ming sold 10 kilograms of crayfish and earned 100 yuan. His sales behavior is directly related to the expected results and can be easily measured. In this case, the monetary incentive is Effective.

However, employees working in companies generally make two plans, answer five cooperation calls, and reply to seven emails a day. There is no clear cause-and-effect relationship between their daily work and the expected results of the project. And it is not quantifiable. At this time, financial incentives will cause problems.

The limitations of monetary incentives are reflected in the following four aspects:

First, monetary incentives often only focus on activities that can obtain immediate returns, while other activities that cannot be realized temporarily have an impact on the entire Companies are equally important but don't get as much attention. For example, if financial incentives are used to promote the achievement of annual budget goals, many companies will only take actions that are in line with their short-term interests at the expense of long-term investment, which is detrimental to the company's long-term development.

Second, monetary incentives focus more on individual gains and less on social behaviors, such as teamwork or cross-department collaboration. On the surface, financial incentives can stimulate individual initiative and improve efficiency, but in fact they will affect team collaboration.

Third, using inappropriate financial incentives can change people’s expectations for ethical behavior. Financial incentives replace moral incentives, which may change people's perceptions of what is right and wrong.

Two economists from Cambridge once conducted a study.

A kindergarten clearly stipulates that parents must pick up their children before 4 p.m. But parents are occasionally late. They offer a solution: fine parents for being late.

They conducted research on 10 kindergartens at the same time, and the study lasted 20 weeks. When the study began, no fines were immediately introduced. In the first four weeks, the economists only tracked the number of late parents: an average of eight parents per day were late per day. In week 5, a penalty mechanism was introduced, announcing that parents would be fined $3 each time they were late for more than 10 minutes. The maximum penalty could be $380 per month. After the introduction of the fine system, the number of late parents increased instead of decreasing. Soon there were 20 parents showing up late each week, more than twice the initial average number of late arrivals.

The kindergarten program replaces moral incentives with financial incentives, so that parents who are late can make up for their guilt by spending a little more money. Therefore, being late is a legitimate behavior, so why rush to pick up the child?

Fourth, excessive financial incentives can lead people to cheat, especially when regulations are loosened and the possibility of being caught cheating is small. case.

Business managers should use monetary incentives carefully and supplement them with non-monetary incentives.

Effective non-monetary incentives

Non-monetary incentives include social recognition, performance feedback and intrinsically attractive work tasks. The psychology community believes that non-monetary incentives are at least as effective as monetary incentives. Furthermore, where monetary incentives are often ineffective, non-monetary incentives appear to be very effective.

Two professors from the University of Cambridge compared the relative impact of monetary incentives and non-monetary incentives on employees of American fast food chains.

The circumstances of this experiment are ideal for studying the effects of monetary incentives because there is a causal relationship between employee behavior and outcomes, and the results are measurable.

In selected fast food restaurants, the two professors also introduced two forms of non-monetary incentives: social recognition and performance feedback as alternatives to monetary incentives. Social proof refers to informal recognition, attention, praise, and sincere appreciation for a person or group for a job well done. Performance feedback is to change or maintain performance in a specific way and provide quantitative or qualitative information about past performance. This information is helpful for employees to do their jobs well.

The research results show that both monetary incentives and non-monetary incentives significantly improved the store's profits and customer service quality, while reducing employee turnover rates.

An interesting point is that this study proves that the effect of non-monetary incentives is very powerful. Specifically, the average profit margin of fast food restaurants increased from 30% to 36% after the non-monetary incentive intervention; monetary incentives accelerated the service response time of drive-thru meals by 19%, while non-monetary incentives increased the service response time of drive-thru meals by 19%. The service speed is increased by 25%; monetary incentives reduce employee turnover rate by 13%, and non-monetary incentives reduce employee turnover rate by 10%.

The three most important factors in non-monetary motivation:

Desire for reciprocity;

Desire for social recognition;

Interesting tasks desire.

The first two desires are social in nature. These desires are products of evolution and exist in the hearts of all people. The third desire stems from the human brain’s innate pursuit of learning and progress.

Establish the most effective incentive mechanism

In general, monetary incentives are necessary. Monetary incentives are most suitable when the direct results can affect the company's profits or key performance indicators.

However, money is not always an effective motivator. When basic factors such as salary are high enough, monetary incentives will have the smallest performance improvement effect, and non-monetary incentives will become a better solution. Non-monetary incentives include the achievement, meaning, recognition, intrinsic nature, autonomy, growth opportunities and room for progress of the work itself. Take 3M and Google as examples. These two companies provide "free time" for employees, allowing employees to devote their working time to their own "interest" projects.

Therefore, the ideal corporate system should use both monetary incentives and non-monetary incentives.

The implementation of non-monetary incentives requires managers to have the following abilities:

First, the use of social recognition and performance feedback requires leadership skills.

Social recognition and performance feedback are most effective when they are communicated in a positive manner, provide incentives immediately upon meeting appropriate performance levels, and are specific to praiseworthy behaviors. Therefore, leaders often need to be trained to effectively implement non-monetary incentives.

Second, using non-monetary incentives requires leaders to have a high level of integrity and ethical behavior.

Non-monetary incentives are effective only if management leaders can clearly demonstrate what behaviors will be appreciated. In other words, leading by example is essential.

Criteria for an effective incentive system

In the more general case, for both monetary and non-monetary incentives, there are six criteria that an effective incentive system must meet. .

Employees know exactly their role and the company’s expectations.

People have the ability, power, information and resources needed to accomplish the desired results.

Employees know exactly what “excellence” looks like, so the key factors that unlock higher performance are motivation and willingness to demonstrate the required behaviors.

Tie bonuses to “good” behavior and moderate results.

The organization uses fair and accurate systems to measure results and evaluate performance.

The final criterion is that people receive frequent and constructive feedback on whether and in what ways their performance deviates from ideal standards.

Finally, let me highlight the key points for you~

Performance commission is not a panacea, but it cannot be a panacea.

The sources of bonuses can be diversified, the performance of small departments can be controlled, and the overall performance ratio of the company can be gradually adjusted.

For young people, opportunities for career advancement, learning, and exercise are more important than bonuses.

Excessive bonus gap is counterproductive to motivation.

Internal competitions and rankings are as motivating as bonuses.

Non-material rewards (formal and informal recognition and encouragement, care for family members, etc.) have a greater motivating effect than bonuses under certain conditions.

If an enterprise wants to maintain a sense of mission for a long time and manage it efficiently, the distribution system must be carefully considered. It cannot allow everyone to be half-hearted when struggling, let alone allow the strivers to suffer. Please find the problems with your company's current bonus system and correct them, and you will see new changes in the company.