Increasing Pay Is Not the Answer to a More Productive Workplace

Although it is tempting to slap a bandage on the lack of labor force by raising salaries, pay is not the only factor employers should be focused on adapting in our tightening economy. A competitive and fair compensation structure is just one factor that leads to a satisfied workforce. It is no longer seen as “above and beyond,” but rather an expectation. Without competitive pay, business leaders will end up with a dissatisfied and unproductive team. Targeting that source of dissatisfaction and reducing negative connotations are different from shaping an engaged and positive team. Although this is a lot harder to do, it is ultimately more impactful.

Experienced leaders understand that developing a fair compensation complete with proper benefits and work-life balance leads to reducing levels of dissatisfaction. What they must keep in mind is that it does not permanently change the overall attitude of the workplace. Focusing on workplace culture in a more holistic light will achieve the greater goal of job satisfaction and worker commitment. Employers need to start seeing the bigger picture.  

Clarity on the differences between basic satisfaction and a truly productive workforce was first brought to light in the 1960s by Frederick Herzberg, who published Work and the Nature of Man. Discrepancies between what characterized “necessary factors” like compensation and factors that are essential for a productive workforce are identified and explained. He says it is imperative to be able to distinguish between extrinsic and intrinsic factors within individual places of work. In a study included in his book, Herzberg looked at 3,500 experiences of events on the job. These events were then rated by employees as either resulting in a feeling of satisfaction or dissatisfaction. Intrinsic factors, those that work within the context of organizational culture, were studied to have a more likely result in employee satisfaction. Topping the list (ranked by number of mentions) was responsibility five times, achievement four times, recognition three times, and work two and a half times. Contrary, extrinsic factors like company policy and administration led to seven mentions and supervision to four mentions. Compensation and salary were the least mentioned factors, with a negative ratio of one and a half times.  

Recently compensation studies have developed a list of companies who are stated by their employees to have the best workplace environments, including factors such as pay, additional amenities, and work-life balance. What earned these companies their coveted spot on the list? It is simple: the high performers understood the intrinsic factors. Their leaders were able to identify and put into action a holistic view of a productive workplace culture, to which they attend to daily. This cohort of businesses are not reacting to employees’ needs, but are instead trailblazing a set of rules for navigating the new world of work we are living in. They continue to offer their employees flexible work arrangements and as a result, have seen their profits soar. CEOs like Satya Nadella of number one ranked company, Microsoft, was voted “most underrated” by his peers for presenting a confident and trailblazing attitude towards how he leads the organization. This leadership style translates down to the employee level by convey an adaptable, yet reassuring work environment that employees feel most productive in.