How to Motivate Employees

It’s been a long time since the US economy has seen the labor market as tight as it is right now. The national unemployment rate is at a 50-year low. Businesses across the country are scrambling to fill open positions, and even more so in areas where unemployment is even lower than the national average. Just as important, employers are also looking at ways they can better retain the employees they already have. The topic an increasing number of companies are wondering about these days is this: How to motivate employees in ways that will make them not only want to stay, but become loyal, high-performing workers who add lots of value to the company’s bottom line.

Why Worry About How to Motivate Employees? Employee Turnover!

Losing and replacing an employee is an expensive proposition in any economy, but the stakes are even higher when unemployment is so low that there is a significant shortage of candidates for any position vacancy. What is the true cost of employee turnover? The first step in answering this question is to accurately identify the elements of turnover that suck up company resources. The main components include the following:

• Lost productivity when an employee quits.
• Expenses incurred to hire and train a new employee.
• Lower productivity during the time it takes for a new hire to get up-to-speed.

The last one deserves special mention because it highlights the importance of robust training during new hire orientation and onboarding, which is the main focal point of this entire website. But before getting into the details around that, what does employee turnover cost in terms of actual dollar figures? First of all, you have to actually measure this in order to figure it out for your company. As management guru Peter Drucker said many times and in many ways, what gets measured gets managed. Any company wishing to reduce turnover (or improve retention) needs to benchmark the three components of turnover cost mentioned above. And it probably makes sense to track the figures separately for a few different job categories in the company. After all, it makes intuitive sense that the cost of replacing an entry-level worker is going to be different (less) than replacing a manager/supervisor or a senior/executive-level employee. In other words, as annual salary rises, so does the cost of replacing the employee in question.

You’ll see all kinds of wildly different estimates on the cost of employee turnover, but one from the Center for American Progress that takes a good conservative approach based on actual case studies, notes that on average, the cost of replacing employees being paid $75,000 a year or less (which covers 9 in 10 workers) is about 20% or one-fifth of the annual salary. But once you start looking at senior or executive-level positions or even highly complex jobs requiring a lot more specialized training and education, the cost of replacing those employees is more like 200% or twice the annual salary of the position. The point here is that unless you’re measuring what your company’s specific cost of turnover is, you won’t be able to tell if changes you make as you try to figure out how to motivate employees are having any impact or positive return on investment (ROI).

Motivating Employees is About More than Compensation

Is compensation an important element of how to motivate employees? Of course it is, but it doesn’t go as far as you might think. In fact, it has surprisingly little to do with overall employee satisfaction. The Society for Human Resources Management (SHRM) has been studying job satisfaction and engagement for years. In its most recent 2017 study, overall job satisfaction has been inching upwards (by very small amounts) in recent years. On a scale of five stars where one star is “very dissatisfied” and five stars is “very satisfied,” the big-picture average comes out to 3.97 – not horrible, but not great either. More eye-opening is what the study found in terms of the factors that have the biggest impact on job satisfaction, and the percentage of workers who are “very satisfied” with each factor in their present job:

1. Respectful treatment of all employees at all levels (38%)
2. Overall compensation (26%)
3. Trust between employees and senior management (33%)
4. Job security (36%)
5. Opportunities to use your skills and abilities in your work (44%)

As you can see, while compensation is the number-two factor related to job satisfaction and only 26% are very satisfied with their compensation, there’s more that goes into the big picture. The number-one factor being the respectful treatment of all employees is not surprising given the rise of the #MeToo movement. But look at the other issues – trust between employees and company leadership, feeling secure in a job, and being able to use everything a person brings to a position. Simply throwing more money at employees will not solve the problem of how to motivate employees or reduce employee turnover.

Motivating Employees Begins Before They Start

How your company motivates employees should be a top priority for all new hires, and it even begins before they officially starting working! After a company has gone through the time and effort it takes to find and hire a great candidate, you’d be surprised how many of those candidates experience total radio silence from their new employer during the time after they accepted the offer and their first official day of work. This is such a huge mistake – especially if there’s a week (or two or three) before they begin. If the new hire hears nothing from you during that time, you can bet they will be seriously second-guessing whether or not they made the right decision. By the time they do start, they will not be very motivated to dive in and work for you. They’ll more likely be looking for signs to confirm their gut feeling they made the wrong decision, which also means they are much more likely to quit. Are you aware of how quickly a lot of attrition takes place soon after hiring? Below are some various studies about that:

• Among newly-hired hourly workers, half leave within the first 120 days (source).
• As much as 20% of employee turnover happens in the first 45 days of employment (source).
• 25% of employees quit during the first 90 days on the job (source).
• More than 40% of new hires leave their job within 6 months of joining (source).
• Organizations with poor onboarding programs have double the chances of experiencing employee turnover (source).

See how onboarding comes up again in these statistics? And the best onboarding begins before the employee’s first official day. For more information on pre-boarding, see the article A 7-Step Better Onboarding Plan (step one is all about pre-boarding).

Improving New Hire Orientation and Onboarding

Pre-boarding, of course, is just the first step of creating better new hire orientation and onboarding programs. What’s the state of these efforts at your company? It’s downright shocking when you realize only 32% of companies have formal onboarding programs. If your newly hired employees walk in on their first day and experience mediocre or nonexistent onboarding and training, you should not be surprised when they quit early on. The message you’re sending is that you don’t really care enough to set them up for success beyond signing off on a mountain of paperwork. Check out the New Hire Orientation Resources Blog on this website for articles on all kinds of ways to create and/or improve your company’s onboarding program. And if you’re still not convinced just how critical onboarding is, the first article you should read is Onboarding Research Roundup #1: Improving New Hire Orientation And Training. It’s your biggest chance to start things off right and deserves careful attention!

10 Ways to Boost Employee Engagement and Motivation

The good news about employee engagement is that it is in fact on the rise. Gallup has been studying this since 2000, and 2016 saw the percentage of “engaged” employees reach its highest level yet. The bad news, however, is that the figure is only 34%! This means 68% are NOT engaged, which is rather depressing. The further detail on that 68% is that 53% of workers are “not engaged” and 13% are “actively disengaged.” Ouch. But there are all kinds of things you can do to boost employee motivation and engagement. Here are just a few ideas:

1. Incentive compensation: If the company is doing well, then everyone benefits with more pay, as long as they’re showing good individual performance.
2. Career development: Nothing makes an employee feel valued as the company taking an active interest in their career path through coaching, mentoring, learning and development opportunities, and so on.
3. Work/life balance: Allowing greater flexibility in work schedules and time off, once again contingent upon good performance, is highly motivating to most employees.
4. Soliciting input: Another easy effort is making sure there are lots of opportunities for employees to have input by actively soliciting it and listening thoughtfully to it, whether it’s about ways to improve workflows, problems and concerns, or other workplace issues.
5. Continuous performance feedback: Employees can’t improve if they don’t have constant feedback about where they’re at and how they’re doing on performance goals.
6. Respectful treatment: Remember that the single biggest factor for job satisfaction right now is respectful treatment of all employees at every level. Do your company’s managers and supervisors walk the talk on this? Are there high-quality trainings around anti-harassment and diversity/inclusion?
7. Recognition: If you want people to be star performers, you’ve got to always be looking for creative ways to recognize a job well done when it happens. Most employees crave recognition for their hard work.
8. Trust: Trust is a two-way street, but it means a lot to employees when it’s clear that senior management trusts them to do their jobs and do them well. This vote of confidence goes a long way towards motivating employees to give their best.
9. Transparency: Being open and honest about the state of the company lets employees know you trust them with the inside view, and gives them opportunities to ask questions and voice opinions. When workers feel like they have a valued seat at the company table, motivation skyrockets.
10. Orientation and onboarding: And because it bears repeating, make sure your new hire orientation, onboarding and training are top-notch!

How to motivate employees and reduce employee turnover are hot topics right now, given how tight the labor market is at present. In describing the why and how of what’s involved, it’s time for businesses everywhere to step up to the plate and make it happen!