As an environment of low employee morale and high costs strikes the business world, studies show many managers are overlooking a simple way to boost employee engagement – without breaking the bank.
According to a study by McKinsey Quarterly, more than half of companies have experienced a drop in morale in recent times. Researchers Martin Dewhurst, Matthew Guthridge, and Elizabeth Mohr warn that “organizations face the challenge of retaining talented people amid morale-sapping layoffs that tend to increase voluntary turnover over the medium term”.
Strong talent management is critical to recruit new ones from, for example, the financial sector, who have been laid off from their employers or feel disenchanted with them, they say.
In a study of more than 1,000 executives, managers and their employees, McKinsey Quarterly discovered that the majority of managers are focusing on cash-based incentives to do so, whereas many non-financial motivators can be just as effective, if not more so.
In the study three nonfinancial motivators: praise from immediate managers; leadership attention (for example, one-on-one conversations); and a chance to lead projects or task forces, were all rated as more effective than the highest financial motivator: cash bonuses.
The second and third-highest rated financial incentives – increased base pay and stock/stock options – all rated significantly below the top three nonfinancial incentives.
Despite these figures, 13% per cent of survey respondents reported that managers praised their subordinates less often than before, 20% said that opportunities to lead projects or task forces were scarcer, and 26% that leadership attention to motivate talent was less forthcoming.
Dewhurst, Guthridge and Mohr suggest that a key reason behind this is a reluctance to challenge traditional managerial wisdom: that money is what really counts.
“While executives themselves may be equally influenced by other things, they still think that bonuses are the dominant incentive for most people,” say the researchers.
“Another reason is probably that nonfinancial ways to motivate people do, on the whole, require more time and commitment from senior managers.”
With 28% of businesses intending to reintroduce financial incentives in the coming year, Dewhurst, Guthridge and Mohr urge business leaders to take a broad approach to employee engagement.
“A talent strategy that emphasizes the frequent use of the right nonfinancial motivators would benefit most companies in bleak times and fair. By acting now, they could exit the downturn stronger than they entered it.”