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Employee Morale – How Does it Affect Employee Performance?

May 19, 2010 by Frank Goley, Business Consultant

 “Employee X” wrote an eye opening article in the January ’09 Entrepreneur Magazine, titled “Why I Finally Quit.”  Employee X, wishing to remain anonymous, is “a bright, 28 year old employee with a degree from a top university and a ton of high-level computer experience [who chose to] bail on the Company he really believed in.”  He was willing to accept a salary “$20,000 below market rate with pretty pathetic benefits while working up to 60 hours a week in a high stress environment.”

Why He Took the Job

1.     He was part of a team that would create a revolutionary product.

2.     Had strong incentives to help the Company achieve success with a Stock Option Plan.

Why He Left the Job

1.     Owners hired new managers from the outside and the corporate culture completely changed.

2.     The trust employees had built together was immediately extinguished by constant distrust and monitoring by the new management team.

3.     One evening at 9pm, Employee X was asked by a Manager from a different department why he was leaving work so early.

4.     Low Employee Morale set in under the new management scheme; hours were long with little payoff; no downtime between projects; and labor lawsuits were filed by employees.

5.     Employee X asked for and received a $10,000 raise but it was “too little, too late”.

6.     A mass exodus of employee talent ensued.

7.     Employee X went to work for a 10 year old company in the same industry; got paid market rate and overtime; and most importantly, has “an employer who invests in me [Employee X] as an employee, via everything from extensive training to Company barbecues….”

8.     When asked what would keep at his new job five years from now, Employee X responded, “if they let me telecommute at least a few times a week, I’d be more than happy to do whatever it takes to help my new employers succeed.”

Lessons to be Learned from this Story

1.     Company A could have successfully retained Employee X if they had held on to their team oriented corporate culture which fostered trust, sharing, openness, growth and hard work that was acknowledged.

2.     Instead, Company A’s lack of effective Compensation Planning and Proactive Performance Team Building lead to a situation where a happily underpaid, hard working, talented employee base went looking for greener pastures.

3.     As illustrated, retaining talent isn’t about pay.  It is more about contribution to the Company’s success; progressive compensation structures; open communications; trust fostering culture; team oriented success; investment in an individual’s growth; and smartly placed perks.

Resource: For more information on an integral part of a Company’s Compensation and Retention Plan – Perks and Employee Morale, please refer to my article on Small Business Recessionary Tactics.

Conclusions

The Central Point of this article: Compensation Planning, to be effective for both the company and employees, needs to address certain key areas in a comprehensive, yet targeted package:

1.     Built-in Incentives which aren’t a burden to the company’s cash flow or tax liability yet provide key employees rewards for growth.

2.     Business Continuation Planning and Key Employee Protection

3.     Performance Pre-View System which proactively rewards individual and team success toward achieving the Company’s Strategic Plan’s Goals.

4.     A Comprehensive, Cohesive Benefits package which isn’t held to be the Golden Parachute, but rather, a strong component of a Company’s overall Compensation Plan, yet minimizes the financial burden on the Company.

5.     The level of Pay is not the central component of an effective, attractive Compensation Package.

6.     Effective implementation of a Company’s well-designed Compensation Plan is vital to and oriented toward Employee Moral.

Posted in Business Compensation Strategies. Comment