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Published 17 June 2013 11:14, Updated 18 June 2013 08:11
Never let it be said that money doesn’t matter. We may be motivated by other things, but if we think we are being paid unfairly, the whole edifice of employee goodwill comes crashing down.
And if there’s no goodwill, there will be no great work. And the best employees will flee to someone who will pay them more, in line with their expectations.
The managing director of Great Place to Work Australia, Zrinka Lovrencic, says it is not always necessary to pay people more, but there needs to be an annual discussion about remuneration which is open and honest about the reasons for the rate of pay.
“We advise companies to be transparent. The hidden danger in not having that conversation is that people will end up going on Seek or MyCareer and they might see information that might be irrelevant to their job, or they could see package values that include other things that are not explained,” she says.
While Pink’s book is sometimes misinterpreted to mean that money doesn’t matter, what he is really saying is that fair pay is the baseline of being a good employer.
“If the employer does not pay an ‘adequate amount’, or if her pay isn’t equitable compared to others doing similar work, that person’s motivation will crater,” he writes.
“Providing an employee a high level of base pay does more to boost performance and organisational commitment than an attractive bonus structure.”
So the point is to take the issue of money off the table: “Effective organisations compensate people in amounts and in ways that allow individuals to mostly forget about compensation and instead focus on the work itself.”
Effective organisations compensate people in amounts and in ways that allow individuals to mostly forget about compensation and instead focus on the work itself.
In Australia, organisations prefer to keep such information secret, avoiding awkward discussions and also protecting the privacy of employees. However, in the public service, where people are paid by grade level, there is effective pay transparency.
The co-founder and co-chief executive officer of Whole Foods Markets, John Mackey, says pay transparency dampens down the gossip mill and exaggerations about what everyone else is being paid. Lower-paid employees are also motivated to find out what they have to do to improve their compensation and strive to get there.
“Any kind of favouritism or nepotism is seen,” says Mackey. Meanwhile, lower-wage employees can see what the best paid-positions are – which provides motivation to strive to build their careers within the company.
One way that companies can set off on the path of ensuring fairness is to actually do a pay audit, so they can see whether salaries reflect the value of the work being done.
Lovrencic says many organisations are unwilling to take this step because they are afraid of what they may uncover – and that they will then be obliged to do something about it.
“This is also the reason why a lot of organisations don’t do engagement surveys or staff satisfaction surveys. But they are damaging themselves by not uncovering problems and fixing them,” she says.
“But people talk. They have a fairly good understanding of what the market is out there. If they feel they are being taken advantage of, they will leave.”
Notably, among the organisations that make it onto the Best Places to Work list annually, pay audits are common, she says.
For instance, a recent study by Deloitte finds executives think money is far more important to company culture than it actually is.
Executives believe that compensation (pay) and financial performance are among the highest influences on culture. Their employees rank these factors among the lowest.
Instead, employees rank highly such things as regular and candid communications, employee recognition and access to management and leadership.
Says Lovrencic: “There is a lot of research out there to prove that money isn’t the first and last deciding factor.”
Great Place to Work will be launching its 2013 Best Places to Work list in BRW on Thursday, June 27.