six PRiNCiPles FOR motivating AND RetAiNiNG employees in A FlUCtUAtiNG economy AmeRiCAN express GlOBAl PRePAiD JUNe 2010
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1 six PRiNCiPles FOR motivating AND RetAiNiNG employees in A FlUCtUAtiNG economy AmeRiCAN express GlOBAl PRePAiD JUNe 2010
2 When the economy picks up, my best people will be the first ones to leave. 1 BACKGROUND The economic downturn of the last few years has profoundly impacted many industries and businesses. Budget cuts, downsizing, and the elimination of raises and bonuses have had a dramatic effect on the workplace nationwide. In the face of budgetary cutbacks, companies may neglect their most important resource their employees or human capital at a time when their leadership is needed most to assuage concerns. Weathering the Storm Lessons Learned: Straight Talk from the World s Top Business Leaders, recommends that leaders [m]aintain integrity and take proactive steps to remove distrust and fear when emotions are running high. 2 Increasing morale should take precedence when employees feel most vulnerable. As many Human Resource (HR) professionals know, neglecting employee morale can have negative repercussions, particularly for small and mediumsized businesses. According to a recent survey, 39% of people who left their jobs cited insufficient recognition as a major factor in their decision. 3 While economic and other factors can exist beyond management s control, aspects within their environment like morale should be harnessed effectively and remain top-ofmind during turbulent times. American Express recently conducted focus groups with a cross section of Human Resource (HR) professionals in small and mid-size companies to get their perspective on how the economic environment has impacted their organizations and to learn what tactics have helped them maintain employee morale despite significantly declining budgets. Many expressed concern that employees are feeling unappreciated. Employees are taking on extra responsibilities in the office as a direct result of downsizing and, in the current climate, their hard work is not being acknowledged. These most valuable employees might be quick to move on once the economy turns and more appealing jobs became available. Additionally, they acknowledged the difficulty in sustaining employee morale especially post- downsizing and/or pay freezes. Through conversations with these HR professionals, we were able to uncover several innovative ways to motivate employees and elevate morale in the workplace. What follows are six guiding principles to help you improve employee morale and motivation in your company. 2
3 Employees need reassurance [from management] that the company is heading in the right direction. Communication is important they need to understand what you re trying 1 to do. Guiding Principle 1: Communication is key TALK TO YOUR EMPLOYEES AND LISTEN, TOO According to Accelerating Out of the Great Recession How to Win in a Slow- Growth Economy, an open system of communication for both good and bad news is most important during uncertain times: In an information vacuum, [employees] will connect the dots in the worst ways imaginable. Leaders should hold team and one-on-one meetings to encourage people to talk about what they are feeling (and should listen with empathy). 4 Public events, such as town hall meetings with face-to-face exchange, can be more effective at raising morale than one-way communications, such as s or memos. It s beneficial for companies to hold regular events that enable open conversations in which employees hear directly from and ask questions of the CEO and/or management. If bonuses are being cut, openly discuss alternative modes of reward with employees. Initiate dialogue about which rewards would be most meaningful to them. If you do not have definite answers to questions about if and when layoffs will happen or whether a salary freeze is forthcoming, you can still talk about what you do know. Simply stating that, as of right now, there are no plans for layoffs and that the company is doing everything it can to avoid them, goes a long way. In addition, speaking honestly about the company s financial situation and the realities of keeping the business viable will be appreciated by employees. Every word spoken to address the subject helps fill the void of speculation. Effective employee motivation programs, implemented on both a personal and a group level, can dramatically improve company morale. In order to create a positive, productive working environment one in which employees feel invested in and proud of their work it is essential to connect with and motivate employees both collectively and as individuals. 3
4 employees are happy and motivated right after bonuses are given out, but the positive morale derived from that is very difficult to sustain. 1 GUiDiNG PRiNCiPle 2: think BeyOND CAsh the most OBViOUs GiFt may NOt Be the most PRACtiCAl Cash rewards are an obvious way to effectively drive employee motivation and are consistently ranked at the top of the list by HR professionals surveyed (Figure 1). These rewards are often given in the form of raises and bonuses. However, this method of distribution can raise concerns around use, equity and frequency: Use: When a monetary reward is received within a paycheck, employees often feel obligated to invest or save the money. Gift cards are often considered a better alternative because they encourage use for a personal purchase or a special experience. Equity: Many times cash rewards and bonuses are unevenly distributed to employees. Knowledge of this inequity often raises issues around employee expectations and fairness, which can damage employee morale. Frequency: Bonuses are usually given out as a one-time lump sum payment at the end of the year. As a result, improvement in employee satisfaction is usually short-term and may not be a practical tool for sustaining employee morale. Figure 1 top FiVe methods UseD By hr PROFessiONAls to improve employee morale: BONUses time OFF GiFt CARDs WellNess education PROGRAms PROs Still perceived as the best way to affect morale. Can reduce stress, improves life/work balance. Freedom to choose reward, rewards multiple employees, can be personalized. Decreases sick time, shows that you care for employees outside of work. Encourages growth and promotions. CONs Often unattached to achievement, employees feel that they have to invest. Rewards less employees due to cost. Need for coverage while employee is out or productivity is affected. May incur service fees, can expire. May not be for the majority of employees. Can be a big investment. 4
5 [S]etting a personal development goal [for employees] is motivational as it demonstrates the organization is interested in the individual and their longterm 6 career. Guiding Principle 3: Prepare for the future WHEN THE ECONOMY TURNS, WILL YOUR BEST EMPLOYEES STAY? Many of us have weathered the current economic climate by clinging to the belief that a rebound is on the horizon. But from an employee retention standpoint, this can be a precarious strategy. An economic upswing can mean more job options for your employees. While there is no foolproof plan for 100% employee retention, there are several measures you can implement to keep your best people happy. Goal setting and employee development plans are effective tools for business growth, and can also contribute to both employee retention and workplace morale. A more comprehensive and extensive employee development plan forecasts a longer tenure with a company. Instead of a one-year development plan, consider expanding to a five-year plan that addresses long-term career goals. Ask your employees what they hope to have accomplished in five or ten years. Setting a personal development goal is motivational as it demonstrates the organization is interested in the individual and their long-term career. As part of the appraisal process, discuss the employees skills and longer term development needs and include these in their personal objectives. 5 5
6 Leaders need to celebrate success and recognize the contributions of individual team members who have achieved 4 results. Guiding Principle 4: Be consistent, but also spontaneous HOWEVER YOU DO IT, SAYING THANK YOU GOES A LONG WAY Positive verbal acknowledgement can go a long way in helping employees understand how much they are appreciated. While most people look forward to bonuses, they are often expected annual rewards, unattached to individual achievement and without public acknowledgement. Whether or not your company offers bonuses, frequent acknowledgement of employees in a public forum can successfully boost morale by demonstrating a direct correlation between effort and reward. Leaders need to celebrate success and recognize the contributions of individual team members who have achieved results. 4 Gift cards enable spontaneous public acknowledgement because they motivate employees to treat themselves, which in turn can result in positive impressions of your company. Gift cards can be given not only at public events such as service award dinners, but also as a spontaneous reward for a specific accomplishment or the completion of a project. Consider implementing a surprise and delight program in which HR professionals and/or supervisors keep gift cards in their desk drawers for on-the-spot recognition. basis. It s nice when a manager notices you did something, but when co-workers notice [ ] it fosters esprit de corps the spirit of a group that makes all the members of that group want to succeed. 5 One effective way of communicating peer acknowledgement is to use gift cards as tokens of appreciation. When people on teams become highly supportive of one another, they develop a sense of oneness with a common concern for success. 5 Armed with a common purpose, employees work may prove to be more focused and efficient, but when each employee is connected to a culture, work may even be inspired. Additionally, group events can communicate the message that your company views employees as people and not just assets. Taking employees to local sporting events, hosting a barbecue, initiating shorter work Fridays in the summer, or even sponsoring a pizza lunch can increase workplace morale. The cost of an hour or two of group entertainment or socializing is a small price to pay when one considers the productivity gains that come with increased morale. According to Creating Passion-Driven Teams How to Stop Micromanaging and Motivate People to Top Performance, an essential component of motivating employees involves evaluation by the people with whom they work closely on a daily 6
7 The key to motivational management is to align your employees needs closely with those of the organization. 6 Guiding Principle 5: Treat people like people HELP SUSTAIN THE LIFE/ WORK BALANCE No one wants to feel like just a number. Unfortunately, layoffs or even the fear of layoffs can have a dehumanizing effect on employees. But there are a variety of ways to remind your staff that you think of them as people who have lives that extend beyond the company. Sending such messages in the workplace can have a dramatic effect on the perception of a company. According to Essential Managers: Motivating People, businesses need to achieve their goals and targets, however, the people who work for them have their own needs, which can t be ignored. The key to motivational management is to align your employees needs closely with those of the organization. 6 Setting up seminars that address retirement planning or education funding shows that you are sensitive to the challenges your employees face in achieving goals. This is especially important if you have had to suspend or curb a bonus or promotion program. Additionally, providing wellness seminars and presentations, covering anything from nutrition to stress management, shows that you are genuinely invested in the quality of your employees lives. Perhaps they might be interested in a weekly morning yoga class, or a smoking cessation or weight-loss program. Consider creating a suggestion box to find out what types of activities are important to your employees. 7
8 All gift cards aren t the same. There are those that can only be used at specific stores while others can be used 1 anywhere. Guiding Principle 6: The freedom of choice REWARD WITH GIFT CARDS HR professionals cited gift cards as one of their top five tools for increasing employee morale (Figure 1). They were seen as an essential component of a company s overall recognition program, and a more individualized and spontaneous alternative to cash rewards such as bonuses and raises. In addition, the ability to personalize the gift cards with the employee s name and/ or the company logo made them a more thoughtful reward. A distinction was made between the value of network branded gift cards (open-loop) vs. store brand gift cards (closed loop). Open-loop gift cards like the ones issued by American Express are preferred because they give the recipient the freedom to choose how he or she wants to spend the gift (e.g., gas, clothing, groceries, online). Providing freedom of choice increases the likelihood of enjoyment and ensures that a gift card won t go unused. American Express Gift Cards are a great employee reward Benefits for employees Accepted at thousands of US locations No fees Funds on the Card do not expire Benefits for employers Customizable (logo, image or personalization) Available in denominations from $25 to $3,000 Can be ordered online, up to $75,000 in a single order 8
9 final note When the economy does come around, increasing the frequency and amount of employee rewards can help send the message that everyone is sharing in the growth. If there is not yet sufficient funding to restore a bonus program, you shouldn t overlook this crucial time period for employee recognition. American Express Gift Cards, available in denominations of $25 to $3,000, are the perfect way to reward employees whether the economy is on hold or flourishing. Hopefully these guiding principles can help all of us weather the economic storm together. These years have not been easy for businesses, but the recession has challenged employee motivation and morale, and has illuminated its need. With a little creativity and flexibility, you might find that you can get more out of your current HR budget than you ever have before. 9
10 BIBLIOGRAPHY 1. A Qualitative Research Study on Employee Morale and Motivation: Incentives. Survey. 09 March Fifty Lessons. Weathering the Storm Lessons Learned: Straight Talk from the World s Top Business Leaders. Cambridge, MA: Harvard Business Press, Employee Job Satisfaction & Retention Survey. Survey. Salary.com. February Rhodes, David and Stelter, Daniel. Accelerating Out of the Great Recession How to Win in a Slow-Growth Economy. Boston, MA: McGraw-Hill, Bobinski, Dan. Creating Passion-Driven Teams How to Stop Micromanaging and Motivate People to Top Performance. Franklin Lakes, NJ: Career Press, Talwar, Saloni, ed. Essential Managers: Motivating People. New York: DK Publishing,
11 feedback To send us your feedback about our whitepaper, us at 2010 American Express Travel Related Services Company, Inc. All rights reserved. 11
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