As if we all haven’t chewed on the economic woes enough, it seems there is a bright side—cash-strapped companies are realizing that recognition can have a bigger impact on engagement than even financial incentives.
A recent McKinsey Quarterly survey offers some proof for companies that might be short on cash, but also hesitant that recognition won’t have the same impact as financial rewards. The report shows that respondents, “view three noncash motivators—praise from immediate managers, leadership attention, and a chance to lead projects or task forces—as no less or even more effective motivators than the three highest-rated financial incentives: cash bonuses, increased base pay, and stock or stock options.”
These nonfinancial motivators prove that people want to feel appreciated—and they want it so much that they value it like, or more than, money.
And yet, here’s the rub. McKinsey survey results revealed:
Over the past year, 70 percent of organizations have adjusted their reward-and-motivation programs
However, only 27 percent adjusted their programs to increase employee motivation
The majority (60 percent) adjusted their reward programs to reduce costs!
Yikes. Here we find one of the most respected consulting firms in the world showing that companies should be doing more recognition in tough times, and the majority of companies are actually reducing these programs? Why?
Survey respondents most frequently cited executives’ lack of understanding of true employee motivators. Because executives themselves are influenced most by cash, “Managers see motivation (for everyone) in terms of the size of the compensation,” said one respondent from the financial services industry. Another reason for this disconnect, McKinsey argues, is that nonfinancial rewards do “require more time and commitment from senior managers.” In other words, cash bonuses are easy to offer, but personalized recognition and other engagement strategies require thought. And yet the report finds that managers who fail to show this type of caring create “a highly damaging void that saps employee engagement.”
Concludes the report: “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.”