Does Pay packet help to retain people?

One of the puzzles the modern organizations are trying to resolve is how to “Attract and Retain Talents”. Although industrial revolution commenced more than two centuries ago, the true industrial complexity started only when Henry Ford founded the motorcar manufacturing company in 1906. Since then there have been drastic changes leading to complex business models such as software engineering, knowledge outsourcing, BPRs and myriad financial services institutions. Quite interestingly, in the growing economies, the GDP is more contributed from service sectors than the manufacturing, which is only one third of GDP while the service is two third. Although it is not a healthy balance as the true economy comes from the agriculture and manufacturing while the service and software are the support industries. The true stable growth of any economy comes from value adding products.

Taking a peep into history, we find certain interesting developments since Henry Ford invented and manufactured motorcars, which is one of the most complex gadgets ever manufactured and used in large quantities by human beings. Today our civilization minus automobile will lead to a major collapse in the economy and take us back, if not to the Stone Age or at least to the Iron Age stage. When Henry Ford wanted to manufacture this complex gadget, there was no manufacturing model for him to take a cue, as the motorcar was the first of its kind with large number of parts and complex shapes and precision. He also faced another challenge in his time, which was shortage of educated and skilled manpower. It is strange to know that the US was lagging in educated engineers in early 20^th century. Even today, Indians whose immigration skyrocketed since 1990 accomplish most of the thinking jobs in the US. As someone jokingly said to me “Good coffee, IITs and IIMs are not for India – if you need them, go to US”

Ford came up with a brilliant idea of mass production using the philosophy “Thinkers and Doers” which divided the people who worked for him into two categories. ‘Thinkers’ are the ones who can ‘Think’ and ‘Doers’ are the vast majority of the remaining, who will ‘Do’ the work. Henry is believed to have said, “I am going to make motorcars using men who don’t know how to make them!” Thus the era of modern manufacturing began and remained almost the same till Toyota Motors came up with the TPS – Toyota Production System, which challenged almost all the traditional way the west was manufacturing the motorcars and the way it related to actual people management.

Henry Ford picked a few highly educated engineers and designed the parts, tools, jigs and fixtures, which has completely de-skilled the workmen who can produce the parts without even knowing what they are doing. This approach explains what Henry meant in his statement above.

Interestingly, Ishikawa the famous Japanese Quality Guru and author of “Cause and Effect” diagram presented a new dimension about the West and East approach to people from the religious beliefs. He said the West believes “Human are evil” and East believes “Human are divine”. According to him the people management policies and systems stem from these beliefs. If we believe “Human is evil” it leads to the conclusion that if we don’t supervise and direct, the human beings will do harm to the company. If we come from the belief “Human is divine” we tend to conclude that human beings by nature are good, creative and wish to ‘think’ if they are given an opportunity. The Toyota Production System is designed on the belief “Human is Divine” which lead to the philosophy “Doers can also Think” which challenges the traditional foundation of Ford manufacturing system.

Having seen history, let us look at the issues the modern business models are facing today, how and what engages  people to align with the organizational purpose, stay longer and make a career. The people dependency for the organization to achieve its vision has increased significantly as compared to the Ford era. Let me present a few challenges before we could discuss what actually strikes chord with the employees to stay and remain engaged with the organization.

Customer- Centricity: 

One of the most important success factors for modern industries is ‘Customer Focus’ which was not as much felt in manufacturing industries as the service industries. This is due to fact that the people in the manufacturing hardly face the customer on a day-to-day basis as much as in service industries like banking, airlines, telecommunication etc. The customer dissatisfaction is imminent the moment a service industry people are indifferent to their customers. If the people are not satisfied and have a pride to work for their organization they are bound to be rude and indifferent to their customers. For example I was recently flying in Go Indigo airlines where the pilot was so keen to keep up on time departure and arrival and the entire crew was celebrating this achievement every time. I could see a visible pride when they are able to be punctual. When the flight was delayed for no fault of the crew, I saw the pilot’s grief from his voice and words during his announcements. It is heartening to see that these are happening in India which is a country never bothered about punctuality or customer service. All these are not possible unless the people feel that they are part of their institution.

Realization of Vision:

'Envisioning' had little meaning in a protected economy where all industries in India could report huge profits irrespective of what they did are right or wrong. Mostly many organizations are top down driven and focused on ‘maintenance of status quo’ of their products and services, as there was hardly any competition or fear of their customers to switching to their competitors. If organizational leadership team has no vision, obviously maintaining status quo is good enough and strategy has no meaning. If there are no strategic plan, then there are no improvement projects and hence all employees are expected to do their routine jobs.

But the scenario in India at the moment is very dynamic due to the globalization and the presence of many world-class players in all kind of industries. If the CEO has no vision of the future, the industry will perish due to the onslaught of the competition. Vision drives strategy, which in turn drives improvement projects. After all, improvement projects have to be implemented and maintained by the people and if they don’t get engaged, the industry is bound to have its own natural death over a period of time.

Is it the Pay Package that engages people?/ Is it the 'lure of the lucre' that engages people in a company?

 

Now I am going to open the 'proverbial can of worms' to deal with this complex question, which often has divided views. A section of HR professionals feel that ‘Compensation and Benefits (‘Comp & Ben’ a jargon  used among HR community) is vital for employee satisfaction’. I am going to challenge this hypothesis taking support from few researches done in the recent past. Before that, let me present a few concepts I learned from my HRM mentors:

1. When does HRM achieve its Objectives? 

Without bringing complex HR models, let me deal with this question, as I am not a HR professional by education but a simple ‘People - oriented person’ who believes HRM is not learning models and concepts. But it is a simple orientation towards people psychology and genuinely trying to meet the expectations of the people. I am of the view that the human being is the most 'complex gadget' that nature has ever produced, which can never be predicted or fitted into any formulae or conceptual models. My mentor told me “HRM achieves its objectives only when the individual and organizational needs are aligned”. Hence a true HR person is none other than one who respects all human aspirations and finds a meeting point of organizational needs and individual needs.

2. Hygiene and Motivational factors:

Human beings are driven by motives, which is the plan of nature to make us act till we are breathing. We are driven to take actions based on some intrinsic engines, which are called “Motivators”. For example, animals are driven to action, based on their ‘Instincts’ as we see in the instance- that the tiger chases the deer only when it is driven by hunger. If the ‘Motivation’ is not there, human beings will become vegetables. Having said that, we can classify the drivers of action as ‘Hygiene’ and ‘Motivators’ as HR professionals proposed. Hygiene factor as the name implies, falls in the lowest rung of Maslow’s higher order needs. These are pay packages, designations, fringe benefits etc. They have a limited ‘Shelf life’ for human satisfaction. The ‘Motivational’ factors are the ones, which have lasting employee satisfaction such as ‘empowerment’, ‘recognition’ etc. which has the ability to meet the emotional and intellectual needs of the employees.  

3. Human beings aspire for self-actualization:

It may sound very philosophical if I say that, “Every human being wishes to get enlightened one day or the other and will move towards this need progressively” On the other hand if I say in HR language “Maslow says that every human beings will look for fulfillment of their higher needs once their basic needs are fulfilled, till they reach self-actualization”. Self-actualization is a word often misunderstood than any other words in HR parlance. It means when an employee contributes anything towards his/her organization or society, they get a sense of fulfillment, which is similar, to how Edison would have felt, when he invented the electric bulb. It is also evident, when we witness the world's richest man seeking solace in 'Giving' to the underprivileged.  The cycle gets started with ‘Taking’ and ends with ‘Giving’. If it is ‘Taking, Taking’ all the time, then it ends in misery as it has of times happened in the life of many well known celebrities.

What attributes to employee Engagement and Retention?

Thank God we have finally arrived to our main topic of hypothesis now!

In my 45 years of association with the corporate World, one characteristic that challenged me to understand is “Why attrition is low in an organization which is not a great pay master and it is high in an organization which pays significantly higher packages? Although intuitively I know the answer, I was keen to find a research finding, which supports my theory. I wish to share this revealing finding which will aid many business leaders to formulate their HR policies and processes keeping these facts in their mind.

Fact-1: Competency distribution

As Nature has a fancy to distribute variance, human beings are also not spared and are divided into three categories namely ‘Super performers’, ‘Mediocre’ and ‘Dead woods’. The extreme tail-enders are few and the vast majority are ‘Mediocre’. The industries survive and grow only due the ‘Super performers’ and ‘Mediocre’.

Fact-2: People retention is not due to paychecks!

  

This is quite a shocking revelation, which disappoints many professionals as it challenges their strong held paradigms. It is also supported by the data, which shows that companies like the Tata Group, L&T, Godrej enjoy very high employee loyalty and retention while their pay packages are much lower than many other service industries. Paradoxically, service industries pay 3 to 5 times more than manufacturing, but suffer from attritions and lack of employee satisfaction and engagement.

Fact-3: Super performers not enamoured by Package:

This is something very debatable but a fact. Very strangely, few people find adrenalin shots from the challenge and their contribution to the organization and society at large. They derive power not from pay package but from responsibility and sense of accomplishment. I don’t know whether they become super performers more because they are 'goal oriented' rather than ‘package oriented’. In their case, money chases them rather than them chasing rewards and recognition. This may well be in alignment with ‘karma theory’ of Indian philosophy. Invariably, the employee satisfaction is very high at senior levels as compared to lower levels. One may argue that the seniors are paid better, but it is important to analyze what took them there. During my recent interviews of CEOs and MDs of large corporate for my book on Leadership, I found they were not chasing power and positions but on the contrary, they wanted challenge and contribution.

Fact-4: Purpose, Mastery and Autonomy engages people:

Very paradoxically, ‘Pay package’ is not there in the above factors that makes people get engaged with their organization and share its vision. Let us see how they strike the chord of the people:

Purpose:    

It is very evident from the way people engage with voluntary organizations with no monetary benefits since they derive a sense of serving larger human needs. When the purpose of the enterprise is larger than making money, it creates a sense of accomplishment for the employee and hence the engagement. This puts the responsibility on the leadership teams to create a sense of purpose and ‘walk the talk’.

Mastery:

One of the deep desires of human beings is to ‘Master’ the art of doing any work and a sense of being called an expert. The learning quotient – LQ is the best motivator for mankind. The learning and changing organizations have been observed to have the highest retention. If the organization does not provide a means for continuous learning, it cannot retain performers. Once the chairman of a famous National brand company, Matshishuta said that they have become multinational due to the reason that there were minimum three CEOs developed in their company every year who were sent to different countries to set up their company.    

Autonomy:

When the employee feels a sense of purpose, the next thing that motivates is ‘Freedom to take decisions’ within his limited space which is called ‘empowerment’ in HR parlance. When one does not know ‘why’ he is doing ‘what’ he doing, it becomes a drudgery. Swami Sukhbodananda defines autonomy with an acronym ‘GEM’; G – Goal orientation, E- Empowerment and M- Monitoring of results and feedback. I find this is a simple mechanism to empower people irrespective of what their job role is. For example, the airhostess has a defined purpose to make the passengers travel comfortable and they enjoy doing it repeatedly. The goals are clear and they have autonomy to deliver that without any one above micro managing them. Their performance is monitored and feedbacks are provided. This explains the reason that even a repeatable job engages them.

Fact-5: Money does not motivate the super performers:

It is also a thought-provoking finding to note that money fails to motivate those who are super performers who really run the organization as they look for more challenges and achievements. On the contrary, they resent when they were rewarded while not contributing their best. The only way companies can retain these super performers is increasing their responsibilities and providing enough challenges like what Matshishuta did. It is also important to note that there are many in the ‘Mediocre’ band who can be converted as super performers by spotting them and enhancing their scope of work.

  

Conclusion:

·      The era of “Thinkers and Doers” has ended.

·      Modern Organizations need to be serious about their  “People assets” 

·      By now, from the foregoing discussions and research findings, it is evident that “Comp-n-ben” is not the solution to attract and retain talents.

·      Purpose, Mastery and Autonomy are the three factors that satisfy employees more than monetary benefits.

·      Super performers are encouraged by responsibilities and challenges than hygiene factors.

I wish to end my article with the famous quote by Albert Einstein”

“All that can be counted does not count; but all that cannot be counted is what counts”

People assets are one of those that cannot be counted.

Kind Regards

NC