Using Non Economic Means To Motivate Employees

Companies all over the world have reduced the bonus incentive plan, but few companies use other ways to motivate talent.

We believe that enterprises should use non economic means to motivate employees.

A large number of research results show that in many industries, jobs and business environments, for those employees with satisfactory salaries, some non economic incentives are more effective than additional cash incentives in improving their long-term dedication.

Many economic incentives are mainly motivated by short-term motivation and negative consequences.

Under the current economic crisis, enterprises need to cut costs and balance short-term and long-term performance effectively. This also gives business leaders a good opportunity to reassess the combination of economic and non economic incentives and use incentives, which is the best policy for both enterprises to survive crises or for development after crises.

The recent survey in the McKinsey Quarterly highlights this opportunity.

In the respondents' eyes, compared with cash cash packages, raising the base salary and stock or stock options, the 3 most commonly used economic incentives were 3 non cash incentives, the praise of direct superiors, the importance of leadership (for example, one to one conversation), and the chance to lead a project or task group. There was no difference in incentive efficiency (see chart 1).

The most advanced 3 non economic incentives mentioned in the survey played a key role in letting employees feel that their company respected them, valued their welfare and created opportunities for their career growth.

These 3 themes recurred in many studies on how to motivate and attract employees.

Now is the best time to strengthen low cost incentives.

As a major incentive mode, the traditional cash incentives are facing pressure from all sides.

For example, declining corporate revenues, declining stock markets, increasingly regulated regulators, radical shareholders and the general public.

Our in-depth interviews with some human resources executives show that many companies have cut their salaries by 15% or even more.

However, according to another survey by McKinsey, when employees and leaders are eagerly required to do better in all industries, the incentive for employees worldwide is doing rather badly, and almost half of them are facing a decline in morale.

The morale of the current layoffs is low, and the automatic turnover rate of mid term employees will be pushed up. Therefore, enterprises are faced with the challenge of retaining talents.

In general, those who perform well will be the first to leave.

Strong talent management ability is very important for recruiting new excellent employees.

For example, outstanding talents recruited from the financial sector may be dismissed by employers, or employers may be reluctant to take the initiative to express their resignation.

In the past 12 months, although 70% of the companies have adjusted or planned to adjust their incentives and incentives, most of the adjustments have been directed towards cost management.

The top executives interviewed by 2/3 will cut costs as one of the three main reasons for their adjustment; 27% of executives surveyed said the reason for the adjustment was to enhance their incentives for employees, while only 9% of executives surveyed said that the adjustment was aimed at attracting new talent.

In the past 12 months, although the total reliance on economic incentives has declined, some companies have also reduced the use of non economic incentives.

13% of the respondents said that the number of managers commended their subordinates was reduced; 20% of respondents indicated that the chance of leading a project or task group was reduced; 26% of respondents indicated that top management level was less concerned about motivation.

In the current cash shortage situation, why do many companies still do not want to make more use of low cost non economic incentives?

One possible reason is that many managers are hesitant about challenging traditional management wisdom - what really works is money.

And management may also be influenced by other things, or that most people, bonuses are the most effective incentives.

A manager from the financial services industry explained: "managers measure incentives according to their salaries."

Another possible reason is that in general, non economic incentives require senior managers to invest more time and energy.

A visiting HR Director said they tend to "stay" in their offices, which reflects their uncertainty about the current situation and prospects.

The lack of interaction between managers and subordinates has created a very high risk gap, which will damage the professionalism of employees.

Some visionary companies are trying to find ways to motivate their employees, and will study them as part of the letter.

A survey conducted by a global pharmaceutical company shows that in some countries, employees attach importance to the role of senior leaders; in other countries, employees attach importance to social responsibility.

The company now increases the number of engagement indicators in the management scorecard, and engagement indicators are regarded as key performance goals.

A Biotech Corp has reformulated its incentive plan, focusing on "appreciation" rather than "reward", in order to stimulate more in-depth discussions on how to motivate employees.

The 3 non economic incentives most frequently mentioned by respondents in the survey provide guidance for management to focus on what aspects should be emphasized.

For example, the HR executives who interviewed us regard the leadership as a signal to retain senior talents.

When the CEO of a global pharmaceutical company drew up this year's strategy, he summoned several talented executives in different fields to discuss how to create more value for the company.

With the same aim, a leading beverage manufacturer asks every member of the Executive Committee to interview the key figure in his department.

"A one to one conversation between leaders and employees is very motivating," he explained. "He makes employees feel their value in difficult times."

By contrast, respondents said large exchange activities, such as the general assembly in the economic crisis, were one of the worst economic incentives.

There are also unpaid leave or part of the salary holiday, training and flexible work arrangements.

Communication is crucial, however.

A human resource manager told us that it is very meaningful to convey information about the current situation of enterprises.

Only half of the respondents said they often give employees the opportunity to lead projects as incentives, although this is a very effective way to motivate employees to make more contributions in difficult times.

This opportunity also fostered the leadership of employees, which in the long run is very beneficial to enterprises.

"Participation in a special project allows employees to feel that they are partly responsible for the project and are also part of the future of the business," said a human resource executive from the basic raw materials industry.

A beverage industry leader selected 30 potential managers to participate in a leadership training program, which created a series of projects designed and led by participants.

The director of the enterprise's Human Resources said when he launched the plan this year, "now is the time to go upstream and invest more for potential people."

With the recovery of profitability in some regions and industries, we see signs that the bonus incentive system is regain again: for example, 28% of respondents said their enterprises plan to restart the economic incentive mechanism next year.

Although this economic incentive mechanism plays a very important role, business leaders should really consider the lessons of this economic crisis and think extensively about the best way to attract and motivate employees.

Whether in times of depression or prosperity, a brilliant strategy - focusing on frequent use of appropriate non economic incentives - will be more beneficial to enterprises.

The enterprises that take action now will be stronger when they get out of the crisis.