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Money – Does it Drive Engagement?

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Robert Lavigna
August 3, 2018

Recently, I met with the leaders of a county government to present the results of the employee engagement survey we conducted for the county. The survey results showed that county employees reported a low level of satisfaction with their compensation. However, our analysis also revealed that pay was not a “key driver” of employee engagement.

This finding was met with some confusion – and even consternation. One department director stood up during the meeting and said this couldn’t be right because he knows employees have left his unit for higher wages elsewhere. Therefore, he went on to say, pay had to be a key driver.

Before I describe how I responded, a little background:

When we conduct an engagement survey, we analyze the results and then provide a series of reports, including question-by-question results. For each survey question, we report the percent of positive responses (employees who responded with a 4 or 5 on our 1-5 scale), the percent neutral (3) and the percent negative (1 or 2). For this county, a question about pay had the lowest percentage of positive responses.

In addition to reporting the raw question-level data, however, we also do statistical analysis to calculate the drivers of engagement. That is, the questions that, statistically, are the most important influences on the engagement of the organization’s employees. We’ve found these drivers vary from organization to organization and can even vary within units in the same organization.

Identifying the drivers is important because this analysis helps the organization decide which factors to focus on to improve engagement.

And therein lies the apparent contradiction. If the engagement survey shows that satisfaction with pay is low, isn’t this what the organization should focus on to improve engagement, especially if employees are leaving because they say they can earn more money elsewhere?

A good—and very logical—question.

My answer is that when we find pay is not a driver, this simply means that while employees may not be happy with their compensation package, pay is not why they come to work every day. Money is not necessarily what motivates them to be engaged – and deliver the “discretionary effort” that is fundamental to employee engagement.

More likely, as we find in many organizations, the drivers of engagement are factors such as the work itself, leadership, training and development, and employee recognition. In other words, while the organization shouldn’t ignore pay, the most-effective way to improve engagement is to focus on the key drivers.

While money is important, it doesn’t always buy happiness, at least at work. For example, according to the U.S. Department of Labor, 64 percent of Americans who leave their jobs say they do so because they don’t feel appreciated.

There is also a stream of research on “public-service motivation” (PSM) that many ASPA members should be familiar with, since it’s been reported extensively in our journals, including Public Administration Review. PSM has been defined as, “an individual’s orientation to delivering services to people with a purpose to do good for others and society.” The PSM research has revealed that many public servants were attracted to government because they want to do good and help others. To many government employees, this motivation can be more  important than compensation.

So, does all this mean government employees don’t care about compensation?

Stack of paper money clipart

Not at all. It just means that there can be more important drivers of engagement. In other words, what motivates people to deliver discretionary efforts isn’t necessarily pay. Other factors such as leadership, career development, the work itself and recognition can be more important drivers of engagement.

However, if an organization knows it is not compensating its employees fairly or competitively, it should fix that problem. Ultimately this will cause turnover or morale problems.

One strategy to address this is to make sure employees understand the total value of their compensation package, including the monetary value of their benefits. In the public sector, benefits can add 30 to 40 percent to the value of direct compensation. A city manager of a large U.S. city recently told me that benefits add 60 percent to the base pay of some employees in his city.

For example, government seems to be the only sector that still provides defined-benefit retirement packages. Most private-sector firms no longer provide retirees with lifetime pensions.

As for the director who pushed back on our analysis of drivers of engagement by saying that he knows that employees are leaving because of low pay? Well, employees may say they leave for more money elsewhere, but we’ve all heard the saying, “employee don’t quit their jobs, they quit their bosses.”

Of course, that’s not how I replied to this guy.

Author: Bob Lavigna is director of the Institute for Public Sector Employee Engagement, a unit of CPS HR Consulting, an independent government agency. Previously, he was assistant vice chancellor and director of human resources for the University of Wisconsin and VP-research at the Partnership for Public Service. Email: [email protected].

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