Wednesday, 2 January 2008

Reward, happiness and performance

And there is a third article from last year's Employee Benefits magazine I wanted to comment on before time moves on too far. This is from the October edition. And I wanted to refer to it not because it includes insightful comments from me (it doesn't) but because I thought it was a really interesting survey that probably demands more attention that it got.

The survey, conducted by YouGov, found that 59% of employees are happy in their current job role and 54% are happy with their employer. Looking at how happy an employee is on these two scale provides the matrix in the attached slide:

The survey found startling differences between ‘total happys’ and ‘misery guts’. For example 87% of total happys but only 10% of misery guts are committed to their organisations.

Comparing employee satisfaction with different elements of the employee value proposition (EVP) against their happiness with their employers shows that reward, recognition, communication, career development, line management and the working environment have most impact on happiness with the employer. Reward, benefits, recognition and career development are identified as critical improvement areas as these have a high impact on happiness and come with generally low levels of employee satisfaction.

Focusing more specifically on benefits, out of a list of 24 benefits, total happys get 4.3 and misery guts just 2.8:

“Analysis identified that the benefits which result in employees being most satisfied with their benefits package are: a bonus, private medical insurance and flexible working. In fact, the survey showed that 85% of employees who get all three of these benefits are satisfied with their benefits package, 37 points above the average. Other specific benefits which have a big impact on satisfaction are discounts on the organisation’s own or other company’s products and a pension (final salary of other occupational pension such as a stakeholder or group personal pension).

Other benefits, such as free car parking, access to free counselling, employee share schemes, sports club membership and season ticket loans are all ‘nice to haves’ but it is really the five high impact aforementioned benefits which lead to the most satisfied employees. Furthermore, there is a whole ream of benefits which, in overall comparison, have little effect on benefit package satisfaction (but may meet other HR objectives).”

These benefits which have little impact on satisfaction includes life assurance cover, retail vouchures, healthcare cash plans, critical illness insurance, car allowances, personal accident insurance, optical care, luncheon vouchures, income protection and crèche provision / payment for childcare.

YouGov’s findings contrast with those in Human Resources magazine’s August 20007 survey which found a correlation between benefits and employees’ perspective of their employers as great places to work. This found that homeworking had the greatest impact on engagement. Employees who spend 10-30% of their time working from home feel 13% more engaged than those who do not. Profit related pay, sabbaticals, flexible benefits, duvet days and gifted days also have a positive impact on engagement. However, free private health and free or subsidised sports facilities did not produce any noticeable improvements in engagement.

Of course, it is possible to make a number of challenges to these findings. There are three main questions that occur to me:

Firstly, supporting last year’s Towers Perrin Global workforce study, but contrasting with Gallup's Q12 results, YouGov find that satisfaction with line management (at a high 65%) does not have a high impact on happiness with the employer. So does engagement come mainly from the individual?, the line manager, or the organisation?

Secondly, this research seems to contrast with previous previous research showing that happiness does not have a connection to performance. For example, Herzberg’s theory would suggest that as a hygiene factor, benefits can improve satisfaction but are unlikely to impact engagement. It’s an important question because most organisations probably don’t really care, from a capitalist rather than a humanistic perspective, whether people are happy at work or not.

In this survey, happiness does seem to have an impact on levels of commitment, motivation, engagement, advocacy, loyalty and customer focus. However, do benefits and other HR deliverables cause happiness which then causes commitment, or are happiness and commitment both outputs of these deliverables. Or does commitment cause happiness? And where does being seen as a great place to work fit in, as given Human Resources' varying findings, this is obviously measuring something slightly different.

These questions reinforce the need to construct a strategy map / value chain to try, as much as possible, to understand that interconnection between elements such as HR deliverables, satisfaction, happiness, engagement and business results.

Also it is important to remember that even if we had a clear answer to this question, different organisations and different groups of employees respond in different ways, so although this type of research provides an interesting straw model, each organisation also needs to construct a bespoke model of what they believe causes what for themselves.

Thirdly, despite the positive correlations between benefits, happiness and commitment, there is always the potential problem that emphasising financial benefits will have a negative long-term impact on commitment.

According to a study by Maarten Vansteenkiste from the University of Leuven in Belgium, published in the British Psychological Society's Journal of Occupational and Organizational Psychology, and described in HR Review, employees who value material success, status and power more than helping others at work or developing their talents are less likely to be satisfied at work. Dr Vansteenkiste commented:

"The current ethos in many organisations today is to reward workers with material benefits, but this research shows this could be counter productive for both the organisation and the employee. Although these benefits may appear to be great motivators they, rather paradoxically, are not. This is because material rewards divert employees away from recognising/attaining other less tangible goals that are important to maintain good mental health, such as good working relationships with colleagues, autonomy and job satisfaction."

There's still an awful lot we don't know about HR!

So in 2008, this blog will continue to share interesting and useful research and helpfully contribute to helping raise understanding of how we can help raise the performance of our organisations through our people.

See also: