Don’t Count on Compensation (or Raises) for Employee Engagement

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Let’s be honest with each other and – more importantly – with our employees. Raises during the last several years have not even covered cost of living increases.

There certainly isn’t enough differentiation in pay increases to support “pay for performance,” either. As you can see in the research excerpt below, an 0.8 percent more increase in salary for top performers over “average” certainly doesn’t constitute pay for performance as traditionally put forth.

Pay awards have risen slightly in January 2013, compared with the end of 2012, but could simply be due to a ‘beginning-of-year bounce.’

This is according to the latest research from pay analysts XpertHR, which looked at details of pay awards made so far in 2013. It found a median pay award of 2.5 percent, with half of awards ranging between 1.5 percent and 2.8 percent.

Pay awards in the three months to the end of December 2012 were recorded at a median 2 percent, unchanged on the three months to the end of November.

However, XpertHR pointed out that during 2011 and 2012 pay awards also rose in January before dropping back again, and 2013 may witness a similar pattern.”

Pay and praise are very different things

This lack of differentiation on the compensation front is precisely why it’s critical to always remember that pay and praise are two entirely different things.

After a certain point, you do not motivate through salary. Remember:  Cash compensates. It does not motivate. Praise and recognition need its own “currency” to be effective.

In an article on Envisia Learning yesterday, Wally Bock explained this better than I can:

Money is a hygiene factor. There must be “enough” salary and benefits or people don’t feel like they’re being treated fairly. Increasing the money may get a temporary bump in effort, but it doesn’t last long.

Praise, on the other hand, is a motivational factor. Increase meaningful praise and you’re likely to get more effort.

[Monetary] compensation and praise are also delivered differently. Salary and benefits are set on high, far above the level of most workers. For them, compensation is the environment. It is what it is.

Praise is delivered by the boss. If you want to increase effective praise in an organization, the best way to do it is choose people more likely to succeed as bosses and teach them how to deliver meaningful praise.”

Praise must really come from everyone

The only recommendation I’d add to Wally’s is praise doesn’t have to be delivered only by the boss. Indeed, it mustn’t be. Praising others for the good work happening around them every day is the responsibility of all employees.

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That doesn’t mean bosses are off the hook. No, praise from bosses is important. But no single manger, regardless of how good he or she is, can see everything. All employees need to be involved in “catching someone doing something good” and praising them for it.

Is a salary increase the only acknowledgment you receive annually on the value of your contributions at your job? How does that make you feel?

You can find more from Derek Irvine on his Recognize This! blog.

Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their company culture. As the Vice President of Client Strategy and Consulting at Globoforce, Derek helps clients — including some of world’s most admired companies such as Proctor and Gamble, Intuit, KPMG, and Thomson Reuters — leverage recognition strategies and best practices to better manage company culture, elevate employee engagement, increase retention, and improve the bottom line. He's also a renowned speaker and co-author of Winning with a Culture of Recognition. Contact him at


2 Comments on “Don’t Count on Compensation (or Raises) for Employee Engagement

  1. The argument that pay is a hygiene factor is now 50 years old. Even Herzberg waffled on his conclusion. He — and Wally Bock — failed to differnetiate between base pay and any the several forms of pay for performance. He also failed to reconize that ‘merit’ pay is itself a recognition practice.
    We also never have learned how much is ‘enough’.
    Praise and recognition are clearly important but an overriding problem is that few managers and supervisors are good at handling thise conversations.

  2. As I’ve participated and facilitated 100’s of leadership and professional development workshops; the common battle cry for recoginition is as simple as saying good morning and asking your team members “what’s new?” The point acknowledge each other – whether you work side by side or virtually.

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