I often start my public training courses by asking people why they work. People often start by answering that they work to develop their career and learn knowledge and contribute to their company. Great! So, I will tell your company that the next time they review your payment they should not give a pay review but instead provide further opportunities to learn and develop. But within those sessions, eventually someone responds by saying that they work for money. Actually, I believe that 98% of us work for money!

People work to earn money to live. When I say money, it is not just the salary but also the allowance, and bonus, it is the whole package. Therefore, employers who want to attract, retain the staff they need, and get them to perform successfully, have to get the money part right. In these cases, money should be seen by employees as fair, and competitive.  

Who manages money in this case? Not the finance department but the HR department. Yes of course, finance can keep an eye on it as well but ultimately this is one of the fundamental roles for the HR team to get money right. 

What is the link between money, motivation and performance? 

If money is low, motivation and performance is also low. As money gets better, you will see that both motivation and performance get better. But then there comes a point where if you pay too much, the money is too high and both performance and motivation will start moving closer to the zero point.

So, one of the critical matters for any HR team is to find this optimum place where money is at the right point to maximise performance and motivation. If money is too low or too high, performance and motivation are low. But if money is at that optimal place, both performance and motivation are maximized. Money doesn’t actually motivate anybody but get it wrong and it demotivates your employees, get it right and it’s a neutral factor on whether they stay or not.  

There are six other factors that positively motivate an employee, money ranks number seven. The first factor is the supervisor- you join a company, but you resign because of the manager. In this case, managers who motivate people, give them trust and responsibilities help retain employees. The second factor is whether people love the job they have and that is also important. The third factor is what sort of tangible career opportunities they have within the next 24 hours, opportunities to learn something new and get a promotion. The fourth is recognition from people who are higher grades than the employee. The fifth factor is appreciation from people who are at a similar grade as the employee. The sixth factor is professional reputation that is where people work and if they are proud of it.   

I can only think of two companies out of more than a million in my career that can get those six correct. It is almost inevitable that one, two or three of these factors, you won’t be perfect at. If you are not perfect at one or two then from time-to-time employees will go job hunting, if they do and they discover that their salaries are low, then they will move from your company to another one that can pay them higher salaries.

What is the Golden Triangle of Reward? 

As I previously explained here, if your voluntary resignation is less than 5% then that is an indication that you are paying too much money. If it is bigger than 15% that is a red flag that you are paying too little. I would say that if you are hearing complaints about pay but your resignation rate is less than 5%, then you can ignore those complaints. Those are not about money, they are about culture, environment and leadership style. If your resignation rate is less than 3% that is a red flag, that is too low, it means you are paying far too much money.  

Again, money is a hygiene factor, get it low then it demotivates, get it right then money is neutral, and these six motivators kick in instead. If you are getting things right, then your voluntary resignation rate should be between 7 to 10% window. That applies to all industries except telephone call centers.  

Firstly, I advise that we must know about every job in the company. What are the responsibilities and contributions it makes towards the departments, the complexities, risks and minimum necessary skills, education, qualifications, training and relevant experiences needed to be able to do the job successfully. In other words, what are the competences? 

But not only do you have to know about jobs, but also about people and their performance. We must understand what are we asking people to achieve in terms of goals and objectives; moreover, how are we asking people to achieve it. We must understand their competencies, that is the behaviour and attitude that will make people do the jobs successful in the job.  

Furthermore, we have to look outside at the labour market, and we have to ask ourselves what the competitors are paying for the type of people that we want to hold on to. Ask yourselves if you can afford to pay the same as your competitors? But also understand what is happening in the economy in terms of supply and demand? 

How valuable is an employee? 

If I am looking at a job or an employee and trying to understand what the pay would be, I am going to ask myself these four points:  

• Please describe the job they are doing 

• Please weight it in terms of grades 

• What is the quality of the person doing the job? That is performance management and performance appraisal 

• What is the market value for this kind of job? What is the compensation  

So, if I were to re-express the golden triangle in a different way, I would describe the job the employee is doing, what is the quality of the person doing the job and what is the market value? We can break up this golden triangle into these critical questions and this is how we go on managing the remuneration. Who is going to manage this triangle? HR. 

Editor’s Note: You can watch Robert’s webinar on the fundamentals of managing compensation here. To learn more about the 12-webinar series, please visit this link.