Weekly Video Highlight

Employee Retention Frenemies: Pay for Performance and Work-Life Balance

If we’ve learned anything about employee engagement or retention in the last ten years, it’s that no strategy or solution is one-size fits all. Even Google, who has consistently been atop of the “Best Companies to Work For” list has had some of their initiatives criticized for affecting work-life balance.

Any company can create a strategy with the intention of fulfilling the needs of their employees, but the success of those initiatives is a lot less common.

Contingency pay and work-life balance initiatives are both popular options, but come with their own soft points and back-fire potential. Particularly, the Pay for Performance (PFP) model of contingency pay can do the opposite of work-life balance strategies.

Think about it, if your bonus is contingent upon your contribution to organizational goals, you are influenced to work harder to earn that bonus than you would your base salary.

Your work-life balance can suffer because you’re prioritizing extra income at the cost of extra effort. This is what motivation theorists call a “valence,” and can be thoroughly defined as “the importance an individual places on an expected outcome.”

Motivation matters

We’ve talked in-depth about effectance motivation, but expectancy motivation assumes that choices and behaviors are made consciously to maximize pleasure and reduce pain. Pay for performance operates on expectancy, and is thus exposed to the failures of expectancy, of which there are many.

The most glaring failure of expectancy modeling is that it assumes workers always act out of self-interest and a desire for a reward. It views your entire workforce as maze-rats zealously focused on the cheese at the end of the tunnel.

Setting expectations for your employees is absolutely necessary to reach your organizational goals, but using the same motivational theory to bolster employee engagement and retention should be done cautiously, and always with the individual and their valences in mind.

More than ever (and not just as a symptom of the Millennial takeover of the workforce) employees cite the importance of work-life balance. Creating a culture where that balance is for sale works for some, but it also bolsters the rat race mentality – “He who dies with the most toys wins” – which is in opposition to modern thought on what work-life balance truly means.

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The new work-life balance model takes employees out of the workplace, and at the helm of moderating the emotional, physical and intellectual efforts they pour into their jobs. It looks at popular employee engagement initiatives such as Google Campus and says “This is worse, not better.”

Instead of focusing on how to improve the work environment and benefits, it focuses on how companies best express the value of not making work more important than the life that happens outside of it.

The good news

Again, all of this isn’t to say that Pay for Performance is objectively bad for work-life balance, or that it is not a successful strategy for engagement and retention.

Research shows a positive relationship between PFP and employee satisfaction. But it’s not because they’re earning more money. Performance pay gives employees the perception that their work effort is being appreciated – one of the pivotal keys to achieving employee engagement. 

Through all of my research on employee retention strategies and engagement, there is one consistent relationship trend between those initiatives and success, and that is the effort that companies put into meeting their employees as individuals with discrete and unique needs and motivations. 

Using Pay for Performance can and will motivate your team, as long as some of the performance factors that you’re monetizing truly matter to the individual and their development as an employee.

For more great insight on implementing a successful engagement initiative, check out our Employee Retention Strategies series available in the BizLibrary Collection, or tune in to our HRCI/SHRM approved webinar, 6 Ways to Improve Employee Engagement and Create a Culture of Learning

Enjoy a 1-minute preview of “Employee Retention Strategies: Pay for Performance and Work-Life Balance” from The BizLibrary Collection below:

Marketing Automation Specialist