Why Financial Incentives are Not Always the Best Answer to Increase Employee Engagement

Written by: Stephanie Burford, PHR, HR Manager and Advisor HR

In today’s society competition is higher than ever. How businesses differentiate themselves against their competitors is not the process, technology, cost, accessibility, etc. It’s the people. Employees are an organization’s biggest asset and maintaining a high level of employee engagement is the key to an organization’s success.

Employee engagement and retention increases when managers take the time to get to know their employees and understand how they are motivated. It’s common that leaders will instinctively turn to financial incentives such as bonuses or raises to increase engagement, but that may not always be the best approach for long-term engagement. Financial incentives offer short-term motivation. While raises and bonuses are always appreciated, this type of motivation is often short-lived. To create long-term engagement, managers must truly get to know their employees and understand what motivates them.

Abrahman Maslow created a Hierarchy of Needs. This hierarchy is used as a motivational theory explaining how human needs are organized from basic to advanced: psychological, safety, love/belonging, esteem, and self-actualization. Lower-level basic needs must be met before the higher needs can be fulfilled. By understanding this model, employers can:

1.        Provide conditions that satisfy the different needs of employees

2.        Increase employee engagement, productivity, and job satisfaction

• Physiological Needs: In an organization, these needs are satisfied by basic compensation (salary), comfortable working conditions, breaks, and access to food and water. Ensuring employees are well-compensated, have reasonable work hours, and a clean environment to perform their tasks will fulfill this level of motivation. If the basic needs are not met, employees will not focus on higher-level motivations.

• Safety Needs: Once the physiological needs are met, employees move on to fulfilling the safety needs. They want to feel secure in their jobs which includes a well-rounded approach such as stable employment, health benefits, and feel protected (physically by hazards and mentally not having to worry about being laid off). A sense of strong stability allows employees to focus on higher-order needs.

• Social Needs:  When an employee has satisfied both the physiological and safety needs, they can now focus on the social needs. Employees like to feel connected to their organization and form social connections/relationships at work. A collaborative work environment encourages teamwork and provides opportunities for social interaction while promoting inclusivity. Having strong connections with the people you work with can increase engagement and satisfaction.

• Esteem Needs: Now that the physiological, safety, and social needs are met, employee’s motivation shifts to the next need: Esteem. This is establishing self-confidence and independence. Employees want to be acknowledged and recognized for their contributions. Keep in mind that not all employees like to be recognized the same way. Some prefer a group setting while others prefer 1:1. Additionally, employees want to feel challenged and have opportunities to professionally develop. This also increases the employee’s self-esteem and overall engagement and satisfaction.

• Self-Actualization: Lastly, when an employee has satisfied all previous needs, the employee has reached the top of the pyramid. The self-actualization needs give employees the freedom to accomplish everything that one can. This area focuses on personal and professional growth and creativity while working to fulfill one’s potential. Encouraging employees to take ownership of their work and pursue areas they are passionate about will increase engagement levels.

Maslow’s Hierarchy of Needs plays an instrumental role when looking to increase productivity and engagement levels. Having a strong understanding of where employees fall on this pyramid allows managers to truly understand how to best motivate and engage their employees.

Advisor HR’s ISolved Platform has many different features to ensure organizations can increase engagement, productivity, and reduce turnover. Our Predictive People Analytics advanced service allows employers to benchmark salaries and collect data around turnover and tenure. Advisor HR also offers a Share & Perform advanced service offers a fully customized performance review process and engagement survey platform. Our ISolved platform comes with a basic performance review process, reporting features, documentation, historical data, and more. If you are interested in learning more about how to utilize the ISolved system, please reach out. We are here to help!