How Do You Motivate Employees When You Can’t Afford To Pay More?

If you are concerned about motivating your people in an era of rising costs and falling demand, you are not alone. The challenge of how much to pay the workforce ultimately lands on the CEO’s desk – so it’s you who must fret about the impact on motivation when there isn’t much cash about. What to do?   

Decades of research confirms that money is not a motivator of performance, yet it can be a de-motivator if it is not sufficient. But what is sufficient?  Are you competing for employees against many other local employers?  How do you keep people whose skills are in high demand when you cannot offer more money?  Every business is different of course, so here is a range of ideas that can be adapted to different circumstances.

What else do your employees value?

Your workforce will value many things about working for you, not just the precise amount in their pay packet each month.  Perhaps they value flexibility, security, or the social environment. Take the time to find out why people work for you.  You can talk directly to employees,  use employee surveys, or ask managers to explore motivation with their teams.  Look at the list of ‘benefits’ that you gather, and compare it to any itemised cost ‘benefits’ that you provide.  Maybe you could move some of the money spent on cost benefits that aren’t valued into offers that your workforce would value more.  Or perhaps you can find ways to offer more of the things people value without it necessarily costing much at all.  If the social environment is hugely important to your workforce, how else could you encourage it? Are there some existing resources you can make available to support more social interaction?

Manage expectations

If your workforce thinks the business is doing very well, they may expect a share.  If times are going to be tough, it’s easy for you to be worried that people will leave to where they might hope for more.  But actually, if you are straight with people, are able to show that you are sharing the burden, and try to offer some small compensation, many people will stick with you.  

Time can be as motivating as money

During the 2009 financial crisis, I had to hold back on pay for a while.  I gave people a few hours a month extra time off instead.  For one woman that reduced her childcare costs, for another, it provided much wanted time to develop a hobby.    Turned out that the time was as motivating as the money to a good number of people.  We got all the essential work done and chose to hold off on some development projects during that period.  

Motivation comes from being able to do good work

We all like to end the day feeling we have achieved something.  Most of your best performers are strongly motivated by the opportunity to do their best work.  The more you can clear the path for people to ‘get stuff done’, keep bureaucracy at bay and provide stimulating challenges, the harder people will work for you regardless of money.    

Deal with underperformance

Your best people will be most demotivated when they see the business held back by some people underperforming.  They will resent it even more if they believe money is being wasted on people who aren’t delivering.  So tackle underperformance now.  It isn’t about cutting people to cut costs. It’s about motivating everyone to succeed.  However, if you have tried to turn an individual’s performance around and no progress is being made, at some point you need to manage their exit.  It is no fun for anyone to be in a role where they can’t make the grade.  A big warning here though – if you are reducing headcount to reduce costs, and that may be needed when times are hard – be honest.  Don’t pretend you are removing people based on performance to cover your own embarrassment at dealing with redundancy.   It doesn’t motivate anyone to see colleagues unfairly treated.

Say thank you, acknowledge effort

The biggest motivators are often the simplest. Say thank you on a regular basis.  Acknowledge the effort colleagues are making.  Celebrate success wherever you can.  People like to feel part of a successful organisation.  So even if you are facing difficulties with money, you can motivate people by keeping focused on what is going well.  The wheel of fortune turns, your business will recover, and your employees will be pleased and proud to be part of your business.

About the author: Hedda Bird is the CEO of 3C Performance Management Specialists and author of the new book The Performance Management Playbook: 15 must-have conversations to motivate and manage your people.

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