In the last article, we came to the conclusion that for company growth, people are more important than technology. Now let’s talk about how you retain employees.
Once your employees have acquired the skills they need to be effective in your company, it is vital that they do not leave to work for someone else. It is very difficult for a company with a high staff turnover to grow.
What keeps employees from leaving? Many people think that it’s all about the money. This is partly true, but it doesn’t paint a complete picture.
If people were rational, then the size of their salary would be the deciding factor. The relationship between the manager and their employees would be linear and predictable: a pay rise of 20% would lead to 20% higher quality work and 20% happier people. But this, of course, is not the case.
An employee’s salary should be appropriate for their role, qualifications, and contribution to the common cause. It must also be competitive (although this does not always align with fairness). You need to have standards and formulas based on which bonuses are paid and pay rises are given, and these should be the same for everyone.
Numerous experiments have shown an interesting fact: a salary of USD 1,000 per month, provided that an employee’s colleagues receive the same amount, brings more satisfaction than a salary of USD 1,200 per month if the employee’s colleagues receive USD 1,500. Paradoxically, the amount of a salary is less important than its fair distribution. Relative amount takes precedence over absolute amount!
This is reflected in the attitude of people who experienced the collapse of the USSR and now yearn to go back in time. Most of them today can afford much more than they could in Soviet times, but back then everyone was in approximately the same position and there was no one to inspire envy.
This does not mean that all salaries should be the same. Of course not. It is important to clearly define the “if—then” criteria so that everyone understands why one person has a higher salary than another and understands exactly what they need to do to get a pay rise.
The clarity of the rules act as an incentive for your employees to aim higher. There should be no exceptions for anyone. That is unless you turn the exceptions into new criteria. But in this case, you need to pay the same salaries to all employees who meet any new criterion.
However, people are driven not only by money, but also by love. If this statement seems naive to you, let’s take another look at some raw scientific facts.
We (homo sapiens) are social beings. Primates who in a natural environment live in groups of up to 150. Our brains have evolved primarily to build the social connections necessary for the survival of the group. And to strengthen these connections, evolution came up with the hormone serotonin. It is secreted during positive social interactions such as when communicating with family members and friends.
Negative social interactions and the breakdown of social ties leads to the secretion of cortisol, the stress hormone. Studies show that social pain activates the same areas of the brain as physical pain: on a neurophysiological level, a broken heart hurts the same as a broken leg.
The breakdown of social ties causes great pain because for hundreds of thousands of years, excommunication from the group meant certain death for our ancestors. The stronger the ties were, the greater the pain when they break. The loss of a loved one, a quarrel, dismissal from work all count as a breakdown of social ties.
It follows from this that people who feel part of a cohesive team and one that is like a second family will not want to separate from this team, and this acts as an important motivating factor. Fear of the pain of breaking these social ties is greater than any temptation to move to another job, even one with a higher salary.
The opposite is also true: if there is an unfriendly atmosphere in the team, your employees will be gone at the first opportunity they get, and even the prospect of a lower salary will not necessarily stop them when a happy and harmonious team beckons.