How Money Affects How Engaged Your Employees Are
June 9, 2017
You’ve probably heard this stat before – a mere 33 percent of Americans are engaged with their jobs. That high rate of disengagement costs organizations in the United States alone upwards of $400 billion a year in lost productivity, according to Gallup.
Hence, leadership, HR and learning and development teams are all focused on improving employee engagement. And they’ve developed a myriad of employee engagement strategies, from bosses having career conversations with employees to companies building world-class leadership development programs.
And yet, there appears to be an elephant in the room: money. All the employee engagement activities in the world are great, but ultimately doesn’t it all come down to money?
Well, yes and no. Research into this exact topic shows money is very top-of-mind for an employee, to a certain threshold. Once that threshold is passed, other aspects of the job become more important, so long as they believe they are paid fairly.
The magic $75,000 threshold
Gallup is the leading authority on employee engagement, running surveys on the subject since 2001. They’ve done research into the topic of engagement and money and found a magic number that sticks out: $75,000.
The rule-of-thumb Gallup found was that if a person's household income is less $75,000 a year, money is very top of mind for them. They found a household making less than $75,000 faces a large amount of money-related stress, such as worrying about bills or mortgages or paying for Johnny’s braces.
Once a household makes more than $75,000 a year, those stresses ease significantly. And then, for employees, money becomes not-as-important.
“Money can improve daily emotions, but only up to a certain point,” Gallup wrote. “Once employees reach that plateau, this element of their emotional well-being doesn't get commensurately higher, no matter how much more they make.”
There are exceptions. Geography makes a huge difference: $75,000 a year in Birmingham, Alabama goes a lot further than $75,000 a year in New York City. And some people are innately more focused on money than others.
But, in general, it applies: if you are paying people less than $75,000 a year, money is likely top-of-mind for most of them. Hence, what most of your employees want is likely more money, so showing them a path toward that is the best way to keep them engaged.
On the other hand, if you are paying someone more than $75,000 a year, money becomes less top-of-mind. Instead, purpose, cultural fit and impact can matter far more when engaging an employee – so long as they believe they are paid fairly. If they believe they are earning less than their worth, money becomes top-of-mind again. In that situation, it isn't necessarily the money itself, but the idea they are being treated unjustly.
Think of it as Maslow’s Hierarchy of Needs. If your employees aren’t making enough money to fully support themselves and their families without constant stress, that’s going to dominate their thinking. Unless you have a truly dynamic culture, you run the risk of losing them to a job that pays better – and who could blame them?
Conversely, once someone is making at least $75,000 a year, they move on to the next level of the pyramid. Then other aspects become more important.
How organizations should react to this
So how should this information affect your organization’s employee engagement strategy?
Regardless of income, the biggest reason people leave a job for another is for career advancement. Same goes for engagement – employees start feeling disengaged when they believe their career isn’t going anywhere.
This article helps generally inform what “career advancement” means. For people with a household income of less than $75,000 annually, generally that means advancing to a career that’ll pay more. For people who make more, it’s more complex.
So, if you fall into the former category, you need to show your employees how they can earn more money within their organization. Say you own a retail business where employees start off at $15-an-hour – a great way to keep them engaged is to show them how they can move into management and make $27-an-hour.
If you fall into the latter, it transcends money. Career development to your employees suddenly becomes about matching their skills with something they care about or having more of an impact on the future of the organization. Of course, money still matters, but it's more about the employee believing they are paid fairly.
In that case, a winning employee engagement strategy allows for lateral movements, so people can transfer to jobs that better suit their skills and desires at that time. It also comes down to showing the impact their work is having on the world.
There’s a big caveat to all of this though – this is all generalities. In a world where people are used to more and more personalization, the best employee engagement strategies are highly personalized plans between an employee and a boss.
That comes down to employees and bosses having enough trust in each other to have honest conversations and then employees having tools and paths available to improve themselves. That ensures they can advance their careers, regardless of what that advancement means to them.
Download our interactive workbook today to find out how much disengaged employees and turnover is costing your company.