Why you don’t want happy employees

Umpteen studies over the decades have proven that a happy employee is not necessarily a productive employee.  So all the talk and articles and blog posts about how to make your employees happy are misleading.  Making employees happy is not what you should be trying to accomplish. 

So what do you want your employees to be? 

First of all, you want them to be productive.  Getting the job done is the sine qua non — without which, there is nothing.  But productivity these days is not enough.  You can, through command, control, manipulation, and consequences get people to be productive.  But as a result, they won’t be committed — to providing the best service, to continuous improvement, to developing their skills, and to your company.

So secondly, you want employees who get satisfaction from their work.  This is not the same as being satisfied – that’s not motivational.  Rather, it is the satisfaction that comes from accomplishment and doing  good work, which is the strongest source of motivation — intrinsic motivation.

When someone derives satisfaction from their work, they treat other employees and customers better, they put in extra effort, they want more of the satisfaction from doing a good job.

Don’t try to make employees happy or satisfied.  Instead, help them to be productive and to get satisfaction from accomplishment.  Only then can you maximize your return on people.

The biggest downsizing mistake.

The biggest mistake is to focus solely on cost reduction without regard to value.  It’s a lot like focusing on expense instead of return on investment.

If you don’t come out of this recession with a much more valuable workforce, you’ve missed an exceptional opportunity. 

If you must downsize, you can improve the overall value of your workforce by letting go the weakest performers.  That’s weakest performers, not those with the highest pay rates, or those with the least seniority. 

The Wall Street Journal ran an article a month or so ago about how companies in this recession are letting go less capable and less experienced performers – not the more experienced (and expensive) people the way companies have done in previous recessions.

Common problems:

1. HR or legal want to go by seniority because it’s “only fair” or it will prevent employment complaints.  You know who the best and worst performers are right?  You’ve got a good performance management system, right?  One that differentiates based on performance outcomes, right?  If not, you’ve got remedial work to do because that is affecting your ability to manage your key asset. 
2. Finance is telling you to chop the most expensive heads to reach cost-cutting objectives faster.  The assumption is either that all people are of equal value, but come with different price tags, or the only thing that matters is cutting costs.  You want to focus on value, not short-sighted and one-sided views of generating business value.
3. Managers are saying they want a cookie-cutter approach.   They don’t want to make the difficult choices necessary.  A financial services firm wanted to use the same seniority-based approach across the board.  The reason given was that it would be more fair.  For whom?  For the high performers with loads of experience who happened to be hired recently?  To the long-service employees who are in the in-office retirement program?  What it came down to was the managers wanted someone else to make difficult decisions for them by using an “objective” criterion that does not serve the business, but makes their jobs easier.
4. Managers want complete freedom to pick favorites.  This is the flipside of #3.  They’re either managers who truly want to select the weakest people, or they’re the insecure and autocratic type who want to surround themselves with rotomontades.  You can tell the difference – the latter type get defensive about their picks.

What to do:

1. Make sure you have a good performance management process – one that produces documentation that differentiates based on performance.  It does not have to be sophisticated, complex, or comprehensive.  It just needs to evaluate how well someone is doing, and provide guidance on how to improve.
2. Stay focused on value.  Seniority and pay level don’t matter as much as overall value.  What value is years of seniority if the performance isn’t there?  What value is a high pay rate if the value received is high?

Merit Pay Satisfies No One – and Upsets Many

First, some truths based on overwhelming research and evidence:

1. Individual pay for performance does not improve organization performance.
2. There is no evidence that performance appraisals improve performance.
3. After three decades of research, there is no evidence that merit pay improves either individual employee performance or organization results.
4. Individual employees do not trust their performance appraisal systems.

Furthermore, merit increases aren’t enough to motivate employees – but they will irritate them.  You’d have difficulty feeding a family of four at McDonald’s once a week on the additional pay a high performer gets over an average performer. 

Example:  Average 2009 merit increases are projected to be 3.6 to 3.8 percent, with the highest performers getting 5.6 to 6.0 percent.  For a $50,000 salary, the difference between the average and highest is 2.0 to 2.2 percent.  2.1% of $50,000 is $1050, or $20.19 per week before taxes.

Even when there is significant pay differentiation between weak and high performers, the cash difference isn’t much.  And many studies have shown that differentiation destroys engagement, breeds distrust, and undermines teamwork.

So, what does improve performance?

High performance companies align all the elements of strategy implementation with compensation.  This includes:

1. A clear strategy effectively communicated through the organization so people understand their roles.
2. An organizational structure and processes that enable information, collaboration and decisions to flow in all directions.
3. Co-workers who are competent, productive and positive.
4. A culture of collaboration and high performance.
5. AND rewards that reinforce the strategy and values.

Treating performance reviews and merit increases as annual administrative exercises puts the focus on administrative deliverables, instead of on strategy, values and business outcomes.

Performance management can be a powerful tool to align effort and improve performance.  But it will never achieve those results the way it is traditionally practiced.

(Bob Legge helps clients improve performance and return on people.  For more about this topic, go to http://www.leggecompany.com/articles.htm)