As businesses attempt to determine the best way to increase productivity and employee engagement, many factors are being considered. A recent study conducted by the U.S. Commerce Department has found that one way to boost productivity is higher pay.
Based on information from a 2011 survey of manufacturers, vast pay differences can be seen between industries and within the same businesses in relation to different departments. The study found that as the amount in a payroll rises per employee, so does the added value. It was seen as particularly strong for employees who were paid less than others.
How can wages actually affect productivity? The study determined three major causes including:
- Attracting more skilled employees: Businesses should invest in their employees beginning at the point of hiring. By doing so, businesses can attract more skilled workers who are capable of handling potentially higher stress situations and a steeper workload. In addition, with more skills, these employees may be more likely to move up within the ranks of a business more quickly, filling out executive and management positions.
- Better work practices: Employing more skilled, motivated employees from the beginning can enhance daily tasks and aid in their completion. Businesses that invest more in their employees often see a greater return of those skills,
- Retention: Employee turnover is costly for both skills and overall revenue. Eliminate high rates of turnover by offering more money. It is a quick, easy perk that will encourage employees to stay within a business longer.} In addition, offering pay hikes and other incentives can also increase retention.
Another factor some businesses are considering when it comes to engagement and productivity is employee ranking. Although implementing a ranking system can enable employees to view where they stand in a business, as well as see their room for growth, ranking also has some negative consequences.
A recent study conducted by Iwan Barankay, an associate professor at the Wharton School at the University of Pennsylvania found that employees achieved higher sales when there was no ranking system that they knew of, as opposed to those who knew there was one in place.
Although ranking employees may have good intentions, it can highlight real skills differences between workers creating a disconnect and animosity between them. In addition, many employees often rank as "average" and although average is more than adequate, it can be harmful to a worker's morale and future engagement in the company.
"Competition in a collaborative environment doesn't work well," said New York University Professor Steven Blader.
Before implementing a real change in your business, be sure it will do more good than harm.
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