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Praise or Raise
In most staff happiness surveys, scores about pay come out lowest of all.

A candid member of staff once told me that the reason for this was that employees reckoned that if they all scored low, management would be forced to do something and raise pay levels higher than they otherwise might. But what can cloud the issue is that most employee surveys are too inward-looking; they offer managers no point of comparison to similar data from their sector or outside it.

What I can reveal from my website, which surveys the workplace happiness of thousands of individuals, is that pay is not the biggest issue in securing their satisfaction and engagement. What’s more important to staff is being recognised for a job well done.

These findings confirm the work of the renowned business management psychologist, Frederick Herzberg, whose theory of motivation in the workplace concluded that pay and working conditions can only ever minimise an employee’s dissatisfaction with work. Neither pay nor working conditions are enough to promote happiness or engagement on their own merits.

Employees are motivated by a range of other factors, but most notable are having responsibility, being recognised for their achievements, feeling a sense of pride in their work, and that an organisation is interested in their well-being and development. In other words, if you want fully-engaged employees – and to reap all the commercial advantages that come with that – you can’t just throw money at the issue. Achieving a happy and effective workforce runs much deeper.

For many, it’s recognition rather than pay that’s a more motivating factor. I read recently that people are praised at work on average only once every four and a half months. According to Maslow, two of the most valuable psychological needs that we have as humans are the desire to be appreciated and to belong. In other words, acknowledgement is crucial.

Companies that regularly and properly recognise their staff have 31pc lower voluntary turnover (employees willingly choosing to leave their jobs) than companies with a poor recognition culture. Saying thank you and acknowledging a job well done goes a long way. On a biological level, thanking someone releases oxytocin, a hormone that makes us more relaxed, collaborative and happy.

So what can the data tell us about pay and recognition by sector, age, gender and management level?

Cutting by industry, I’m sure the results won’t surprise that employees in public services, retail and hospitality feel the least rewarded for their work, while those in working in the legal services, industrial goods and automotive, and marketing and advertising sectors rank highest.

But comparable data is key here; as I reported in recent months, pay is not the main area of employee discontent in the retail and hospitality worlds – far from it. Good career development, having your views heard, being trusted with responsibility and feeling a sense of pride in your work all score lower on the satisfaction scale.

Remember that these sectors are going through great change and staff want to feel like they're actively involved in shaping their future with it. A few extra pounds in an employee’s pay packet is not the answer to that.

Cutting it by sector again, we asked employees: “do you feel recognised when you do something well’?” Those working in education feel most that this is not the case, followed by insurance. The most recognised are those working for not-for-profits, and industrial goods and automotive companies.

The case of those working in the former is, I think, the most revealing feature of this research. We know that not-for-profits are not as high-paying as other sectors, so you would expect it to be bottom of the pile when it comes to feeling fairly rewarded, but it scores ninth out of 20 sectors. This should tell other companies that a greater sense of recognition could lead to employees feeling less dissatisfied with their pay.

What else does the data tell us? In spite of, or perhaps because of, the recent headlines over the gender pay gap, the difference between how men and women feel about pay is not as significant as you might expect, although women are certainly less happy. The same is true of recognition.

However, the gaps are much wider when it comes to managers and non-managers, and age; you’re most likely to be happy about your pay and being recognised for a job well done as you get older.

Aside from the revelation that high levels of recognition can offset discontent over pay, the other standout finding is that feeling rewarded and feeling recognised are both notable and significant predictors of self-reported workplace happiness – and of the two, feeling recognised is a stronger determinate.

Article also published in The Telegraph today:

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Praise therefore must come before raise in engaging a workforce.