For Retailers, Giving Employees Extra Pay Is Good, But Appreciation Better

“Happy employees equal happy customers. It’s a linear relationship,” says Paul Warner Ph.D., … [+]

At a recent Senate Budget Hearing, Costco CEO Craig Jelinek made a surprise announcement that it was raising its employee minimum wage to $16 an hour, from its current $15.

In choosing the hearing as its platform, Costco maximized the PR value of the announcement while raising the stakes against Amazon AMZN +0.8%, Target TGT +1.6% and Best Buy BBY +4.7% which remain at $15.

With the PR battle raging on amidst a tightening labor market with unemployment now at 6.2%, what are smaller retailers or those that didn’t reap the financial rewards from the government’s essential-business classification during the pandemic to do?

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Without the wherewithal or financial stability to up their wages, how can they hold onto their valuable and well-trained employees against these major retailers waving the red-flag of more pay in front of them?

“Studies have shown that giving people a few extra dollars to perform a task doesn’t psychologically increase their motivation,” says Paul Warner, Ph.D. in clinical and industrial-organizational psychology and vice president in customer and employment experience strategy at InMoment.

“Base pay is the bottom layer of Maslow’s Hierarchy of Needs,” he continues. “Supporting employees goes beyond just pay. It’s employee well-being and providing a work environment where they can actually thrive in their lives.”

While adding to an employee’s pay package is a tangible step – effectively throwing money at the problem – it isn’t the only alternative for retailers to retain employees or necessarily the best.

“Perception is king,” Warner continues. “If employees’ perception is that they are not being treated fairly, then what is the likelihood that they are going to stay with the organization? Or what is the likelihood that they will quit their job psychologically yet stay for a paycheck. When that occurs, it creates a very toxic culture.”

Retailers need to think holistically about what their employees need to thrive in their jobs and in their lives.

“The best brands are going to be looking at people’s self-worth, self-esteem, growth and development. Beyond just meeting basic pay expectations, that is going to help them keep the best people,” his research shows.

For retailers whose balance sheets don’t afford the luxury of added pay, and even for those that do, there are many more ways to reward valued employees and show they are appreciated.

“A person’s work life and personal life are integrated now,” Warner says. “Especially when you are the largest retailer, like Walmart WMT +1.2%. People not only work there, they shop there. Their lives are integrated, so any efforts like tuition reimbursement or more health benefits are things that will actually affect someone’s life and are tangible ways to show appreciation.”

Beyond that, employees need to know they are heard. “When someone doesn’t have a voice, when they are not brought into decisions that affect their lives, then they have a perception the employer is not treating them fairly,” Warner warns.

It requires a management structure where the employees feel part of the process, not just interchangeable cogs in a wheel.

“The best brands have taken major steps in reaching out to employees to get their voice and rewarding them for their ideas, then using those ideas to actually affect change,” he shares.

Every employee wants to feel like their work matters and that they have made a contribution to the whole. Giving them greater autonomy on the shop floor to resolve customer issues creates a work environment where people can flourish, rather than languish.

“When people feel like they have to follow a set policy, where they can’t effectively resolve a customer’s concern, this creates a sense of learned helplessness,” Warner says. “The customer becomes more upset and more demanding which can lead to employee burnout and apathy.”

He points to retailers like Nordstrom JWN -1.3% and Costco that empower their employees to go off script and cross-functions to respond to immediate customer needs.

“It’s frustrating for an employee, not to mention the customer, when they have to stick to an assigned task and can’t cross boundaries to help the customer on the spot,” he says.

“Imagine the negative impact when 60% of your employees feel frustrated at the end of their workday? Employee empowerment, autonomy and the ability to make decisions that can actually satisfy customer demand are critical elements,” Warner continues.

And retail managers should have the autonomy to reward retail employees who make those above-and-beyond efforts to help customers too.

“The best retailers have on-the-spot rewards programs so if an employee goes out of his or her way to help the customer, they get a little extra benefit for a job well done,” he notes.

Such on-the-spot rewards are far more motivating than scheduled bonuses. “It’s the psychology of intermittent rewards,” he explains. “If it’s scheduled rewards, people adapt to those rewards. It doesn’t create motivation but satiation. Intermittent rewards are a surprise,” leading to personal greater satisfaction and a feeling of being appreciated.

It’s that personal recognition for a job well done that makes the employee feel valued and is further positively reinforcing for the rewarding manager who has the autonomy to grant such recognition.

“Happy employees equal happy customers. It’s a linear relationship where the elements of the ecosystem in the work environment all affect both the employees and then ultimately the customer,” Warner says.

“It’s ironic those individuals who are responsible for executing a brand promise and delivering a service by interacting with the majority of the customers are often paid the least,” he says.

And while we both agree that added base pay for retail employees is to be desired, there are many other less financially-impactful ways retail employers can retain employees.

Making them feel appreciated, heard and that they really matter can take a retailer far, even if extra pay isn’t in the equation.

“People need to feel their opinions matter, that they are appreciated and they are contributing. That’s how a retail employer can get them to put their best self into their work,” Warner concludes.

I am a market researcher, speaker and author focused on the affluent consumers’ behavior and mindset, including the HENRYs (high-earners-not-rich-yet) mass affluent. I

 

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