How to Keep Your Employees Happy When Raises Aren't In The Budget

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In this volatile economy, dishing out raises to your employees may be a scary thought. When the budget is too tight to allow the raises that you’d like to give, it’s important to understand how a little love can save the day.

As far back as 1924 when the so-called Hawthorne Studies originated, researchers began to understand that employee behavior is not dependent on money alone, far from it. In fact, job satisfaction and performance often depend heavily on factors that have nothing at all to do with money; and nowhere is this more important than in a service business.

Of course, reasonable pay is the foundation of job satisfaction and productivity, but it cannot do the job alone.

Do you know what motivates your employees to do an honest and productive job for you? On the surface, that would seem to be an easy question to answer. Many employers would suggest that paying a competitive wage is all you need to know, but research over the years paints quite a different picture.

The groundbreaking Hawthorne studies were probably the first to take a scientific look at employee motivation, but they weren’t alone. Another study conducted by Abraham Maslow in 1943 fully supported the Hawthorne studies and went further by introducing five levels of needs that humans require to provide satisfaction in our working lives.

While these studies involve psychological complexities that go beyond the scope of this article, they can be boiled down to the important conclusion that job satisfaction and job performance often depend heavily on factors that have nothing to do with money.

Despite all of the studies on the subject over the years, motivating employees is still far from an exact science. Each person has his or her own set of reasons for working, and they are as individual as the person. We all work because we need to obtain something from that work that is important to us.

Here are six things you as a business owner or manager need to know to improve the motivation, and thus the performance, of your employees when budget restrictions don’t permit handing out raises as often as you’d like:


Every human has a powerful need to feel respected, to be accepted and valued by others. This need touches every aspect of a person’s life and nowhere more strongly than in a business environment. From brain surgeons to salesclerks, the craving for self-respect and recognition is so strong that it can dominate and control employee behavior and performance regardless of financial considerations.

The work of an employee left with no reason to think that her boss respects and values her contribution is almost certain to fall well below her potential. In extreme cases, negligent or even harmful behavior will be the eventual result.

Unfortunately, it’s easy for an owner to overlook an employee’s need for recognition and self-respect. Consider this actual exchange overheard between a business owner and an employee passing in a hallway:

Employee: “Good morning, Mr. Smith. Looks like we’re going to have a nice day.”

Boss: “Fine, thank you. And how are you?”

That sort of disconnect between an employee and a busy owner or manager is not uncommon — and a clear message to the employee that he and his work are unimportant. Lack of recognition such as this preys on the susceptibility of many workers at all levels of our workplace hierarchy who are starving for self-respect and the essential dignity that goes along with it. Failing to supply it provides a perfect setting for the loss of initiative and lowered work ethic on the part of the offended employees.

Fortunately, providing the kind of recognition that satisfies this important need is an easy task. One of the simplest and most effective ways to develop and demonstrate sincere interest in your employees is to take a little time to learn something about each one.

Employee Equalization

Favoritism, or even the appearance of it, can be a deadly enemy of positive employee attitudes. An employee who feels he or she is the victim of favoritism is likely to develop an unseen grudge that can silently, but effectively, damage your business.

Make a constant effort to show appreciation to your employees in a fair and equitable manner. Any indication that you regard one employee with more respect or appreciation than any other is a certain path to negative employee morale. While it’s not always possible for you to avoid regarding some employees more highly than others, allowing that feeling to become obvious to others is a serious management failure, one that will almost certainly exact a costly penalty.

Good Working Conditions and Personal Safety

While some jobs are inherently and unavoidably dangerous, personal physical safety is one of those instinctive human needs that rank near the top of our subconscious concerns. Employees need to know management is aware of the need to take reasonable precautions to protect them from workplace harm.

One of the most obvious demonstrations of this concern is an on-going and visible effort to make certain that all equipment, electrical and mechanical, is in good working order and checked on a regular basis.

Another working condition that can affect employee attitudes is cleanliness. While a lube business is obviously not a hospital, an on-going effort to maintain neatness and cleanliness in the workplace demonstrates a respect for customers as well as those who spend their working hours in it.

While motivation can’t be forced, it is not difficult to create the kind of physical work environment that encourages positive employee attitudes.

Job Security

In today’s economic environment, any reasonable person understands no employer can guarantee an employee’s job will always be there. Still, it’s important for owners and managers to demonstrate they understand the need for a work environment that recognizes employees’ concerns about job security. In particular, it’s important to avoid unjustified dismissals that will have a negative impact on all remaining employees.

Employees who feel management strives to provide the highest possible level of job security will be motivated to do their own part by performing at their best levels.          

Recognition and Non-cash Incentives

A report by the research firm McKinsey & Co. on motivating people strengthened the importance of recognition and non-cash incentives in the workplace. In particular, the report points out that non-cash incentives (including sincere praise and recognition from immediate managers) is often a stronger motivator than traditional incentives such as bonuses and stock options. This is of particular importance to businesses operating on tight budgets.

“Cash is too expensive,” said Dave Peer, president of the Incentive Marketing Association. “It costs a lot more to deliver cash awards than non-cash awards.”

Peer reported companies are discovering that cash is not the panacea they thought. Non-cash awards can include such obvious things as a fruit or flower basket or dinner out with the boss. The only limit is your imagination, but don’t forget the one often suggested as the most important of all — praise and recognition from the boss.

None of this is to suggest that money in the form of wages isn’t the heart of positive motivation, only that money alone is not likely to inspire the kind of motivation that brings out the best performance in your employees.

Respected Leadership

A serious disincentive for employee motivation generated by some managers is failing to accept the blame when something goes wrong. A reputation for always putting the blame on others is a management deficiency that will eventually exact a heavy toll in the form of employee unrest. Being in charge means being willing to take responsibility for whatever happens on your watch.

“If a leader wants to build an atmosphere that promotes positive motivation, he or she needs to discuss problems with employees in a private setting. If he wants people to work hard on Fridays to get ready for the coming weekend, he needs to stay late himself. If he wants courteous employees, he must offer courtesy to others. In short, the person leading the operation must display the behavior he or she wants others to emulate.”

While employee motivation may seem too theoretical of a subject for some busy owners and managers, others will recognize that attention to the kind of employee concerns discussed here can be the difference between mediocre and optimum performance, especially when current conditions do not permit granting the wage increases they would like to give. 

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