Monday, 22 December 2008

Pay rises consigned to Room 101 – how about training?

By William Franklin, Director, Maven Training

The current economic climate is making many people worry, with food and fuel prices rising and house prices falling, circumstances are getting difficult. At Maven Training our mission is to help our clients achieve optimum performance, be they SME’s or large organisations, even though this can be challenging when their employees find it difficult to meet the commitments of both family and working life.

Clients are coming to us and saying “I’ve got to spend my limited resources on either developing the best staff or give them a salary increase.” In fact this request by beleaguered line managers is not confined to periods of economic stress. Even during the good times, line managers are often under pressure to pay their staff more to keep them doing the same job.

Salary vs. Development

It’s easy to think that paying staff more money will result in them becoming re-energised, re-engaged and recommitted to the business. However, over 90% of employees are on a fixed salary which means they know what they will earn each year. They also know roughly what their colleagues earn and how much a similar job would pay elsewhere. Managers therefore have to determine whether an inflation busting pay rise for a few key staff will make any difference let alone ‘the’ difference.

Let’s do the maths:

As we can see, a 5% increase in basic salary would result in a net monthly benefit to staff of between £46 and £148 per month. Even with an extraordinary 10% increase in basic salary, the maximum benefit to a high wage earner would be less than £300 a month and management have to ask themselves the question; “will this be sufficient to ensure their commitment to the organisation?”

Assuming the same job will continue to be undertaken by the employee following the pay rise, the only certain outcome for the company is a higher fixed cost base and lower operating margins, as higher salary does not necessarily translate into higher productivity.

So what else can organisations do to make sure their staff feels valued such that their commitment and enthusiasm remain with the business?

This is where Maslow's hierarchy of needs comes in. Written by Abraham Maslow in the 1940s, it defines the 4 key levels of an individual's physiological needs leading to the final psychological stage of Self Esteem. While many managers will recognize this model, applying it to the area of job security within an economic slow down is a new approach.

What we see is that job security, the ability to pay the mortgage and feed our families, sits towards the bottom of this hierarchy. It is this aspect we at Maven Training find particularly interesting - as companies start reviewing the staffing levels, how do you maintain job security among your staff?

In a survey conducted by the Institute for Employment Studies over 10,000 employees were asked, what contributed most to their level of job satisfaction. The answers in descending order were:

1. Training, development and career
2. Immediate management
3. Performance and appraisal
4. Communication
5. Equal opportunities & fair treatment
6. Pay and benefits
7. Health & safety
8. Cooperation
9. Family friendliness
10. Job satisfaction

It is interesting that Pay and Job Satisfaction, two areas that organizations would expect to rank much higher, actually came in at 6th and 10th respectively whilst Training, Development and Career Management took the top spot. What is even more interesting is that the original survey was carried out in 2003 and in each subsequent year Training and Development has remained the number one driver of job satisfaction.

So if management is to accept the idea that staff training and development has a significant impact on employee engagement, what are the costs likely to be?

An on-line health & safety course could cost £50. A chief executive coaching programme may run to £2500 per day whilst a mid-level five day could be about £1500.

When you compare your return on investment for training and development against a straight forward salary increase, the financial benefits are immediately clear. After a relevant and worthwhile training course, the employee returns to work feeling inspired, re-energised and valued with a new level of knowledge and understanding which they can apply to their job and working environment.

The tangible benefits of a salary increase are less clear.

So why should an individual ask for more training?

- Training is a direct investment in the business and as such is more likely to be approved than a salary increase
- Time out of the office to develop new ideas and re-energise
- Learn new skills that enhance your career

…and why should a company offer its staff more training?

- Training is a direct investment in the business, a salary increase is a cost
- It will increase individual, team and company performance
- The individual will feel valued and more likely to fully engage with the business

Even though the uncertain economic climate looks like it’s going to be with us for a while, we can take measures to ensure employees feel motivated and secure. There is also the added benefit that when the economy does turn round, the individuals and companies who follow this strategy will not only have faired better during the downturn, they will also be better placed to take advantage of all the opportunities we know will arise as confidence returns to the market.

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