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To Cope with Labor Shortage, Raise Emotional Compensation

November 18, 2021

Employees Celebrating

The current labor shortage and employee retention are concerning issues for organizations. Many leaders are scrambling to attract and retain the workers they need. A combination of factors has resulted in an insufficient number of workers to meet available jobs: job quits hitting historic highs, declining immigration, and fewer working-age individuals (16-64 years old). This labor shortage started before the Covid-19 pandemic and is expected to persist for some time.

And then, there are those who have a job but aren't happy with it. A recent survey found more than 40 percent of people are considering leaving their current job this year. The pandemic has caused many people to re-evaluate their work lives and what they are willing to accept.

What is Emotional Compensation?

Raising wages and offering attractive benefits packages are the primary and traditional recruitment tools employers use. But, employers should not limit their thinking that compensation is purely financial. Addressing “emotional compensation” will be increasingly important and valued by employees.

For the last 20 years, we’ve learned that boosting emotional compensation is based on meeting seven universal human needs to thrive at work:

  1. Respect
  2. Recognition
  3. Belonging
  4. Autonomy
  5. Personal growth
  6. Meaning
  7. Progress

The sense of connection from having these needs met causes positive emotions. It also helps us feel connected to our work and our colleagues.

The most effective leaders know that emotional compensation benefits the individual as well as the organization. Leaders who cultivate a culture of connection through inspiring visions, valuing people, and giving employees a voice will see success. They will meet the seven needs, unite employees, and foster a relational environment that helps employees do their best work.

Does it Actually Matter?

Let's take a look at Costco's "Do the Right Thing." Costco attracts, engages, and retains employees so well that competitors are envious. Not only do they pay workers higher wages for their industry sector, but they also cultivate a culture of connection that produces positive emotions. I am not at all surprised that Costco ranked four on the Forbes and Statista “America’s Best Large Employers 2021” list. They lead the retail and wholesale category. Costco has consistently been in the top five of the list for years. So, Costco’s leaders are clearly doing something right.

Jim Sinegal, Costco’s co-founder, once told me that Costco’s culture can be described as “do the right thing.” By this he means, Costco:

  • Obeys the law.
  • Takes care of its members (i.e., customers).
  • Takes care of its employees.
  • Respects its suppliers. In adhering to these standards, Costco rewards its shareholders. It’s a win for all parties.

Costco employees are proud to work for an organization that does the right thing. They know that Costco’s leaders value them as individuals. They don’t think of or treat them as mere means to an end. Costco promotes from within and invests in apprentice-like training to develop employees and give them opportunities for advancement. In addition, they give employees a voice to share their ideas. When I spoke at Costco’s Annual Manager's Conference, I witnessed endless videos of employees who proudly shared their ideas. From locations all around the world, they came up with ways to improve efficiency, reduce costs, and improve member and employee experience. These aspects of Costco’s work culture help boost employees’ positive emotions.

For more about Costco as well as profiles of other leaders and organizations that boosted emotional compensation through cultivating cultures of connection, read Connection Culture: The Competitive Advantage of Shared Identity, Empathy, and Understanding at Work (2nd edition).

Positive Emotions at Work

Positive emotions are especially needed today. People are longing for more positive workplace cultures. The signs are there that emotional compensation would be highly valued by employees. Coming out of the pandemic is a natural time to make improvements.

The Gallup Organization’s State of the Global Workplace 2021 found that:

  • Negative emotions among employees across the world have been rising for years and reached record levels in 2020,
  • Seven in 10 employees are presently struggling or suffering, and
  • 80 percent of employees are not engaged or are actively disengaged at work.

These statistics may sound bleak but leaders should consider it a major opportunity.

Given the economic and emotional benefits of working for leaders and organizations that cultivate cultures of connection, it's no wonder that organizations that pay well and provide emotional compensation become the employers of choice in their industry sector. Connected, engaged employees are more collaborative, innovative, and productive. Leaders and organizations that get the emotional compensation piece right will gain a competitive advantage.

Are you interested in learning more about increasing your employee retention? Watch the Increase Employee Retention Through Emotional Compensation webinar that Terryberry hosted with leadership and work culture expert, Michael Stallard from Connection Culture Group.

We'd love the opportunity to connect with you! We can help you build and maintain an excellent company culture.

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About the Author

Michael Lee Stallard, president and co-founder of Connection Culture Group, is a keynote speaker, workshop leader, executive coach and globally recognized expert on how to tap into the power of human connection to maximize the performance of individuals and organizations. Michael was recently recognized as one of the top 20 leadership advisors. He is the primary author of Fired Up or Burned Out and Connection Culture, now in its second edition, which was recognized by Leader to Leader as one of the top 100 leadership books.