Retaining talent – the role of extrinsic and intrinsic reward
Editorial by Alberto Gabbai Chairman of the Board of Cezanne Software
If you work in the HR department, or if you are a manager with responsibility over a business area, you will inevitably have to deal with compensation issues.
We routinely evaluate employee performance to establish if a salary raise should be given or not; we deal with succession and career to ensure that the organization can continue to thrive by promoting the right person to a new (and better paid) job; we train people so that they can move on to other jobs, and the underlying thought is that the other job will pay better than the current one. Even when we are recruiting, the negotiation about the compensation package can take quite some time and effort.
When we talk about compensation we usually think money, even though it can take several forms: salary, bonus, stock options, and benefits. Many HR departments have become good at planning; defining policies, matrices and guidelines to ensure that people are rewarded as fairly and as objectively as possible, while helping the company to keep control over its personnel costs. We are also aware that there are other, “softer” compensation items that play a role in the equation: the “perks” that might come with the job (the condo in Grand Cayman, as portrayed in Grisham’s novel “The Firm”) or with the company: for instance some companies are allowing babies and children into the workplace, so parents don’t have to worry about babysitters or daycare. These additional benefits are harder to translate into pure monetary terms, as they hold different values for different people, but they can play a big role in talent retention.
Still, this doesn’t tell the whole story either. That’s why I found Dr. Adizes’s reward theory revealing and instructive. Dr.Adizes, in his book “Corporate Lifecycles” states that the reward system in any given organization is composed of two categories of rewards, extrinsic and intrinsic. The extrinsic are those I’ve mentioned before, money and perks. We still have to address the intrinsic rewards that may be inherent in the job itself. Dr. Adizes identifies three forms of intrinsic rewards: the reward linked to the task, the reward linked to the power the job might hold, and the reward that comes from perceiving that the job is part of a grander scheme aimed at a broader mission. For example, the task itself may become a reward when I really enjoy doing what I do, and this fact may be the main reason why I work here, and therefore plays a major role in talent retention. An example of the second case, although a distorted one, is what happened to me when I recently passed through immigration. My documents were in order, everything was as it should have been, nonetheless the immigration officer kept me for 10 minutes lecturing me, in a very kind manner, about immigration rules. Why? His job gave him the power to do so, and sometimes this is a strong reward. As for the third one, mission, not money, is what motivates volunteers, who often work as hard, if not harder, than highly paid employees.
While all five components are present in everyone’s perception of their job, the intrinsic elements are easily overlooked by companies as part of a reward system.
The true reasons why an employee stays or quits are often hidden in the intrinsic elements. Knowing the balance of these five components in every employee’s perception is crucial to developing a reward system that goes beyond the purely pecuniary, and that allows companies to spend only what is necessary, and not more, on monetary compensation and, at the same time, engage and retain the talent they need.
