Is Money The Key To Talent Attraction And Retention?

Full Transcript Below

[ANNOUNCER]: Breaking down everyday workplace issues and diagnosing the hidden sickness not just the obvious symptom, our hosts James and Coby.


[COBY]: Did we lose a patient?


[JAMES]: No that’s just my lunch.


[COBY]: Hey thanks for joining us. I’m Coby, he’s James. Let’s get started with a question. Is money the key to talent attraction and retention?


[JAMES]: Okay here’s a really clear and very succinct answer. Sort of yes, but mostly no. The problem is, it is to a point, and then it isn’t. Is  kind of where I think a lot of our conversation is going to end up. And I really like this topic, and I want to talk about this for a number of reasons. Because everybody is struggling with how do I attract people? How do I retain people? How do I solve the problem of finding and keeping good talented hard-working people? That’s a challenge that virtually every business is trying to figure out how to accomplish right now. And it’s not just private sector businesses that are struggling. We’re based in Nova Scotia, recently the Nova Scotia government has issued… they’ve got a new program to try to retain nurses. Because our Health Care system has been bleeding people for a long time. So they’re doing a ten thousand dollar retention bonus for nurses who sign on to commit to two years. I think they can get like ten thousand dollars this year and then if they sign on for two more years, they can get another ten thousand. Like it in terms of an incentive, it sounds fantastic, right? Ten thousand dollar retention bonus is far more than many people get in terms of an annual raise, if you get annual raises. But is it solving the problem? Is money going to fix your retention issues? Is money going to fix your attraction issues? And again to my very clear and succinct answer. Yeah, kinda. But mostly no.


[COBY] Yeah and I mean, I think this is because one of the things that we have to be aware of, is the complexity of wages and benefits. Because so I’m gonna grab a little definition. We use this in a lot of our training, but it’s helpful to kind of keep these things straight. There’s problems that are complicated, and problems that are complex. And complicated problems can have tangible, repeatable, solutions. So is something is complicated, it means that it’s multifaceted but it is something that a traditional, standard approach could be used to solve it, and that approach is repeatable pretty much all the time. Whereas a complex problem is different every time, and a single response or single approach will not work in all situations. And so that’s why when we say that, when it comes to wages and benefits and the idea of talent attraction and retention, this is a complex problem. There’s a real complexity to this because part of it, when you’re looking at why we have to have these incentives, like what the Nova Scotia government is doing with nurses, its because part of the underlying cause of it is the idea of using money to make the stress they have to deal with worth it, and trying to find the balance. But the question is, like you know, is more money the only way, or the best way, to find that balance between, you know, to balance off the stress you have to deal with? Maybe it’s not the best way, but it is certainly the simplest way, it’s a simple thing but  whether it works or not is the question. But the idea of… I think this will be the heart of what a lot of these solutions around using money as the key to talent attraction and retention is that if you think of the problem as a complicated problem, then money may be an answer that makes a lot of sense to solve a complicated problem. But because these are complex problems, a single one use fix won’t have repeatable results, so it’s not something that we can necessarily always rely on.


[JAMES]: And just kind of one way to look at the difference between complicated and complex. Processes are often complicated, there are many stages involved but generally once you understand the stages involved and you develop that plan, it’s repeatable. You can do it over again. People are complex. And when what works for one person, will not necessarily work for another person. Even if they’re in the same job, same industry, same level of experience, similar background. Like people are just messy and complex. And that’s why you can’t take these one-size-fits all solutions and just replicate them. In terms of… I wanted to justify my really bad answer to the question a little bit. Because saying yes and no at the same time is a garbage answer.


[COBY]: I wasn’t going to say it so I’m glad you pointed it out.


[JAMES]: Well I wanted it to be a little cheeky of an answer. But it doesn’t actually say anything, it’s a non-answer. Anyways, so when does money… when will money work to address attraction and retention? And when will money stop working to address talent attraction and retention? I’m gonna caveat this by saying there is no clear cut off and threshold, but I want to introduce the topic of diminishing returns. Because at a certain point as our lifestyle needs are met, money has a lower impact, lower influence on whether or not it is going to be a significant motivator. Now more money is always going to be good. People are always… if you ask people if they want more money they will say yes. If you ask somebody are you motivated by getting more money? They will say yes. Because money determines how well we can engage in society. Our entire society is built around consumption. Being able to engage in society means that you need to be able to spend money on things, beyond just the basics, right? If you are struggling to meet your needs, your basic fundamental needs, of “I don’t know if I’m going to be able to make rent this month.” “I don’t know if I’m going to be able to put food on the table this week.” “I don’t know if I’m gonna… Do I have to choose between paying my power bill and paying my grocery bill?” You know, “Can I go without cable so that I can keep my my children fed?”, right? And that unfortunately is a reality for a lot of people, and if that’s the demographic that you employ, money is going to be a significant motivator. Because as people are able to… if people are not currently able to meet their needs, the influence that money has as a motivational factor is going to be significant. Because they need to feed themselves, they need to clothe themselves, they need to provide safety and security for them and their family. It will have a significant influence on, primarily on attraction. It works with retention as well, but money is really good for getting people’s attention, and getting them to pay attention to what you’re offering them. But once we kind of meet those essential needs and we move from essential wages, or Essential Income to being actually having Disposable Income, then there it starts to become a diminishing return on how effective money is as the sole motivator, or as the primary motivator.


[COBY]: Yeah and I think that, I think this is kind of the crux of why it’s so important to explore this relationship between wages and compensation with talent attraction and retention. Because when it comes to… because you’re right. When it comes to levels of wages that are below, or kind of around, what is needed to provide basic levels of comfort and quality of life, wages and compensation is vital, if not the single most important influencer on on people. Because the reality is, it is really expensive to be broke, right? So you and I used to work in the nonprofit sector, and we worked a lot with people kind of who are lower income, or especially when I was in Community Education, there you

 work with everybody. And, you know, you see people that are low income, when it comes to things like dental care, right? They can’t afford the basic  maintenance to kind of keep their teeth clean so they end up prolonging going to see the dentist. Which causes really expensive like removals and canals, and problems because they can’t afford the regular maintenance.


[JAMES]: And a lot of additional health problems as well.


[COBY]: Absolutely. Cars are the same way. Transportation insecurity, right? So they can’t afford a car that’s not going to break down on them all the time. Or they can’t afford monthly payments so they buy something that’s cheap that they try and keep going. But then that causes them to be inconsistent with transportation. And they have to try and you know pay for expensive repairs. So it’s one of those things where it is really expensive to be broke. And there’s just no way around it.


[JAMES]: And I also want to flip this on the employer side, because it’s really expensive to pay poverty wages. Because you’re causing a lot of your own headaches. You’re causing more problems with absenteeism, you’re causing more problems with dissatisfaction, with burnout, with all of these workforce issues. If people are not able to focus on the work that you have, that you need them to perform, because they don’t know if they can feed themselves and their family. You are causing a lot of your own problems.


[COBY]: Yeah you’re right. Because there’s something that businesses need to understand. When they employ the Working Poor. Because when you employ people that are around the poverty line or don’t have, again, the wages to provide them the basic level of comfort and quality of life, you’re right. It comes with higher health issues, kind of like what we said about the dentist thing. They’re less likely to seek medical attention on stuff if they can’t afford the prescription. So it ends up prolonging issues that become worse. They have Child Care Insecurities, right because they can’t afford standardized child care. So they often mishmash between babysitters, friends, family, Grandma which makes them often miss time when illness happens. They have more transportation barriers. Because they, again, they rely on a bus that might break down or unreliable car. So when you employ people that are… with low wages and they’re trying to live on low wages, that comes with a whole host of problems that are likely your biggest pain points. People being unreliable, people missing a lot of time, or people leaving for health issues or burnout, like you said. Because the condition… because what you’re providing them, doesn’t give them the comfort or quality of life that they need to take care of themselves in the way that you want them to, to be reliable employees. And it’s a really important thing for people to be aware of. I didn’t want to go on that soapbox and talk about that. But that is something that is fundamental, I think, it is important to cover in this conversation. Because it’s the reality that many businesses and organizations put themselves, unintentionally. Not realizing the baggage that comes from hiring people with low wages. It causes expensive problems for you, that you could probably have a much easier time avoiding if you had the higher wages that removed a lot of those barriers that are holding people back from being reliable employees for you.


[JAMES]: Yeah and one of the big problems is that… the problems that employers are creating for themselves by, you know, paying these lower wages or employing the Working Poor, don’t show up on a balance sheet, right? There isn’t a line item to point to where your costs are actually coming from. Which is a big problem because it’s really easy to ignore things that aren’t right in front of our eyes. But you’re right, we could go off on a tangent on this for a while, and I do want to stay on topic a little bit. And I want to be clear that this is not just Coby and James randomly talking about, you need to pay people more. Or you know, just pulling this out of thin air. This is an economic principle, it’s an economic principle with a long and confusing name. The Diminishing Marginal Utility of Income and Wealth. Just a beautiful sentence there. Essentially what the theory talks about is exactly what we’re saying. At a certain point, money is going to be a substantial motivator. So if you are currently unemployed and you get a job making $500 a week, that will substantially change your quality of life. It will change the way that you interact with a lot of… within Society in a lot of ways. If you then making $500 a week, and find a job where you’re paid a $1000 a week, that again will make a big impact on how you engage in society. On what you’re able to spend your money on. You might even go from barely surviving to actually having some Disposable Income, right? But as your salary increases, if you are making $5000 a week, a $500 increase is great. I will take that every day. But it doesn’t substantially change how you engage in society. That extra $500 a week is probably going to go into an investment account or it might mean that instead of going on one vacation a year, you’re able to go on two vacations a year. It will impact your satisfaction and happiness, but not at the same rate, not at the same motivating factor that it does at those earlier stages. And this is the idea of diminishing returns. That the more you have of something, an increase has less of a influence on the outcome. It’s really, really important for businesses to understand. Because we have so many businesses that are trying to solve their problems by throwing money at it, and that can be a really good Stop Gap. Going back to the Government of Nova Scotia example. A ten thousand dollar retention bonus. If their strategy… now this is brand new and I don’t know what their strategy is I’m hoping that they have a strategy. I will not go into politics, I swear. But if their strategy is; “We need to stop the bleeding, so we’re going to do a ten thousand dollar retention bonus to keep people from walking out the door, so that we don’t have to shut down more ERs while we are fixing the other issues”. Beautiful. On board 100%. I think you’re on the right track. If their strategy is “We’re just going to keep doing a ten thousand dollar retention bonus every two years”. There’s going to be a significant diminishing return on that investment.


[COBY]: Because a lot of what that is… that kind of comes down to the question of the other causes of people leaving. Usually it’s around wellness, and mental health, and stress. Like I said before, how much money do you have to spend to make the stress worth it? Because with that example if they’re not trying to fix the inherent culture problems that happen or cause people to burn out and leave. Then the question becomes, how high does your salary have to be to sell your wellness and mental health, right? But again, if it’s a Stop Gap of, “Okay we want to try to buy your wellness and mental health for the short term, while we inherently fix the systemic structures that are causing you to burn out and causing these issues to persist”. Then there’s a bit of, like I said, it’s a bit of a Stop Gap and that could be a short-term fix to kind of buy you some time for a longer term fix. Absolutely. But if the only plan is just to buy people’s wellness and mental health and think that will work indefinitely, you’re right, you’re going to hit a really sad reality when you realize how much of a dimension return you’re going to get from that.


[JAMES]: Because for a lot of people, once we get past that Essential Income level, if all you compete on are wages, then the moment somebody gets a better offer, if they’re out the door. You cannot buy loyalty, right? You can’t pay somebody for loyalty, because they’re only loyal to the paycheck, not to you. If you want to solve these problems you have to look at the reason why people are leaving. And oftentimes… yes, they may be going to another position that offers a higher wage, a starting salary, but wages are usually aren’t the reason why people start looking for other opportunities. Usually it’s something to do with… often its their manager, their direct supervisor has a huge influence on job satisfaction and whether or not they…


[COBY]: I believe it was it’s a Gallup study from like 2019-2018, it said it was like 79% of employee engagement and satisfaction comes from the direct supervisor, or something like that.


[JAMES]: It’s huge, yeah we’ll have to get this stat and the study and put it in the show notes. Because it’s critical to understand that your culture is what is causing people to look for other opportunities. If you are already paying good wages, you’re in an industry that people are not at risk of losing their home, and not being able to feed themselves and their family, and not having to choose between paying their grocery bill and paying their electric bill. If your employees are not in that situation, and they’re still leaving, it’s time to investigate your culture.


[COBY]: Yeah I mean so, I do remember,  we’ll put this on the show notes too, is it was an MIT study that said, that when it comes to predicting a company’s turnover rate, culture is 10 times more effective than compensation. Because that is the reality, because as you said, going back, I’m going to quote you, because once income goes from Essential to Disposable, it has the diminishing return as a motivating factor. Because you’re right, once you hit that that line of now you’re in the Disposable Income, then the things like wellness, and autonomy, and those types of things become so much more meaningful. The environment, you know avoiding toxicity and harassment, and being able to get all the kinds of that stuff becomes priority. Because your basic needs are being met, you now have some, you have a little bit of a financial cushion. So now the other parts of your needs have to be met too. So going back, I’m going to drop another stat. Actually, okay I forget this one, I forget the who to with cite this one, but going back to what you said about why people are initially leaving. There’s another stat, like okay I can’t remember where this one comes from, I’ll put it in the show notes though, I believe it said 81% of people start looking for a new job because they’re dissatisfied with the culture of their existing job. So again, when you move beyond that Essential Income line and that line is different, it’s different by location, different by industry, sort of thing. And you have that that diminishing return that that money will have on you. But then it gets into, you know, about the culture. Their level of job dissatisfaction, the experience they have with their manager, those are the reasons that you’re struggling with attraction and retention. And that’s why the “no” part of your answer, with’ is money the key factor to tell attraction and retention?’


[JAMES]: It really is. And yeah we need to get those stats in the show notes, because they’re excellent illustrations of the point that we’re making. Like this is not just “Oh, you know, you need to treat people well, and if people are happy then they’re gonna solve all of your problems”. No. Your business is not in… well depending on what your product or services, your business is not really about making people happy, right? The purpose of your business is to make money. Your business has a product, a service, that you are offering, that you want to sell, that you need employees to develop the products, build whatever. Your ability to make money as a business is dependent on your ability to attract and retain good talented staff. It doesn’t matter what your pay scales and pay levels are, what your industry is, if you have employees your business is largely dependent, your business success has a hugely impacted on the people who are delivering on your value proposition.


[COBY]: Yeah and I mean I do think though too that we should also state… because again when I started off by saying this is a complex issue. Because, again, there are some sectors, industry, regions, where this stuff is… where these rules are a little bit… are a little bit harder to  say are universal. Like for example, in sectors like Finance, or Sales, or I.T. You know, your salary, your wages, money is a lot more important. It’s often why people get into the some of those fields, for the paycheck. Especially if there’s kind of no industry plateau, where kind of everybody, you know that’s… I think an engineer kind of makes around the same amount, when there’s just no plateau. And wages and salary options…


[JAMES]: Sales is a great example, because it’s often commission based, or base plus commission, you know if there’s no commission caps. Depending on the industry, like sales attracts people who tend to be more so other Industries, tend to be motivated by money. So, yes. Compensation is going to be a big motivating factor for people in that industry. And you’re right, I’m glad that you brought that up because we’re not saying that this is the one rule that you need to implement. You need to understand the environment that you operate in. You need to understand the people that you employ. You need to understand what motivates people on a day-to-day basis. Not the, you know, “we’re out to change the world and connect to our vision in some abstract way type of purpose” But what actually motivates people on a daily basis, what gets them out of bed . Once you hit that Essential Income line and you’re passing into Disposable Income, you really need to start investigating more than just money. Money is still going to be important but it’s not the only arrow in your quiver.


[COBY]: Exactly but just like we say in some sectors, again like Sales and Finance, money may have, will always have a stronger grip and have a stronger influence, then it will you know then in the general sectors. But in some other sectors, it actually has even less of an influence. Like in non-profits, in creative industries, in a lot of governments jobs. It’s actually kind of less important than the average. Because there people kind of are more looking for the, after the quality of life issue is kind of addressed, and they’re meeting the Essential, and they’re into Disposable, then it’s really about impact. Like nurses don’t get into nursing for the cash, right? They get in for the impact. It’s often for…


[JAMES]: It’s values based.


[COBY] Yeah. there’s the values based piece. But it’s also more about autonomy, it’s about about being allowed to kind of have that professional freedom, or ability to make their own schedules, or like I said, it’s about that kind of that purpose of helping others, or playing into the bigger picture, or you know making a difference, and even consistency. Like you know, kind of having this kind of place where I know that my job is consistent, and as reliable, and dependable, and that job security, piece too. So those are kind of the things that tend to have more of an influence in some sectors. So just like in Finance and Sales, money might have a tighter grip and a more influence than the average. In other sectors, like in government, possibly creative industries, nonprofits it actually has even less of a grip, once you move past that that Essential into Disposable. So it’s important to… and this is why we say it’s complex. Because there’s no one single answer, just do this one thing and boom everything’s fixed for everybody, everywhere. It’s complex. So knowing, like you said, knowing the environment you’re in, knowing the situation that you employ people in, that kind of goes into the complexity of the answer to the question, ‘is money the key to talent attraction and retention?’


[JAMES]: Yeah and I think you’re absolutely right that there’s no single one answer of how do you fix it. But I think there is a good starting point, regardless of the industry that you’re in, and that is understanding the factors of your workplace, and how they are contributing to job dissatisfaction. If you are struggling with retaining people, if people are looking for other opportunities, and they’re leaving in droves, and you have already met that kind of minimum threshold of where your wages or compensation is going to sit, then you really need to start investigating the factors of your workplace and whether or not they are creating job dissatisfaction. It’s things like, how you take care of… how you approach wellness in the workplace. It’s the consistency of work, the day-to-day consistency, consistency between departments. There’s a lot of things that you can do that don’t necessarily cost you a lot of money to start to address some of the culture issues, because as Coby said, culture is 10 times more likely indicator of retention than compensation. Or sorry, of employee turnover, which is influenced by retention, but I want to… yeah we’ll get that stat clearly defined.


[COBY]: Yeah you’re right. This all goes back to, I mean we talked about this in a previous episode about job dissatisfaction. Because this is really the crux of what we call The 7×3 Rule. The idea that the factor of the workplace, which include wages, but it’s also job security, consistency, wellness, the environment, safety, all that stuff has to be; Competitive, Sufficient and Equitable. I mean because, again, compensation is what we were talking about, this has to be Competitive if you want people to choose you over someone else. But when we get into the Sufficiency level, that’s when we’re talking about the Essential versus Disposable. Because those are important pieces, but it needs to be about realizing that it’s not just in the compensation realm. You have to look at it, again, from a wellness perspective, from a consistency perspective, from job security… all this kind of things. Your company needs to be falling in line with The 7×3 Rule if you truly want to reduce the employee turnover and increase your attraction levels. Because that’s the sort of stuff that people are really caring about. And they know they’re caring about it now. Where they may have always kind of subtly known this was important, but it’s become front and center in the past few years.


[JAMES]: And I think this is even more important if you are in an industry or in a situation where you realistically can’t address compensation right now. If realistically you are in a production environment, and your wages are largely set. You know, your margins don’t allow for substantial increases in wages. You know it doesn’t really matter what industry we’re talking about, but if you’re in that situation where you just you legitimately don’t have the ability to address compensation in a meaningful way, then you have to make sure the other factors of your workplace are rock solid.


[COBY]: Absolutely. Yeah, so again, the whole answer to this question is that it’s there’s complexity to it. Because the idea of wages and benefits and the idea of once we move past the Essential into Disposable income, then if we’re still trying to play the money game, then it’s a matter of, is the money making the stress worth it. And the answer for most people is maybe yes for the short term, but definitely a hard no for the long term. And that’s why we’re starting to see these shifts happen. I think this is a really important relationship to for us, not just us to explore, but for people to explore. And to take a hard look at how they utilize and view wages in their company. But in their region and sector, because again the complexity of the situation means that one answer won’t work everywhere. So we all kind of have to take a hard look at ourselves and hard to look at situation that we find ourselves working in to know what the best move for us is. Yeah, so I think that’s about it, I think I’ll do a quick wrap up and then we’ll tie the conversation up. Before I do anything else you want to share James?


[JAMES]: Uh no I just I really liked what the what you said earlier about how much is enough for somebody to sell their mental health? Or to sell their health? I know I’m butchering your quote, but I thought that was, I  wanted to bring that point back, because there’s a few things that I think are really important from this talk. One is that idea of how much do you have to pay somebody to make dealing with your crap worthwhile? And I think it’s really important to understand the idea of diminishing returns on salary expectations, or on compensation in general. And how once you hit a certain threshold, yes money will… more money will always be appreciated, but as a motivating factor to address attraction and retention, it has diminishing returns.


[COBY]: Right, cool. So as a quick summary. So again, the relationship between wages and compensation, and talent attraction and retention is something that we all need to be exploring. Both in our own companies and in our sectors. Because once income goes from Essential to Disposable, as James says, it has a diminishing return as a motivating factor. And some sectors have a ceiling on how influential salary is going to be on motivation and job satisfaction once we move into Disposable Income. Because it comes down to the idea of how much money makes the stress worthwhile? If money’s the only area that we’re trying to make improvements in. Because as we said and the stat from MIT says, that when predicting a company’s turnover rate, culture is 10 times more effective than compensation. So we need to understand that it comes down to the level of job dissatisfaction that people have in their jobs, how much is burning them out, their Wellness, these are the things that are really going to make the difference. Wages have an influence, but the influence gets diminished over time, or diminished as as salaries kind of go up. And we have to realize that that there’s a permanency to addressing a lot of these culture issues as a solution. Because again, a lot of time it comes down to how high the salary needs to be to sell someone’s wellness and mental health, if we’re only trying to to attract and retain talent with a paycheck. All right, so that about does it for us. So for a full archive of our podcasts and access to the video version hosted on our YouTube channel visit our website at Thanks for joining us.


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