Staff motivation in the time of salary hikes

In companies across India, this is the time of the year when the appraisal process is being concluded and employees are getting to know about their salary hikes. Morale and enthusiasm depend almost entirely on that magic percentage of hike. But it needn’t be so. Experts insist that this is when a company’s HR skills are put to the test. Some ideas on how to keep motivation levels on an even keel in this stressful period.

Dilip Kapur, president, Hidesign India

For an organization to attain brilliant results and perform consistently well, it is imperative that there exists good team spirit and high employee morale. “However, this is not an instantaneous process,” says Kapur. “There is no magic wand for building high morale overnight. It is a cyclic, evolutionary process that needs to take place on a continuous and consistent basis.”

Emotional commitment is the heart of a successful small company like Hidesign, Kapur says. “One should get the employees to feel involved. Give them a sense that their contribution matters to the company. Engage them in decision-making through informal brainstorming sessions. Ensure their variable (pay) is clear, precise and not dependent on any subjective criteria,” he says.

“One reason why Hidesign has so many women (more than 90% of production staff, every single regional head and most of its distributors internationally) is because of their emotional commitment... Constant discussion on the emotional aspects of fashion and commitment to the brand values of Hidesign are critical,” Kapur adds.

Anandorup Ghose, rewards consulting practice leader, Aon Hewitt India

It is a fairly complex time for companies that have given salary hikes,” says Ghose. Till 12 May when exit polls were announced, there was discontent about the economy. But between 12 May and 16 May, when results were announced, people’s outlook brightened. While the salary increase decision was taken in March or April, payouts would have been made in June, “when things seem better, there is an expectation gap that becomes very prominent”, he says. This was not the case last year, when pay hikes were in line with the economy. Ghose says for the last three years, salary hikes have been on the decline; the average salary hike was 10% this year, versus 10.2% last year.

Communication, he believes, is central to managing employees’ sentiments about the salary revision.

To begin with, employees should agree with the rating that has been assigned to them, and if they understand what they can do to achieve a higher rating and therefore a higher payout, there won’t be too much resentment, feels Ghose.

Also, usually, a salary slip just communicates the basic details of the pay. However, a company does more in terms of providing learning opportunities and higher benefits.

“This is not reflected in the hikes and they are not valued by employees. Employees only look at the absolute value of salary increase,” he says. “The idea is to reward employees more from the parameters of what they want and what they will value.”

Even though salary hikes have been declining over the last three years, India has traditionally been among countries with higher pay increases.

“Among countries with highest salary increases, India ranked fourth this year,” says Ghose.

Amit Nandkeolyar, assistant professor (organizational behaviour), Indian School of Business

It helps when managers show empathy towards their employees. It also helps when line managers offer to find out more from HR—in case they are not fully aware of the decision-making process behind the salary hike. Otherwise, it helps to say that salary hike decisions are taken on a company-wide basis and this is not a reflection on the employee’s true worth or their own effort. This is especially true when salary hikes are based on external factors like the economic scenario or broader competitive landscape.

A lot also depends on corporate culture. If the company has a clear, transparent policy so that most decisions are self-evident, there’s no harm in employees talking among themselves about hikes. But if decisions are not communicated in a transparent manner, all that employees can see is the quantum of hike, and not the reasoning behind it. In such cases, talk can lead to resentment and lead to rumours that may do the company more harm than good. As long as the process and policies are clear, the salary revisions seem objective and fair, and are communicated in a transparent way, most employees are likely to accept the final decision. This will reduce unhappiness among the workforce.

Appraisals should not be used merely for administrative purposes (salary hikes and promotions), but should also focus on the developmental process (for example, training needs) for employees. As long as the appraisal process is seen as fair and focused on employee development, we can avoid many unpleasant experience post the appraisal process.