How to motivate staff when money is tight

Good job written on paper - how to motivate staff when money is tightMotivating staff is essential to the success of any small firm. Motivated and engaged employees will go the extra mile, they contribute more ideas and work harder to achieve your business objectives. And good workplace morale also improves staff retention

In fact, we're likely to see staff turnover levels rise in the next few years - and that can be costly for small firms. Chris Smith, consultant at Korn Ferry, says: "As conditions improve, dissatisfied workers pose a significant flight risk. Recognising and then meeting the needs of the workforce will be key to retaining talent in the next few years."

But how do you motivate staff when money is still tight? Survey after survey shows that, actually, money isn't the biggest motivator. And while a bonus may provide a short-term boost, praise, recognition and career advancement are all far more powerful influencers in the long term.

Three non-cash motivators - praise from immediate managers, attention from the top managers, and a chance to lead projects - are just as or more effective motivators than cash bonuses, a pay rise or share options.

Does money talk?

"Money isn't everything. If someone hates their job then they are going to be unhappy whether they get £25,000 a year or whether their salary rises to £30,000," says Simon Jones, director of HR consultancy Ariadne Associates and author of the book Happy Working Relationships. "Having said that, staff pay has got to be right and fair."

So if money is not the only factor for staff, why don't more firms focus on motivation and why are levels of staff satisfaction actually falling in many companies?

The answer is that so many managers still believe money talks, so they accept falling staff motivation during tough economic times.

But many SMEs know better. Indeed, small business managers have many advantages over corporate bosses when it comes to motivating staff.

"The advantage that small firms have is that they can offer staff more rewarding and interesting jobs, especially if they are start-ups. Small businesses can't always offer the benefits that large companies can, so they need to attract and motivate staff in different ways," says Simon.

The small business advantage

"Small firms have the opportunity to keep staff much more involved in the development of the business," he adds. "They can share with staff how the business is progressing, ask for their input and involve them in the overall picture. Big companies just can't take the views of their staff on board in the same way."

What's more, there is less hierarchy in small businesses, so communication is often better and staff feel more involved. And SME owners and managers have the flexibility to tailor roles to the individual, helping to improve job satisfaction. "Although most people work to pay the bills, they also want to get something positive out of their jobs," Simon says. "Having opportunities to progress, a chance to contribute and being able to extend skills with training and career development is a big motivating factor for employees. It doesn't have to cost a lot and it can really improve levels of motivation within the workplace."

Recognition and appreciation is also key, he says. "Saying thank you is absolutely vital. Although it's easy to do, it's actually something that lots of businesses don't do. But it's about understanding the people who work for you. Some staff love public shows of appreciation while others would hate to be in the spotlight. In small firms, the MD usually knows the staff well and it's easier to tailor rewards to the individual."

Creating a fun place to work

When Pontus Noren and James Monico, co-founders of Cloud Reach, established their cloud services business, they got advice from one of the founders of Google who suggested they should create a fun place to work.

That advice certainly paid off. Fast-growing Cloud Reach has been voted the number one best small business to work for in the Sunday Times Best Companies awards.

"People come to work for a company, not for a salary only," says Pontus. "They are looking for a place to work where they are happy, fulfilled, part of something exciting, and where people care."

The firm's core values have been developed by the whole team - respect the individual; promote personal growth; be easy to work with and stay one step ahead. In addition, everyone has share options.

Team-building and fun stuff includes breakfasts in the company kitchen every day, "Cloudy lunches" in local restaurants and weekends away.

But it is staff development that is at the heart of the Cloud Reach approach. The company spends more than £1,800 a year on each person's training and supports more than half of the staff to take work-related qualifications. Four times a year, employees get an extra day off to work on their own creative project that might benefit the business.

Five ways to motivate staff

Respect your staff

  • Treat everyone as an individual.
  • Be flexible and responsive to their personal situations.
  • Pay attention to staff well-being and stress levels.
  • Establish a no-blame culture in order to encourage innovation and if things go wrong, learn from it.
  • Get involved when you can see that someone is under pressure - work by their side rather than taking over.
  • Give every employee a role and job title they can be proud of.
  • Treat employees like human beings - create a pleasant and comfortable workplace.
  • Be fair to all - don't give some preferential treatment.
  • Remember that the simple fact that the business is doing well may not be as much of a motivator for staff as it is for the owner - unless it comes with some rewards and recognition that everyone can share.

Involve your staff

  • Set realistic expectations and communicate them regularly.
  • Listen to staff and welcome their contributions.
  • Ask staff to share their skills and train others.
  • Keep staff up to date with business targets.
  • Have regular company get-togethers.
  • Share company good news - and the challenges.

Develop your staff

  • Provide constructive feedback on a regular basis.
  • Lead by example.
  • Encourage staff to use their initiative.
  • Don't micro-manage - trust your people to get on with the job.
  • Give staff opportunities to develop their skills with regular training.
  • Make sure employees can see a rewarding career path in your business.
  • Give your people time out from their day-to-day duties to work on longer-term projects that could help grow the business.
  • Give employees more responsibility and the chance to lead projects.
  • Make sure that the skills and aspirations of your employees match.

Appreciate your staff

  • Publicly recognise the good work that each of your employees does.
  • Remember to say "thank you" to staff for the contribution they are making.
  • Seize the moment - catch people doing good things and praise them.
  • Say a special thank you - with a lunch, for example - when it is merited.
  • Notice when employees are overloaded or stressed and give support.

Reward your staff

  • Offer benefits such as time off on birthdays.
  • Provide regular small rewards that show your appreciation (but don't insult staff with token gifts that have no personal significance).
  • Be flexible about time off to help your staff achieve a good work-life balance.
  • Be creative in your reward ideas - one firm has a company campervan that everyone can borrow.

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