Unappreciated Employees Cost You More: Here’s Why

There’s a lot of truth behind the saying “people don’t leave jobs, they leave bosses”. More often than not, it’s not because they are underpaid or overworked, rather it’s because they feel undervalued and unappreciated.

Two of the most basic human desires are validation and appreciation — we need to feel like we matter. The good news is that if you invest only a small amount of time and energy into appreciating your talent, you can save yourself — and your bottom line — a lot of grief.

Lessons From a Paper Shredder

Noted MIT professor Dan Ariely has conducted a variety of studies on workplace behavior. One of his most interesting studies involved the relationship between appreciation and desired compensation:

The Study: Ariely gave study participants — students at MIT — a piece of paper filled with random letters, and asked them to find pairs of identical letters. Each round, they were offered less money than the previous round. People in the first group wrote their names on their sheets and handed them to the experimenter, who looked it over and said “Great” before putting it in a pile.

People in the second group didn’t write down their names, and the experimenter put their sheets in a pile without looking at them. People in the third group had their work shredded immediately upon completion.

The Results: People whose work was shredded needed twice as much money as those whose work was acknowledged in order to keep doing the task. People in the second group, whose work was saved but ignored, needed almost as much money as people whose work was shredded.

What Does this Research Mean for Managers and Leaders?

This means that managers need to openly and consistently recognize great work.

In Ariely’s own words, “Ignoring the performance of people is almost as bad as shredding their effort before their eyes”.

Bonuses earned in the banking sector have always been excused with the reasoning that money given in large quantities will ensure the best employees stay, but Ariely’s study proves that there are other factors that are just as, if not more important than money.

As well as the cost involved in having to give steep pay rises to keep unhappy employees, there are other less obvious outlays.

By Ariely’s own account, an unhappy workforce at a software company he was working with admitted to arriving at work later than usual, leaving earlier and taking advantage of out of office expenses. The amount of money that can be lost by a company with a discouraged team cannot be overestimated.

Think Like a Nonprofit

It is no secret that nonprofits are strapped for cash, resources and time. So why, then, do some of the most successful organizations invest a great deal of energy and resources into volunteer recognition? Because it is essential for volunteer retention. Studies have shown that if volunteers feel recognized and appreciated, they will happily continue to donate their time with no expectation of compensation.

In the absence of a salary, it is of course important to find other ways of motivating people, and a wide range of options have been used in volunteer recognition programs. Thank you letters, visits by senior management, quirky gifts including personalized cookbooks, flowers and even potted thyme plants are all ideas for letting a volunteer know they’re appreciated.

It Does Not Take Much

Employee recognition methods should of course be tailored to the type of company and the personality of the employee. Just like how nonprofits acknowledge their volunteer’s efforts, your business or startup can do the same. It does not take much:

– A personalized thank you giving specifics on how the employee has helped the company.
– Timely positive feedback for excellent work.
– A random lunch or night out to celebrate a team win.
– A relevant gift. Even something that can help them do their job better (New Thunderbolt display!)
– A formal thank you letter

The key thing to remember is that special rewards are less effective if they’re given out of habit: they should represent an honest reaction to a great piece of work. Employee of the week or month schemes don’t work, for instance, because it’s often a matter of simply waiting your turn, and often there’s a lack of real thought behind it. Regular lunches lose their value as employees come to expect them.

Establishing an effective recognition program – whether expected or not – will mean that people get rewarded based on a great performance, and not necessarily because it’s their turn. And poor performers will either learn to step-it-up or risk losing their position/job.

The reality is that great performers should be rewarded as much as possible. It shows them that their boss cares and reinforces their efforts. While an outsiders perspective may see this as a manager picking favorites, the overall benefits in a rise of team morale and decrease in employee costs from well-deserved recognition, will be more than worth it.

Appreciation Is Cheaper Than Churn

Not only do underappreciated employees often want more in terms of pay and benefits, they cost more when they (inevitably) leave. As leadership advisor Mike Myatt explains, he has found that two of the top ten reasons that employees leave organizations is because employers failed to care or recognize their efforts. Making even a small investment of time and energy into appreciating your team can save you thousands of dollars in churn-related losses.