Employee Retention

Sustaining Employee Morale and Productivity When Finances Are Tight

Leaders have to show employees why they should stay, especially if year-end bonuses and raises are being reduced or eliminated.
Scott DussaultDecember 16, 2022
Sustaining Employee Morale and Productivity When Finances Are Tight
Photo: Getty

As year-end approaches, employees across the United States anticipate two annual traditions: end-of-year (EOY) bonuses and performance reviews. But as major tech companies like Meta and Amazon conduct mass layoffs, freeze hiring, and tighten budgets in anticipation of a recession, the end of 2022 may break from the recent past. Despite this, we as leaders must keep our people our top priority — in uncertain times, our best talent is the one thing we cannot afford to lose.  

State of the Workforce

With the season of gift-giving and the anticipation of bonuses fast approaching, money is top of mind for many employees. But when 90% of CEOs say a recession is imminent, leaders might consider nixing year-end financial incentives to focus on business investments. Let me say this: Investing in your employees is a business investment. No company would be successful without its people.

  Scott Dussault

Moreover, employees want to be paid what they’re worth or they’ll walk.

Recent data from Workhuman found that about 36% of workers would like an EOY bonus, and another 51% of workers say if they don’t receive an EOY bonus or raise, it will impact their decision to return to their job in 2023. If you’re considering tabling raises this year, don’t do so without knowing the risks. Even if you don’t lose your best talent, by not showing gratitude to employees the organization could face low morale and tanking productivity. 

Why Stay

While compensation is an integral factor in retention, leaders must show their best employees why they should stay. Stripe, which laid off 14% of its staff this November, demonstrated this principle with its empathetic, action-oriented reduction-in-force announcement. Exuding transparency and accountability, CEO Patrick Collison not only explained to employees why the layoffs were happening but offered unparalleled support to those whose positions were eliminated. Perhaps most importantly, he reassured the remaining 86% that the company would continue to act in their best interests. 

Retaining your best workers is fundamental to ensuring you can navigate the tricky waters of a financial downturn. Netflix CEO Reed Hastings once said, “Focus on the employees you would fight to keep,” and in this time of economic uncertainty that has never been more sage. If you want to avoid hemorrhaging turnover costs, show employees the why. Connect them to a greater purpose. Express gratitude for their contributions. Despite a looming recession, the labor market remains hot, and if you can’t make them stay, they’ll go. 

Recognition Helps

After a year shadowed by a looming recession, layoffs, and a complete upheaval of the workplace, many workers are experiencing burnout. Recent data indicated increased productivity could be key to fighting inflation and weak demand. But if workers are burned out and unfulfilled, productivity will suffer. 

As companies develop strong recognition programs, they’re discovering they can be far more impactful than traditional bonuses and raises in the long term.

While every company has its nuances, a culture should always instill a sense of achievement and belonging in employees. The simplest way to create a positive workplace culture and show employees you hear them, you’re with them, and you’re committed to their success — no matter where they are — is through recognition. 

Recognition in the workplace looks like a lot of different things. It’s a “thank you” for lending a hand, kudos for a job well done, or a celebration of a major life milestone like a new baby or a wedding. It’s the big moments where we succeed together as a team or the little moments of appreciation that brighten our days.

As companies develop strong recognition programs, they’re discovering they can be far more impactful than traditional bonuses and raises in the long term. They can also be coupled with financial incentives to make them more impactful. Overall, recognition programs require a comparatively small financial investment. Cisco, which devotes 1% of payroll each year to recognition, was able to engage 85% of its 75,000 employees in peer-to-peer and manager-given recognition

Our report with Gallup also shows employees who feel heard, valued, and respected by their employers are much more likely to show up, be more productive, and contribute to the business’s overall success. Conversely, employees who lack a strong sense of belonging are up to 12 times as likely to be disengaged and five times as likely to be looking for another job. 

Measure Results

Human capital management metrics will be more important than ever for leaders to track their progress and ensure they’re making smart investments in their humans to drive ROI. CFOs who can better understand metrics such as engagement levels, turnover rates, and employee sentiment and feedback on workplace changes will be much better positioned to course-correct when things aren’t going well.

If you’re struggling to find where to reinvest as economic conditions evolve in 2023, consider the one thing that has driven your company through good times and bad: your employees’ happiness. 

Scott Dussault is the CFO of Workhuman, a provider of cloud-based human capital management software.