Money, Flexibility, Development? Figuring Out What Employees Really Value

ALISON BEARD: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Alison Beard.

One of the primary concerns for any manager, any team, any company, is how to attract and retain the best talent. What can you do to persuade top people to join your organization instead of a competitors? Often we focus on compensation, higher salaries, bigger bonuses, better stock options. More recently, flexibility has been top of mind. Employees who can work remotely want that option.

But the two experts we have here today want employers to think more holistically about not just what workers say they want in the short-term, but also the things they’ll view as long-term benefits.

Harvard Business School Professor Amy Edmondson, and INSEAD Associate Professor Mark Mortensen, wrote the recent HBR article, “Rethink Your Employee Value Proposition.” Welcome to both of you.

AMY EDMONDSON: Good to be here.

MARK MORTENSEN: Thank you so much for having me.

ALISON BEARD: Amy, let’s start with you. Why is it dangerous to just ask people what they want and give it to them?

AMY EDMONDSON: Because people are notoriously bad at making the distinction between what they want right now in the moment and what they need and may want for the longer term to stay engaged, fulfilled, to keep growing and learning.

ALISON BEARD: And Mark, why do you think that workers and then organizations themselves overlook some of these other factors that you mentioned in the article, which are community and connection, growth and development, and meaning and purpose?

MARK MORTENSEN: Things like sense of meaning and purpose or growth and development, these aren’t things that you get tomorrow, they’re things you’re building over time, over the course of a career, over the course of your time working for an organization. And one of the challenges is that we as individuals, as humans, we think that we know what’s most important to us as individuals.

We think that we have a pretty good sense of how things play out, but we’re notoriously bad at that. We often overestimate our own capabilities. We overestimate our preferences. We don’t think short-term, long-term, individual collective. Of course, everybody will say, “I would like more money. I would like more flexibility. I would like lots of things.” But we have to actually start thinking about trade-offs and saying, “Really, what is most important to me? What’s most important to my colleagues? What are the things that we are actually getting from our organization?” And that data is really the starting point of the conversation.

ALISON BEARD: Just playing devil’s advocate here. If employees aren’t thinking about it and don’t care, why should the companies?

AMY EDMONDSON: You could say that this is a design problem. The design is, what do you offer your employees so that they offer back the highest quality work in service of the customers, in service of the value proposition created by the organization?

And there are no easy answers to that question, but we argue it’s a mix of the material offerings, which often come to mind first, the growth and development opportunities, the community and relationships that one has, and then, of course, the organizational purpose that one is serving. And the design challenge is getting that mix right, so that you can both engage great talent and enable them to do great work together.

ALISON BEARD: And so, the research shows that companies perform better when they’re getting all of these things right. And also that employees are happier, more engaged, more successful.

MARK MORTENSEN: Absolutely. Amy and I were talking about this. Vivek Murthy, the Surgeon General of the U.S., just put out a mental health and wellbeing report. And part of what they’re talking about in that report is what does it take for employees to feel fulfilled, to feel that they have the kind of environment that makes them mentally as well and as healthy as they can be, and therefore able to produce going forward? We were delighted to notice when we looked at the report that the model that the Surgeon General’s office is putting out, actually, has remarkably close connection. It’s very, very well aligned.

They even use some of the same labels of connection and community as the model that we’re putting forth in this article. Why I’m flagging this is the Surgeon General’s report is highlighting this isn’t just a question of designing something that becomes optimal for the organization so they can extract more value. This is also about creating an experience for employees that is not only happier but also healthier.

ALISON BEARD: For organizations that buy into this idea, employees might be asking primarily for compensation and flexibility, but we know these other elements are important, is the first step to sort of assess how you’re doing on them, and how do you go about that?

AMY EDMONDSON: We think the first step is to assess. And so, we’ve been exploring these issues qualitatively over the last year, and we’ve developed an instrument to assess how employees see the offerings that their company is providing, and give them some feedback on that. So yes, the first step would be to get better data, to get better measures.

MARK MORTENSEN: That data is important for understanding what I, for example, I as an employee think I’m getting from the organization, but part of the data is also me making concrete my own preference set and my own set of trade-offs. And as I mentioned earlier, that’s not always something we’re that good at. So, part of what we try to do with the survey is to create a report, something that we can provide to people, so that as a first step they can even look and see, “When I look at the empirical evidence, what are my priorities? What would I make trade-offs for? And then, I can understand what I need and superimpose that, compare that with what I think I’m getting from the organization to see, how well does that fit?” We know person-organization fit is one of the strongest determinants of job satisfaction, about career success, et cetera. We’ve known that for many, many years. This gives us another approach to understanding that.

ALISON BEARD: Yeah. So, it’s not just the executives, the HR leaders, the team leaders that are looking at this data. It’s the employees too. “Oh, this is telling me I actually do value growth and development just as much as I value my salary or my benefits.”

AMY EDMONDSON: I’m able to recognize the role that growth and development will play in my longer term salary and maybe longer term fulfillment as well.

ALISON BEARD: Yeah.

MARK MORTENSEN: Yeah. So, I’ve had conversations with people where I’ve shown them their data, and the usual reaction is sort of a pause and a, “Yeah, actually that’s right.” That does reflect something. But often their aspects of that they hadn’t recognized or at least hadn’t made explicit. Right now, and certainly over the past six months, year, two years, the conversation has become a very, very polarized, sort of almost caricatures of saying, “Look, the big mean boss wants this, the great employees want that.” This is about saying, “Look, we can provide data so that you can have a real, honest, open, and data driven conversation to try to understand these factors.”

AMY EDMONDSON: An important part of that data driven conversation is that it will be ongoing, right? It will be dynamic. We don’t think that the integrated employee value proposition is something that you figure out one day, set it in place, and then it stays static for the foreseeable future. This is probably something that needs to be revisited and sort of check the balance and check the relationships, and see how you’re doing as aspects of the world change.

ALISON BEARD: As you’ve worked with companies on this employee value proposition project, I’m sure that some saw gaps, they weren’t doing as well as they could on community and connection, for example. So, are there any examples you could give about people seeing that need and then filling it in a way that allowed them to better attract and retain talent?

AMY EDMONDSON: I, at around the same time, sort of mid-pandemic, worked with two different software companies. One had found themselves kind of executives wanting everyone to come back to the office, and understandably, many of the employees pushed back and said they didn’t want to come back. They wanted to stay working at home. So, the executives relented and said, “Okay, fine, we’ll do that.” Fast forward a few months, and they discovered that their employee engagement and employee satisfaction scores had gone substantially down. And people in qualitative interviews reported feeling disconnected and not part of the community and missing their colleagues. And so, that was an example of a company that didn’t really think through the implications of that simple decision to say, “Okay, we’ll stay remote.” And once they did, they weren’t sure exactly where to go from there, but they were realizing they had work to do.

Another company, in the same space, was deliberately iterative. They were experimenting with different arrangements and figuring out when, not whether, but when and how teams should come together, and what implications that would have for their long-term satisfaction, engagement, and value creation. So, by realizing that the employee value proposition was more of a system, they were more able to experiment with it and make changes along the way.

MARK MORTENSEN: I had a conversation a little while back with an executive. He was the head of sales in a fairly good sized company. And he approached me after a discussion around the employee value proposition. And we had spoken about this fundamentally, he was actually very upset because he thought I was taking the side of the boss and he said, “Look, the boss wants us in the office, but he just doesn’t get it. He doesn’t get that I’m more productive when I’m working at home. And you know what? All of my people are. We’re in sales, this works for us.” And he was adamant about this. What I responded to him was, I said, “Look, I think you’re probably right. I bet you, actually, are more productive in terms of delivering.”

He was delivering more value when he was at home due to the lack of distractions and other factors. Now, he was very, very happy about this. But then I continued and I asked him a few follow-on questions. I said, “As the head of sales, how’s the culture these days? I mean, is there a good sense of camaraderie? Do you feel like the folks in the sales area are really pitching together? Are they collaborating?” And he says, “Well, actually that’s kind of gone down on the hill a little bit.” I said, “Well, what about growth? I mean, you’re bringing in new people. I’m sure you’ve got some new hires. How are you onboarding them? How are you helping them to learn the ropes?” And he sort of paused and said, “I hadn’t thought of it that way.” And this is one of the things that we find extremely powerful about this framing, is it helps to elucidate where there are these trade-offs that people may not recognize that they’re making.

In this case, you had somebody making a very valid argument. He was right about productivity, but he didn’t recognize he was trading off the long-term benefits of both individual and collective growth and development, and around connection and community and relationships. Now, I know he walked out of that discussion saying, “I’ve got to do something different. I’ve got to try to rebuild some of those connections. I’ve got to try to think systematically and intentionally about how to craft more learning opportunities to build that in, not just the formal sessions, but the informal, the mentoring, those sorts of things.”

ALISON BEARD: That’s a great example of how something that seems like it would be led by the C-suite, by HR can actually filter down to lower levels in the hierarchy. And team leaders can actually take the initiative to implement this kind of thing on their own.

AMY EDMONDSON: I think that’s absolutely right, because it’s, we are not advocating for one size fits all. We can’t offer a solution that says, “Oh, no worries. No trade-offs are necessary.” In fact, the idea is, let’s make those trade-offs as thoughtfully and deliberately as possible, and with an eye on the longer term sustainability of the health of your organization and your people.

ALISON BEARD: So, how do you navigate a situation in which an organization has an idea about what they want to do, but attitudes vary between teams? The trade-offs would be different for the sales team than they are for the HR team than they are for the content generation team. Do you see scenarios in which an organization has different rules for different teams, or does that create division?

MARK MORTENSEN: As we know, one size fits none. And this is the challenge that a lot of organizations have faced with the policies that they’ve been putting in place. They’re saying, “Okay, is it three days on, two days off, or vice versa? Do I give people autonomy and control over where they get to work? Or do I mandate and say one day a week, and particularly it’s going to be this day, that’s when we’re all in the office for an all hands meeting.”

Now, these are decisions, policy decisions have to be made, but they’re going to have to be adjusted. They’re going to have to be calibrated and contingent on particular situations. For example, if we’re looking at being remote, not all work can be done remotely. If you are in order fulfillment and you need to put things in boxes, you can’t do it from home just as somebody who’s doing customer service maybe can.

But part of what we’re hoping to do, again, with collecting data on this, is we can start to think much more intelligently and much more intentionally about, how we do that segmentation? How we do that differentiation? Is it based on seniority? Is it based on job type? Is it based on life stage? We know for lots and lots of people, the particular point that they are in their life in terms of whether they have familial obligations, how those change over time? What they’re looking for? These are all factors that are going to shape and affect what they’re looking for from their organization. And it should be something that their organization intentionally thinks about. How do we offer the right fit for the right people?

ALISON BEARD: But then, how do you avoid resentment for people who feel as if they need to be in the office when many of their colleagues can work when and however they want?

AMY EDMONDSON: My glib answer is, you don’t. People will always be envious of their siblings. But, I think, with high level of transparency, clarity about what we’re doing and why, your employees are adults and they can understand, I think the best recipe or antidote to resentment is clarity and sense giving, being as honest and open as you can about how you’re thinking about it, what we’re doing and why.

MARK MORTENSEN: I couldn’t agree more, human beings are by nature comparative. I actually think it’s an important piece, not only to be transparent about the decisions, but be transparent about that as well. The fact that people need to just own and say, “Yeah, you may be frustrated by this, but this is part and parcel of the way we do our work.” And I would just flag, this isn’t new. Companies, for example, have been dealing with the exact same problem when they’re dealing with global workforce. If you have people in different parts of the world, your chances are you’re not paying them all the same wage. And so, it’s the same kinds of ideas that we have to try to translate into this environment here.

ALISON BEARD: It does seem like communication is very important. First, assuming you have developed all these things, you have growth and development opportunities, you have community and connection, you have meaning and purpose, you’re also offering those material things, salary benefits, flexibility. You need to be able to tell people that you have them, and then also communicate the importance of them. So, how have you seen companies manage that?

AMY EDMONDSON: I think the stellar organizations have been doing this all along even without using these terms. They generally have a strong purpose statement that employees really believe they’re living it. There’s a strong culture and a sense of belonging. People do have the chance to grow and develop as employees in that organization, and ultimately, they’re quite satisfied with the pay and flexibility that they receive.

MARK MORTENSEN: One example, which we talk about in the article is Gary Ridge at WD-40, former CEO. Everybody knows WD-40. I mean, we all have the yellow and blue can sitting at home, probably two or three of them, ’cause we always forget and we buy another one, as Gary will say, right? It’s selling oil in a can. It’s not something that people immediately think, “Whoa, what a purpose-driven organization. Meaning is so powerful here.” It’s spray silicone, yet Gary spent years building and crafting and reinforcing an incredibly cohesive approach that makes meaning and purpose central alongside growth and development opportunities alongside building an incredible community.

One other example that I would give is, Ireland’s Children’s Hospice. It is an incredible organization focused on alleviating, obviously, the suffering of young children. They have incredible meaning and purpose, but they actually have crafted a very coherent strategy that incorporates all the elements that we talk about. Growth and development opportunities for their staff, sense of connection in community, and of course, tying in what their material offerings are. They thought very intentionally and holistically, again, without having particularly the language that we’re using, but the end result has been incredibly successful. They’re able to get a tremendous engagement and long-term engagement by people who are giving of their time and their effort, because they feel really, really bought into the entire employee value proposition that they’re receiving.

ALISON BEARD: Economic conditions do play a big role in all of this, right? What employers need to do for talent. In a tight labor market what do you see companies typically doing and why or why doesn’t it work?

MARK MORTENSEN: This is exactly what led us to this research in the first place. We spoke to a lot of organizations, a lot of leaders, and the sort of modal response was, “Well, look, the labor market is so tight, we need to throw retention dollars at them. We need to figure out how we get the talent that we need to both join and stay.” And so, lots of organizations were approaching this typically with that initial question of, “Well, okay, we’ll ask them what they want and they answer.” And by far most common request that folks in HR are getting these days is, of course, “What is your flexible work policy? How many days, et cetera, et cetera.” The problem is, when you ask people, how do you feel now that you’re working remote? Most people would say, “Well, a little bit less connected. A little bit less strongly identified.”

So, companies were trying to buy loyalty by giving something that, in effect, reduce loyalty. This isn’t sustainable. What we have to also keep in mind is, as you pointed out, labor market is changing, and by focusing on these very transactional material offerings, that was a great power position for employees when the market was in their favor, to say, “Look, you don’t give me this, I’m going to walk.” Those same elements, if you focus on them, that transactionality works in both directions. And as the labor market power dynamic switch, I think we may start to see a lot of people realizing that the things that made them nice and mobile before as a great bargaining chip also makes them a little bit less tightly connected, which may make them a little more expendable. And I think that’s a very tough situation that many may find themselves in.

ALISON BEARD: In a slowing economy, what’s your advice for organizations who want to hire and retain talent? Seems like it would be easier, but you still can’t ignore all these things you’re talking about, right?

AMY EDMONDSON: I think, in a slowing economy, your number one focus needs to be on creating value for customers. If you are in a company that is healthy and valued by customers and in a position to grow and develop, you’ll be in a good position to keep the employees you have, and hire more of them. So, it really comes down to the quality of the offering that you have in the marketplace, and then going backwards from there to figure out who you need, and selling to them what an opportunity is to be a part of this. Because I think, at a very deep level, all of us want to be a part of something larger than ourselves. We want to be part of a team, we want to be a part of an organization that others respect, and that we believe is creating something of value that we believe matters. So, focus on what and how to do that first, rather than just on that mindset of negotiating with people to get the best deal you can on both sides.

MARK MORTENSEN: By recognizing how this employee value proposition is integrated, it also helps you to optimize when you may not have complete control over each of the elements. As the economy slows down, organizations are tightening belts, they’re recognizing that they may not be able to offer quite as much, and if the only thing you have to offer is a giant signing package, when you no longer have the ability to offer that, you aren’t as attractive.

By recognizing how all these things fit together, now you can start to say, “Well, here’s what we’re able to offer in terms of compensation.” But what they’re getting isn’t only the monetary benefits or the ones that are easily tied that way, but being able to use and leverage, for example, sense of community or connection being part of something or deeper sense of meaning and purpose.

ALISON BEARD: And I imagine that even for the workers who maintain that self focus, “How much am I getting paid? How and when can I work?” The growth and development piece becomes very important, right? So, maybe they don’t care as much about the community and connection or the meaning and purpose. They do feel a little bit mercenary towards their jobs, a little bit transactional, at the same time, that is sort of a personal benefit. That’s a longer term one that as a hiring manager you can really emphasize for those people.

MARK MORTENSEN: Absolutely. Some of that growth and development is making you a more attractive prospect on the job market, and internal promotions and hiring, and all these things going forward. So, there are absolutely benefits to understanding this, both for the individual employee and for the employer as well.

AMY EDMONDSON: One thing that was very clear to Mark and me in doing this work is that there are large bodies of research for each of the individual components, that purpose matters, that culture matters and so forth. So, we’re building on this large body of evidence that each of these things matter by saying that they rarely are looked at a set, and rarely are the relationships between them thoughtfully considered with the same level of rigor as the individual work itself.

And I think the solution to that individual worker who is understandably very much about themselves right now, is to help them to understand that greater fulfillment actually does come from being part of something that matters in the world. That does come from having relationships in a community that is fulfilling. In a way we’re helping organizations and individuals sort of broaden their scope of what they care about.

ALISON BEARD: I love that we all need to think a little bit more of long term. Is there any sort of final parting words that you have for both people thinking about their own careers, whether to take a job or leave a job, and then also organizations as we move into sort of a more uncertain economic climate?

AMY EDMONDSON: I used to say to young people thinking about their careers and what lies ahead, focus on learning. Do not take a job that pays more than the other if the lower paying job actually gives you more learning opportunities, because it’s a long-term game, especially when you’re young and starting out. And I would expand on that old advice to say, similarly to people, it is really important for you to think about the larger picture, that the things that you will engage yourself in, your time, your life is important and singular, and what is it that you want to be a part of? What is it you want to contribute to? What is it you want to learn? Where do you want to be some years from now? And most people will value the broadening of their perspective to move beyond just the here and now.

MARK MORTENSEN: And I think, one of the things that also has struck me in doing this work is, we’ve just come out of, or still in some tail ends of a major, major disruption in pretty much every aspect of life. Part of what that means is, our calibration is, well, it’s been affected by that. I’m not going to say it’s wrong. It isn’t wrong or right.

We’ve seen lots of people say, “I absolutely want to work from home forever.” And then, a little while later say, “Yeah, home not so great anymore. It’s driving me crazy. I want to get back to the office.” These things evolve over time. So, this is one of the reasons that Amy and I are really, really encouraging people, A, to get some data, use that data as the basis of a conversation and make sure that conversation is ongoing and iterative, because even if you say right now, “I got to make sure that I am getting what I need.” Of course, you do, and we’re not in any way denying that, but we want to think about, “How do I make sure that I’m also making the decisions so that I’m set up for what I’m going to need in the future, and what is going to deliver me the value that I’m looking for in some years time?”

ALISON BEARD: Yeah. And that advice applies to individuals and to organizations.

MARK MORTENSEN: Absolutely.

AMY EDMONDSON: Exactly.

ALISON BEARD: Well, Amy and Mark, thank you so much for being on the show.

AMY EDMONDSON: Alison, thanks for having us.

MARK MORTENSEN: Yeah, thank you so much.

ALISON BEARD: That’s Amy Edmondson, Professor at Harvard Business School, and Mark Mortenson, Associate Professor at INSEAD. Together, they wrote the HBR article, “Rethink Your Employee Value Proposition.”

We have more episodes and more podcasts to help you manage your team, manage organizations, and manage your career. Find them at hbr.org/podcasts or search HBR in Apple Podcast, Spotify, or wherever you listen.

This episode was produced by Mary Dooe. We get technical help from Rob Eckhardt. Our audio product manager is Ian Fox. And Hannah Bates is our audio production assistant. Thanks for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Alison Beard.