Employee Entitlement: Why You Need to Beware of Self-Inflicted Wounds

First of two parts

As human resource people see it, entitlement is organizational tuberculosis, a wasting disease that saps energy from the enterprise.

When HR and company executives use the term “entitlement” they mean that employees:

Believe they deserve the compensation and benefits they receive and don’t perceive (or see a need for) a link between performance and rewards.
Resent changes to reward programs, especially benefits, which they think should remain stable and predictable.
Have an unrealistic sense of their rights to their jobs, viewing their positions in the company almost as personal property.

“Oh no!” say company executives when they see the signs of entitled behavior. “Owe? Yes!” say employees, believing that their efforts to serve customers, innovate and take performance-improving initiative justify a more abiding form of respect than they receive from the organization.

Self-inflicted pain

Organizations deliver reward programs that are subject to unilateral change and then wonder why employees lack deep dedication to their jobs and unshakeable commitment to their companies. For their part, employees give their companies low grades for building cultures that encourage engagement balanced with realism.

Here are three ideas that can help companies address entitlement in the employee population.

The bad news: none of these is easy. All require more leadership courage than many organizations can muster.

The good news: be the organization that does deliver and you create a competitive advantage in rapidly warming global labor market.

1. Create an appealing deal with employees and state it clearly

Start by talking with employees – especially those most critical to your strategic success – about the rewards they value most and least. Put the most highly valued elements at the core of your rewards portfolio, and fund them by moving money from the lower-valued reward areas. Make sure your rewards portfolio connects with your competitive strategy.

For example, if you want your exceptional customer service to differentiate you from your competitors, then ensure that how you hire, develop, pay, recognize and promote people reinforces this strategy. And once you’ve made your strategy-supporting deal, communicate it clearly and commit to it.

If you hear yourself saying, “Commit to it? Our employees are lucky to have jobs. They should stop complaining and get back to work,” then consider that the entitlement shoe may have shifted to the other foot.

2. If you aspire to a pay-for-performance philosophy, execute it

Pay for performance: executives tout it, HR folks spout it, managers flout it and employees doubt it.

In the employee surveys we conduct, people routinely tell us that organizations do a dismal job of linking pay and performance. Only 36 percent of employees in our surveys agree that their companies effectively forge this connection. Only half believe that their companies deal appropriately with poor performers.

How can an organization blame employees for failing to see the tie between individual contribution (or the lack of it) and pay when the link is at best obscure and at worst a mirage that exists only in the mind’s eye of HR?

Sometimes the remedy is mechanical: make sure the performance management system has a simple design, that it has concrete (or at least objective) rules for differentiating performance levels and that it directs reward distribution in appropriate proportions.

More often, however, organizations will find that they need to do a better job of training and supporting managers. They often lack the time, energy or courage to use the reward system to reinforce strong performers and send a message to others. Or, worse, they think that financial rewards alone will motivate people to perform at their best.

3. Look beyond extrinsic financial rewards

We’ve known for decades (and perhaps millennia) that such non-financial elements as opportunity for achievement, fulfilling work, recognition and growth opportunities connect more strongly with employee engagement than do rewards like pay and bonuses.

Yet only 54 percent of the employees in our survey database say their companies make adequate use of recognition and other non-monetary rewards to encourage good performance. That’s too bad, because relational reward elements can be:

Difficult for competitors to copy – Labor market rivals often won’t be able to figure out exactly what you’re doing and won’t be able to replicate the elements that are special to your culture
Highly adhesive – Intangibles like cool projects and interesting learning opportunities make employees think twice – or more – about leaving for another company where those factors are unknown
Relatively inexpensive to deliver – Price tags are often small compared with big ticket financial rewards.

Think of it – a category of rewards that more strongly encourages motivation than do financial rewards, confers a sustainable competitive advantage, binds employees to the organization and doesn’t cost too much.

Why not make these a pillar of your compact with employees, non-negotiable when cost-cutting pressures rise? Doing so will require you to think differently about your investors and the costs they bear.

I’ll offer some thoughts about that in a second article tomorrow.