What You Need to Get Right to Improve Employee Engagement

November 9, 2017

During 2015 and 2016, we collected data related to employee experience from over half a million workers who took the PayScale Salary Survey. Our research revealed what matters most — and what doesn’t make much difference — for creating a great employee experience. This is an excerpt from the resulting report, The Formula for a Winning Company Culture. Download the full report here.

“Employee Satisfaction” and “Intent to Leave” are the experience outcome variables we used for this study. The basic idea is that everything an employee experiences at work contributes to how satisfied (or dissatisfied) they feel from day to day. How satisfied they feel — which includes how they feel about pay, workplace communication, appreciation, their company’s future, etc. — is a major piece in determining whether they plan on leaving their company in the next six months.

Most of the questions we asked instructed the employee to rate each statement on a five-point scale from “strongly disagree” to “strongly agree.” The only exception was a question about attrition, where respondents answered yes or no when asked if they plan on actively seeking employment outside of their current company in the next six months. Here are the criteria we measured:

Communication: “There is frequent, two-way communication between management and myself.”
Development: “My employer provides me with sufficient opportunities for learning and development.”
Company Outlook: “I am confident my employer has a bright future.”
Relationship With Manager: “I have a great relationship with my direct manager.”
Pay Process: “How pay is determined at my company is a fair and transparent process.”
Appreciation: “I feel appreciated at work.”
Employee Satisfaction: “I am extremely satisfied working for my employer.”
Intent to Leave: “In the next six months, I plan on actively seeking new jobs outside of my current company.”

And here’s what we learned:

It’s All Important …

The first key result for both employee satisfaction and intent to leave is that everything matters. For every variable, as scores increased, satisfaction also increased and intent to leave decreased.

… But Some Factors Matter Way More Than Others

The second notable result is that there was huge variability in how much these variables affected the outcomes. The primary driver of satisfaction moved the needle 10.9 times more than the least important, and the most important variable for intent to leave increased employee retention 7.8 times more than the least important.

So, what matters most?

Employee Satisfaction

For employee satisfaction, there were three clear tiers of importance for variables.

Appreciation is key: An employee feeling appreciated or unappreciated moves the needle on satisfaction more than any other variable. Company outlook is second most important, with 87 percent the strength of appreciation.

Three variables were roughly half as important as appreciation: communication (53 percent), pay process (49 percent) and development (48 percent).

In the third tier are manager relationship and pay vs. market. Manager relationship has 29 percent the strength of appreciation, and pay vs. market is the least important variable in terms of employee satisfaction, affecting employee satisfaction only 9 percent as much as appreciation.

Major lessons:

Appreciation matters most for employee satisfaction, followed closely by company outlook.
How people are paid relative to the market for their position matters relatively little in terms of employee satisfaction. What does matter is how employees feel about the pay process, which has 5.4 times as much impact.

How employees feel about pay process has 5.4 times as much impact as how they feel about pay.

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Intent to Leave

Company outlook is far and away the chief driver of intent to leave. An employee who strongly agreed that their company had a bright future is half as likely to plan on leaving in the next six months than a neutral employee. A worker who strongly disagreed with that statement, on the other hand, is 2.6 times more likely to leave as the neutral employee.

Employee appreciation has a similar effect. An employee who strongly agreed with the appreciation statement is around 55 percent as likely to leave as the neutral employee, whereas an employee who strongly disagreed is 2.1 times more likely to leave.

Development was the fifth most important variable for driving satisfaction, but comes in third for intent to leave, at 45 percent of the impact as compared to company outlook.

Pay process (36 percent) was next most important, followed by relationship with manager (25 percent) and pay vs. market (22 percent). For improving employee retention, frequent two-way communication was the least impactful variable at 13 percent relative to company outlook.

Major Lessons:

Company outlook is the most important driver of employee retention. Appreciation is second most important.
Frequent two-way communication is an important driver of employee satisfaction, but has a much smaller effect on employee retention.
Pay vs. market, on the other hand, is much more important in reducing intent to leave than it is for driving employee satisfaction. Pay process still matters more than pay vs. market, but the difference is much smaller than it is in determining employee satisfaction.

Want even more big findings from the study, plus specific action items for what you can do to improve employee engagement at your organization? Grab your copy of the whitepaper today!