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Giving Employees What They Want

David Sirota talks about how companies earn huge returns through policies that boost employee morale.

David Sirota, co-author of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want, believes far too many managers stifle employee enthusiasm across the board by using bureaucratic or punitive techniques that should be reserved for a troublesome few. Yet his book, written with Louis A. Mischkind and Michael Irwin Meltzer, finds that firms where employee morale is high—such as Intuit and Barron's—tend to outperform competitors. The authors' research is based on the results of 2.5 million employee surveys taken since 1994.

For example, out of 28 companies employing 920,000 studied by Sirota Consulting, the share price of 14 companies—those considered to have high morale—increased an average 16% in 2004. Those prices were then compared to the companies' industry averages, where the increase was just 6%. Six "low morale" companies saw their prices increase, on average, by 3%, as against an overall industry average of 16%. Industry comparisons were based on data from 9,240 companies.

In an interview with Knowledge@Wharton, Sirota says managers should rely on common-sense principles that allow workers to take pride in their work. He urges them to reject trendy, get-tough tactics that were promoted in the late 1990s, such as trimming staff even at healthy companies in order to improve shareholder value.

Knowledge@Wharton: What do employees want?
Sirota: We find there are three basic goals of people at work. First, to be treated fairly. We call that equity. Employees want to know they are getting fair pay, which is normally defined as competitive pay. They want benefits and job security. These days, employees especially need medical benefits, so those have become significant. On the non-financial side, employees want to be treated respectfully, not as children or criminals. Equity is basic. Unless you satisfy those needs, not much else you do is going to help. If I feel underpaid and if I feel that the company is nickeling and diming me, or wants to pay as little as possible, there is not much else an organization can do to boost my morale. This runs contrary to what a lot of people in my field say—that pay is not that relevant. Baloney. It's terribly, terribly important.

Second, employees want a sense of achievement from work. The key element is to be proud of what you do and proud of the organization for which you are doing it. People don't want to work for an organization that's run by a bunch of crooks. The third element is camaraderie. This is also not mentioned much in our field, but it's key—not only in the sense of having a friend, but working well together as a team. That is a tremendous source of satisfaction for people.

Knowledge@Wharton: Do you see a difference in attitudes among different kinds of employees or organizations?
Sirota: We find these three elements are nearly universal. There is all this talk of new generations—for example, that Generation X does not care about job security. We find absolutely no evidence of that. We find no difference across countries, between men and women, or in the new economy versus the old economy. One reason a lot of these new economy companies imploded is they forgot about basic management. Our research indicates you don't tamper with some of the basics. All this talk about flattening the organization to eliminate hierarchy is nonsense. There are certain traditional management principles that are important and valid. There are also traditional management principles that are very disruptive, like not giving people a say in the way they do their jobs.