How to keep staff morale up in a downturn

With morale in the workplace flagging, GB looks at the options for keeping your employees motivated


With morale in the workplace flagging, is it wise to cut your benefits spend? Growing Business looks at the options for keeping your employees motivated

In a tough trading environment, any extra outlay is scrutinised. This makes non-contractual perks, such as motivation schemes, vulnerable. The average spend per person on benefits – over and above contractual ones – is 5% of each individual’s salary a year, but this is expected to fall dramatically as business owners cut back. But experts say investing in staff now is crucial to help companies survive the recession and keep that momentum going during the recovery.

The right environment

A small firm in Milton Keynes is proof that if companies reward employees, it’s not only good for morale, but can affect talent retention and improve the bottom line. All 165 staff at P&MM are eligible for a monthly nomination scheme where five are selected as best performers and receive £50 each. The best of them then wins a car parking space nearest to the building and a car valet. Even the best team of the month is rewarded with £200 to spend on a party and a bottle of champagne each. This is all run on an annual budget of £20,000, yet it has led employees to vote P&MM – which itself specialises in improving companies’ performance – as one of The Sunday Times’ 100 Best Places to Work. The award, voted for by employees, also shows that staff retention and morale are high.

Richard Davies, head of employee benefits at P&MM, says creating the right working environment is critical to business success. “People are the engine room of the business. They are its biggest cost and it’s important they’re engaged on a daily basis,” he says. “As a supplier, we have to have the principle that a happy motivated employee will be more productive to an organisation.”

It’s a compelling argument. Employers are starting to offer flexible benefits packages on top of contractual ones, such as pensions and health insurance. Some firms give employees a budget, often around £500 each, and allow them to choose the benefits they want, from gym membership to an adult learning course.

The big problem, however, is motivating staff when their colleagues are being made redundant. Sheila Sheldon, director of European operations at Michael C Fina, which specialises in reward and recognition, has worked with companies facing this dilemma. She says honesty about the situation and clear communication is key to ensuring employees buy into the company’s strategy.

“It’s about trying to ensure your employees are engaged,” agrees Davies. “When you are not going to give pay rises and won’t have the motivational effect of this, it’s about looking to creative initiatives to lift the spirits of the organisation in the most cost effective way.”

Investing in people

For some companies, that means introducing training schemes. The Department for Innovation, Universities and Skills (DIUS) is encouraging more employers to train staff despite the economic downturn. It is convinced that a failure to train now will mean we won’t have the skilled workers we need to seize the opportunities that growth presents when the economy starts recovering. “Businesses that continue to invest in their people during the hard times will emerge as winners when the good times return,” it says.

Fortunately, motivating employees does not have to be expensive. It’s possible to cut your cloth to a tough trading environment without aggressively slashing staff benefits. “If you take away salary, employees say feeling valued is the most important thing and often that is about allowing them a voice,” says Sheldon.

This can be done simply. For example, by asking employees for ideas about how to cut costs makes them feel that their opinions are valued. If the best suggestion is rewarded with a bonus or voucher, they will feel motivated too. However, companies are reducing their spend on such incentives in tune with the economy and to meet the needs of staff. For example, luxury items, such as designer handbags, are being replaced by more basic rewards, such as supermarket vouchers and even washing machines.

Davies cautions against focusing too much on recession-oriented rewards, which may be useful, but are unlikely to do much to lift the gloom. P&MM, he says, “delivers benefits that are designed to put a smile on people’s faces”. The company negotiates discounts and vouchers so that people can buy goods and services at preferential rates. These include cinema tickets and cost between £5 and £10 per employee a year. “The value to the employee is high, but the cost to employers is small,” says Davies.

Other inexpensive ways to motivate staff include offering the opportunity to buy and sell holiday allocation, or providing a car parking space. In addition, long-service awards and employee recognition schemes can be woven into the fabric of companies.

The implementation of any scheme is down to the management team. “It all filters from the top. If you have the buy in of the management team it will cascade down. If not, it will never work, even in a small company,” points out Sheldon. “It’s just about boxing clever; taking what you have and applying it in a different way. Motivating people should be cost effective.”

Beyond recession

Management teams of small companies think that they won’t be able to access the same benefits as large organisations, but often they just need to be made aware of them. The employee benefits industry has been growing for the past seven years, a trend that Davies believes is set to continue because of government-backed initiatives, which enable companies to give without incurring huge costs.

For example, at P&MM a ‘bikes for work scheme’ was introduced to enable those in the Milton Keynes area to purchase bicycles tax-free. There is also a tax-free childcare system for parents.

Government initiatives are well worth investigating. Not only are they relatively inexpensive to implement, but they can also help build a culture that convinces staff of a company’s values.

“What we are seeing now are more and more enquiries from small businesses,” says Davies. “Those companies with less than 2,500 employees are looking to rapidly engage their people.”

Cultural change
How Beaverbrooks reduced its turnover of employees by placing an emphasis on staff welfare

High-street jeweller Beaverbrooks puts staff welfare at the heart of its business. It is a strategy that has paid off for managing director Mark Addlestone, who beat off tough competition to take top spot in The Sunday Times Best Company to Work For.

Addlestone realised that the key to a happy workforce was about more than just money. ‘Making it special’ is the adage by which staff are trained to deal with customers – and it’s also how staff are treated.

Key to this is the company’s charitable giving, which has helped create an environment in which people want to work. In 2008, the company launched its Workplace Giving Scheme, where charitable donations are made through the payroll and increased by as much as 40% for a higher rate tax payer. Some 20% of Beaverbrooks employees now take part in the scheme, raising over £16,500 a year.

The results are impressive. Staff turnover at the 66 branches has dropped from 50% to 18% since 1996, while staff report high levels of job security.

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