The Role of Motivation in Employee Retention

March 2, 2023

Motivated employees eat pizza in an office. Taylor is late to work every day, calls in sick once a week, and feels unheard and unappreciated. At the same company, Hayden volunteers ideas at team meetings, goes the extra mile for clients, and feels part of a meaningful mission. Hayden is engaged and motivated, and is therefore more likely than Taylor to work hard, stay with the company, and champion it to others.

Lack of engagement and motivation, like Taylor’s, typically leads to high employee turnover, which costs companies time, money, and talent. On the other hand, strong engagement and motivation, like Hayden’s, leads to high employee retention. Employees not only stay longer at their jobs, but also are likely to be productive brand ambassadors.

What Is Employee Motivation?

Motivation is the engine that drives a person’s actions. Engagement is the connection a person feels with what they do. In the workplace, motivation drives employees to do their best work, and engagement inspires them to stay motivated.

Psychologists divide motivation into two categories: intrinsic motivation and extrinsic motivation.

Intrinsic Motivation

Intrinsic motivation is essentially self-motivation. Employees who are self-motivated find their work personally satisfying. They want to do a good job for its own sake and for their own sense of pride in a job well done. They are highly invested in the quality of their work and want to go the extra mile.

Signs that an employee is intrinsically motivated include volunteering to:

Learn extra job skills
Assist co-workers with tasks
Participate in company initiatives

Extrinsic Motivation

Extrinsic motivation comes from external rewards or pressures. These factors can include the promise of raises and bonuses. Motivators can be short-term, such as a prize for productivity over a short period, or they can take the form of gift cards, team lunches, outings, and public recognition for a job well done. Motivators can also be long-term, such as a well-laid-out plan for raises and promotions according to completely understood expectations.

Human resource experts find that extrinsic motivators can lose their effectiveness fairly quickly. It’s important to include motivators that are timely. For example, a raise after six months, while welcome, may not have the same impact as a reward for success in the moment. Companies should also be aware of negative extrinsic motivators, such as reprimands or constantly moving goalposts. These can rebound and ultimately increase turnover.

Depending on the company, the culture, and the team, extrinsic motivation’s role in employee retention can loom large.

Employee Engagement

Employee engagement means employees are highly committed to the work they do and the company they work for. They take pride in their work, and they know their work is valued.

Companies with highly engaged workforces have the following features:

Employees who act as brand ambassadors. Employees refer others to the company because they know it’s a great place to work.
Growth and advancement. Employees know they have a career path and can meet their career goals.
Managers trust their teams to do the right thing and get their work done without micromanagement.
Employee emotional and physical well-being are taken seriously, and programs such as diversity and inclusion are an important part of the company’s mission statement.
Company values. Employees know that executives and managers are committed to the company’s values and strive to practice them.
Companies share information that’s important to an employee’s job. They make sure employees understand what it takes to succeed and grow.
Managers and leaders keep the lines of communication open. Employees know they can ask questions without being shut down. Changes and news are communicated respectfully.

Employee Motivation, Engagement, and Retention

Employees must feel engaged, that they are learning and growing in their job, and that their work is valued — or they will seek that fulfillment elsewhere. Company leaders know that to keep employees, they have to give them reasons to stay. The smartest leaders know that compensation, while important, is not the only factor. Other actions and elements that can improve employee motivation and retention include the following.

Celebration. Celebration is an effective reward for hard work, making the shared effort all the sweeter.
Recognition. Employees who work hard or go the extra mile should know that companies see and value their contribution.
Autonomy and ownership. Employees should have autonomy in how they do their jobs and feel a sense of ownership over the outcome.
A healthy workplace. This can include reasonable expectations around paid time off and work-life balance, consistent work schedules, and a comfortable office space that promotes productivity.

Employee engagement starts with the executive leadership team, which establishes the company’s culture and workplace norms. The responsibility for executing on this strategy falls to the human resource management team, together with the HR department, which monitors employee engagement through surveys, exit interviews, and other practices, and advises on motivation strategies.

The Role of Motivation in Company Success

Companies that improved their employee engagement saw a 23% increase in profitability, a 41% increase in quality, and a 10% increase in customer loyalty, according to research firm Gallup. They also experienced an 81% reduction in worker absenteeism and an 18% reduction in turnover, in companies that previously had high worker quit rates.

The Financial Cost

Low engagement, lack of motivation, and high turnover have a significant impact on company performance. The cost of replacing a single worker is between one half and twice as much as their annual salary. Gallup estimates the impact of voluntary turnover amounts to $1 trillion in losses for American companies.

The Cost to Employee Morale

When employees leave, their work has to be portioned out to their co-workers until a temp or a new employee can be hired and trained. This can often take weeks or months. This can increase stress, reduce morale, and impact motivation and engagement. High turnover creates a vicious cycle as more employees leave, overwhelming the remaining workers, and contributing to an unhealthy work environment.

The Impact on Recruitment

Company review sites such as Glassdoor have become a resource for job seekers. When companies experience low engagement and morale, workers may leave negative reviews on Glassdoor or even on review sites such as Yelp. Negative reviews about potential employers can deter job seekers.

Factors in Employee Motivation

In 2019, Gallup reported engagement levels at 35%, a record high for American workers. Shortly thereafter, the COVID-19 pandemic hit, which had a substantial impact on employment satisfaction, as companies laid off or furloughed millions of workers. From January to March of 2022, around 4 million workers quit every month. A Pew Research study showed the reasons for leaving included low pay (37%), no opportunities for advancement (33%), and a disrespectful workplace (35%).

Fortunately, companies can turn the situation around by understanding what employees need to feel valued. Recognition, offering professional development opportunities, and a positive workplace culture can motivate employees in the following ways.

Recognition

Experts point out that extrinsic motivators have to be part of a wider company culture that values employees for all of their work. Some of the ways in which companies recognize the work of their employees include:

Thank you cards. A simple note from a boss or a peer can go a long way to making an employee feel valued.
Gift cards. These may be more impersonal but can also be welcome, depending on context.
Team meals. Depending on the company, these can range from a casual pizza party to after-work drinks or restaurant meals paid by the company.
Spot bonuses. These have the benefit of being in-the-moment recognition that can delight an employee.
Raises are a long-term recognition that are part of a company’s overall compensation plan.

Professional Development

Organizations that support employee professional development often see a boost in loyalty. Some examples of professional development programs include the following:

Tuition reimbursement. Starbucks, Home Depot, and Chipotle are just a few of the companies that reimburse employees’ tuition costs. Companies benefit from a more skilled workforce.
Continuing professional education and certification. Accounting firms pay for their employees’ annual professional education and for their Certified Public Accounting (CPA) license.
Mentorship programs. Companies that have formal mentorship programs have greater employee satisfaction, according to CNBC.

Providing professional development is a way to show that companies value the growth and development of their staff.

Work Culture

People spend around 2,000 hours a year in the workplace. While compensation is important, work culture is an even stronger factor in whether an employee will be successful and engaged. Some of the ways that culture is important include:

Culture fit. A research study by workplace app company Speakap found 74% of workers in the U.S. and U.K. identified company culture as important, and 58% said they would leave a job for one with a better culture fit.
Work-life balance. Many prospective employees are looking for a work culture that values work-life balance, such as one that offers flexible work schedules and the opportunity to telecommute.
A respectful work environment. As the recent jobs data showed, companies that are disrespectful and dismissive of employees will see higher turnover.

How to Improve Employee Motivation and Retention

Companies that take the following steps can create a workplace of engaged and motivated employees, which can help boost retention. Not all solutions work for every company, and if managed poorly can have the opposite effect, causing employees to go elsewhere.

Data gathering. To understand the scope of the problem, start with gathering data. This can include employee engagement surveys, exit interviews, turnover numbers, and more.
Flexible work policies. Many office workers had to work from home during the pandemic and are pushing back against returning to the office full-time. Companies are instituting hybrid schedules and some are moving toward shorter workweeks.
Diversity, equity and inclusion. DEI can help attract a wider pool of workers. However, merely giving lip service to DEI can backfire if companies don’t do the hard work to embrace it.
Leadership and management training. Leadership training prepares employees to make the leap into bigger roles and supports their career goals. Management training is essential for ensuring employees are engaged and motivated.

Empower Employees Through Human Resource Management

Business leaders who understand the role of motivation in employee retention are taking steps to create healthy workplaces. These companies and organizations experience lower turnover, attract better candidates, and are more financially successful than those that suffer from low morale and high quit rates.

Students who are interested in how a career in human resource management can contribute to a highly engaged workforce would do well to explore Maryville University’s online Bachelor of Science in Human Resource Management to learn more.