Culture Or Compensation? What Matters More In Your Workspace?

  • Updated on: 26 Dec 2023
  • Published on: 20 Dec 2021
Culture Or Compensation? What Matters More In Your Workspace?

Highlight: While compensation outshines all other motivating factors for a prospective employee, it is not the ultimate factor. The culture of the company is a necessary preservative for thriving recruits.

“The top predictor of workplace satisfaction is not pay: It is the culture and values of the organization, followed closely by the quality of senior leadership and the career opportunities at the company.” 

~ Andrew Chamberlain, Chief Economist of Glassdoor.

It is indisputable how compensation is the primary motivator for any employee looking forward to finding their dream job. But the billion-dollar question – Is money alone enough?- has employers, all across the globe, grappling to find answers for long. Surely, money, at its finest, is merely an enabler and not a motivator. From the above-mentioned quote from Chamberlain, one can derive that company culture is the sustaining factor for employees of a thriving workspace.

Culture is more than just a “feel good” aspect of a company with incentives and happy hours. The cornerstone for unlocking a company’s success is being careful about building and maintaining an influential work culture.

To better understand the compensation vs. culture debate, let’s look at one of the oldest and most widely accepted motivation models – Maslow’s hierarchy of human needs.

Maslow’s hierarchy-of-needs paradigm highlights the importance of payscale at the lowest level of hierarchy. Money provides for the basic physiological and safety needs of existence, such as food, shelter, and warmth. Once the baser wants get satisfied, they no longer hold credence, the focus shifts to higher-level wants. 

However, this is the least essential requirement for humans in the hierarchy of wants. Human beings want more significant goals that make them feel protected, appreciated, and most importantly, lead to personal growth and fulfillment.

Compensation helps employees to meet the first level of the hierarchy by allowing them to purchase the items they believe they require for a more fulfilling life. Employees are motivated to accept a job, work more, and provide their best when monetary rewards such as pay increases and bonuses are offered. Money’s utility, however, ends there. 

Also Read: Financial Wellness: Why Should You Care About It?

Compensation will not be adequate if the rest of the workplace does not provide a supportive and cheerful atmosphere. After achieving financial wellbeing, only an empowered culture can lead to increased levels of employee engagement.

How money is not the sole medium for happiness

Andrew Chamberlain, CFO at Glassdoor mentions in a Harvard Business Review piece how it was clear that among the top six workplace factors that they examined, compensation and benefits were rated consistently lower than others. According to a 2010 study conducted by Princeton University researchers, having a better income enhances happiness by around $75,000 per year. Beyond that, increased money has no impact on happiness, and other factors take precedence.

Another research suggests monetary incentives, and prizes only promote transitory obedience. Why? Because these types of motivators don’t modify our attitudes, values, or commitments, they don’t change our fundamental behaviors.  Factors such as skill enhancement, company culture, and recognition are highly influential to employee motivation, especially at a higher wage level.

How does the opinion of higher-paid officials differ from that of the lower-paid ones? 

Although money isn’t the most important factor in employee happiness, a person’s job goals do shift as their income rises. Let us look at the results of this Glassdoor poll. While the majority of respondents choose business culture over money when it comes to workplace happiness, the poll finds that younger persons value corporate culture much more. In two of the four nations surveyed, millennials are more likely, than those aged 45 years and older, to choose culture over salary.

Referring to the Harvard Business review again, we find that for the lowest income group, the organization’s culture accounts for roughly 21.6% of worker satisfaction, but this climbs to 23.4% in the top income group. This implies that higher-paid employees want their employers to share their beliefs and promote a positive corporate image.

The report consequently emphasizes how workers at higher wage levels clearly value culture and long-term concerns such as leadership and growth prospects over day-to-day concerns such as pay and work-life balance- As a person’s pay increases, the predictive power of compensation and perks decreases dramatically, dropping to 9.8%.

Related Read: Employees Unhappy With Their Benefits Packages? Time To Modernize

Final Thoughts!

Culture as a retention tool 

Company culture is no longer a topic only addressed in closed meeting rooms or limited to current employees. It’s an area of employee concern globally. Before applying for a job, 41% of all candidates look for information on the corporate culture, according to Talent Board, a research agency that investigates the job seeker experience.

Employees and job seekers alike must have total visibility into how businesses operate. A positive corporate culture will attract and retain top people, a solid marker of long-term success. According to an American business journal, Gallup, a company’s long-term success depends on its ability to create an engaging culture. Disengaged workers cost organizations over $450 billion in lost productivity each year, and 95% of employees believe that culture is more important than pay. 

Good reviews and transparency about how people are treated may be highly motivating and exciting. People who work in a suitable culture are happy and willing to go the extra mile to make things work.

Adequate compensation for greater retention

While it is now widely accepted that culture trumps compensation, this in no way diminishes the latter’s importance! If employees aren’t compensated appropriately, there’s a good likelihood they’ll start seeking work elsewhere. The talent battle is real, and only the best personnel can set a company apart from the competition. 

If recruiters want their staff to provide their all, they should ensure that employees are fairly compensated and occasionally rewarded with monetary incentives. Pay must be reviewed and revised regularly in fast-paced organizations where employees expect much more. The worst-case scenario is when someone devotes their blood, sweat, and tears to a cause only to be underpaid for months.

There is no battle between a company’s culture and its compensation to its employees. For the holistic development of the company, it is crucial to find a balance between the two for retaining happy and efficient employees. 
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