By guest authors Tera Allas and Brooke Weddle from McKinsey.
Too many employers pay too little heed to the needs of the lower earners in their company. Here’s why—and how—they should shift gears.
As record numbers of workers quit their jobs, companies are busy trying to figure out how to make working conditions at their organization more attractive and more sustainable. Many companies boast flexible hours, good benefits, and, of course, higher pay. And some go further, looking closely at how roles in the organization can fulfil people’s psychological needs.
Business leaders recognise these emotional needs—whether it is the sense of reward workers have when they accomplish something, the frustration they feel when being micromanaged, the anger they experience after being treated unfairly, the longing they feel to be part of a group, or the desire they have for their work be interesting and meaningful.
Yet many leaders mistakenly believe that only other professionals who have enjoyed similar success—and the financial rewards that come with it—truly value the nonfinancial aspects of their work. As we show in this article, that is simply not true.
People in lower-paying jobs also want their psychological needs at work to be satisfied. Yet data show that those needs are typically going unmet, far more often than is the case for higher earners.
Some of this may be unavoidable: for example, there is only so much autonomy one can feasibly grant a production line worker, while the job of a truck driver may be inherently lacking in social contact. However, most jobs could be enhanced to provide a much greater degree of psychological satisfaction.
In this article, we share novel data and analysis that illustrate the premium placed by all workers on psychologically satisfying work and how current work practices appear to be exacerbating existing inequalities. We also look at what business leaders can do to address the psychological needs of their lower-earning employees.
The good news is that, for the most part, companies have direct control over actions that can improve matters. Moreover, many of the practices that are needed—while requiring some time and effort—do not typically call for direct cash outlays. In fact, better satisfying workers’ psychological needs tends to correlate with higher revenues and profits.
Most people, across all income levels, believe that having an interesting job is as important as having a solid income
For thousands of years, philosophers have argued about what constitutes a “good life”—a life with more progress, pleasure, or purpose. Now, modern sciences—neuroscience, endocrinology (hormones), psychology, anthropology, and evolutionary biology, among others—have caught up. All agree: there is much more to being a human than surviving and procreating. 1
In a way, Maslow’s famous hierarchy of needs 2 was both right and wrong at the same time. On the one hand, it recognieed that people have many desires in addition to basic bodily needs such as water, food, and shelter. On the other hand, it assumed a fixed hierarchy where psychological needs—such as belonging and self-esteem—became relevant only after basic physical and safety needs were met. However, modern research has shown that these needs exist in parallel and that a person’s well-being can be enhanced—for example, by good social relationships—even if their basic physical and safety needs are not completely fulfilled. 3
It is no longer a surprise that people seek more from their employers than just a paycheck and a safe place to work. A preponderance of evidence suggests that “good work” also means
At all levels of income, the most important drivers of people’s job satisfaction were interpersonal relationships and having an interesting job.
- McKinsey’s recent analysis of the reasons why employees are leaving their jobs in record numbers (the Great Attrition, or what many call the Great Resignation) showed that the most important factors were social and psychological, including not feeling valued by their organisation or manager or not having a sense of belonging at work.
- A quantitative analysis of more than 16000 workers globally in 2015 showed that at all levels of income, the most important factors determining people’s job satisfaction were interpersonal relationships and having an interesting job—each accounting for around 20 % of the explainable variation. In contrast, the level of pay accounted for only 4 % of the variation in people’s job satisfaction. 4
- In a representative global survey of nearly 50,000 people across 38 countries, more than 60 % of respondents agreed or strongly agreed with the statement “I would enjoy having a paid job even if I did not need the money.” 5 Only around 40 % agreed or strongly agreed with the statement “A job is just a way of earning money—no more.”
- In the same survey, across all occupations and income levels, only 16 % of respondents rated “high income” as more important than having “an interesting job.” As shown in Exhibit 1, the average importance placed on “an interesting job” was on par with or higher than “high income” in all occupational groupings, including the lowest-paid ones.
Yet companies do a better job of addressing the psychological needs of higher-earning employees than lower-earning colleagues
One of the most prominent models of human motivation, extensively applied to organisational and employment research, is the self-determination theory by psychologists Richard Ryan and Edward Deci. 6 According to this theory, as well as a large body of empirical evidence, all employees have three basic psychological needs—competence, autonomy, and relatedness—and satisfying these needs promotes high-quality performance and broader well-being. 7 Additional studies, including McKinsey’s own research, have also found a link between positive outcomes (for both employer and employee) and employee engagement, 8 often embodied in questions about the degree to which employees consider their work to be interesting, and purposeful.
Drawing on this literature, as well as a large global data set generated by the International Social Survey Programme, 9 we looked at how well employees’ psychological needs are satisfied in different types of occupations, ranging from managerial and professional jobs to lower-paid roles, such as those in customer service, cleaning, and waste disposal. Given the data available, we focused on five psychological needs: competence (related to the concept of mastery), autonomy (related to control and agency), relatedness (including positive relationships), meaning (proxied by how interesting individuals find their jobs), and purpose (proxied by how proud individuals are of their organisations).
The results are fascinating (Exhibit 2). First, the good news: on a net basis (deducting those who “disagree” or “strongly disagree” from those who “agree” or “strongly agree”) across all occupations, a greater proportion of workers feel that their psychological needs are satisfied. Even for those with the worst net score—plant and machine operators and assemblers who were asked about feelings of competence—around 48 percent said that they could use “almost all” or “a lot” of their past experience and skills, versus 23 percent who said that they could use “almost none” of their skills on the job. Similarly, while 23 % of workers in elementary occupations (such as cleaners, couriers, and waiters) didn’t find their jobs to be interesting, more than half did.
In absolute terms, more global workers—whatever their role—feel more positive than negative about the degree to which their psychological needs are met.
The bad news, however, is that this is far less true for individuals employed in lower-paying, and often lower-skilled, jobs. The differences between, say, managers and people in elementary occupations are particularly large in terms of competence (the ability to use experience and skills) and meaning (how interesting the job is). In this sense, current work practices globally seem to be exacerbating inequalities rather than ameliorating them.
The data indicate that not all of this is inherent to, or directly determined by, the characteristics of each role. After all, some people in even the most manual, routine, repetitive, or poorly paid jobs still indicate that their work is meaningful, that they are proud of the organization they work for, and that their role enables them to express and satisfy their needs for competence, autonomy, and relatedness.
Indeed, the potential for any job to inspire is illustrated powerfully by the classic story of the three bricklayers working at St Paul’s Cathedral in London. Christopher Wren, one of the most highly acclaimed English architects in history, had been commissioned in the late 17th century to rebuild the cathedral. One day, he noticed three bricklayers on a scaffold, each of whom appeared to have very different levels of motivation and speed. He asked each of them the same question: “What are you doing?”
The first bricklayer, seemingly the least satisfied with his position, said, “I’m a bricklayer. I’m working hard laying bricks to feed my family.” The second bricklayer, slightly more engaged, replied, “I’m a builder. I’m building a wall.” The third bricklayer, who seemed to be working with the greatest amount of purpose, said, “I’m a cathedral builder. I’m building a great cathedral to The Almighty.” 10 In the modern workplace, great managers and leaders can elicit a sense of meaning by emphasizing, and reflecting with employees on, the ultimate contribution that their organization is making to society.
McKinsey research suggests that society is a key source of meaning for employees, along with company, customer, team, and individual. Together, they make up a collective, integrated whole that leaders can address. If average job satisfaction is weaker for lower-earning roles despite the many lower-paid individuals who do have their psychological needs met, organizations must be overlooking opportunities to do better. Luckily, they have many ways to refocus and improve their efforts.
Addressing the psychological needs of lower earners makes good business sense—here’s what leaders can do:
Any organisation claiming to be a good employer would want to address the imbalances highlighted above, as much as is operationally feasible. As we have written previously, positive and negative experiences at work—beyond pay and rations—have significant spillover consequences for people’s personal lives. 11 For example, one study showed that a mother’s dissatisfaction with her job can contribute to her children’s behavioral problems. 12
However, in addition to the moral case for equalizing the scales on psychological well-being, there is also a strong business case. A comprehensive evidence base shows that higher employee satisfaction is associated with higher profitability 13 and that this phenomenon is not confined to a company’s higher-earning roles. Consider the case of frontline customer service staff: one experiment showed that weekly sales for call center operators increased by 13 % when the operators’ happiness increased by one point on a scale of one to five. 14 Worker satisfaction and customer satisfaction tend to go hand in hand. 15
Another direct link from employee satisfaction to the business bottom line is through employee turnover. In the wake of the COVID-19 pandemic, more people than ever are leaving their jobs voluntarily, both in the United States and in other developed economies.
And while the competition for talent is heated among professionals such as software engineers and medics, vacancy rates in many low-paying jobs are also sky-high. Across the United States, the United Kingdom, and the European Union, unfilled roles abound in the hospitality, entertainment, and logistics sectors, among others. 16 For businesses, losing personnel means costly and time-consuming recruitment and retraining, not to mention lost output and productivity.
Psychological well-being at work is one of the most important factors in employees’ decisions to stay or to go. Regardless of income level, workers who “strongly agreed” that they were proud of the organization they worked for were significantly more likely also to say that they would turn down a job at another organisation, even if it offered higher pay. Granted, people in higher-earning roles tended to be more loyal, but the difference in loyalty between staff who felt proud and staff who did not was dramatic across all income categories.
Whether motivated by equity considerations or bottom-line benefits, employers would do well to consider ways they can improve the working experience for lower earners.
To get started, leaders can think of this as a journey with six steps:
- Appreciate that the majority of people, at all levels of the organisation, are looking for more than just money from their job—that they would like to have their psychological needs satisfied.
- Recognise that workers’ circumstances vary significantly in different jobs and teams and are often very different from those of leaders themselves.
- Analyse how effectively psychological needs are being met in each type of job and each part of the organisation, benchmarking performance to peers and best practice.
- Identify how psychological needs can be better satisfied—typically through changes in company culture, behaviours, and day-to-day working practices.
- Act by creating initiatives, projects, and processes to help make workers feel more masterful, in jobs that are, as much as possible, more skills-based, autonomous, connected, interesting, or purposeful.
- Monitor and evaluate the results, both in terms of how satisfied employees are with their psychological needs and in terms of commercial outcomes and employee well-being.
The best suggestions for how to redesign jobs or processes, or how to make the workplace more psychologically satisfying, will almost certainly come from workers themselves. Indeed, the process of discussing issues and opportunities and listening to employees’ daily experiences is itself a core part of creating positive change. Many businesses already routinely talk to their workers about employee engagement and satisfaction.
The best suggestions for how exactly to redesign jobs or processes, or make the workplace more psychologically satisfying, will almost certainly come from staff themselves.
However, it is vitally important to base these discussions on more than workers’ fundamental needs, such as physical safety and pay. The style of conversation should focus on both what people think about work and how they feel about work. Such discussions are likely to unleash a range of responses—both positive and negative—which leaders will need to harness both respectfully and skillfully.
In addition to intensive employee engagement processes, there are a number of practical behaviors that leaders can encourage through mindsets, communication, role modeling, training, and performance-management processes. For lower-earning employees, the actions and behaviours of immediate line managers can make an enormous difference. Some of the practices that have positive returns in almost every situation include the following:
- Recognise competence: Frequently review a day’s work (with no judgment or blame) and ask what you as the manager or leader can do to make the next day easier. Thank and praise people for a job (well) done. Make the most of individuals’ skills through delegation. Provide regular, strength-based feedback oriented toward problem-solving.
For example, the plant and machine operators in Exhibit 2 who said that they were able to utilize their skills may still have had production line tasks that were fairly prescribed. But their factory organized short two-way briefings at every shift change, allowing workers to contribute their expertise to help make decisions about the running of operations.
- Grant autonomy: Focus on the end goal of what is to be achieved and why and let employees decide—or at least give them a voice in—how to get there. Give frontline workers discretion over appropriate decisions. Ask employees how they feel about work and really listen to their answers.
For example, retail assistants who are given the discretion to accept customer returns or hand out vouchers in specific situations are more likely not only to make customers happier and more confident but also to feel better themselves.
- Build connections: Set up regular (for example, daily) meetings at the beginning of each day (or shift) and allow time for socializing. Create regular breaks or events that help build social connections. Act decisively to eradicate any bullying or harassment. Praise and promote compassionate leaders.
For example, one skin care company whose sales agents work exclusively from home managed to maintain high levels of staff satisfaction by orchestrating regular one-on-one catch-ups, as well as virtual group get-togethers, throughout the COVID-19 pandemic, which allowed people to feel more connected to their colleagues. 17
- Instill meaning: Always explain the “why” behind tasks and link the reason to goals that go beyond making money (for example, being proud of the organization’s product or service). Help make work more interesting by upskilling people to be able to perform more complex or varied tasks. Simply ask people what would make their jobs more interesting.
For example, the workers in elementary occupations in Exhibit 2 who said that they still found their jobs meaningful may well have benefited from the same attitude that met President John F. Kennedy when he visited NASA in 1962. When the president came across a janitor in the hallway and asked him what his role was, the janitor replied, “I’m helping put a man on the moon.”
- Discuss purpose: Set aside time for teams to reflect on the impact the company has on the world. Use one-on-one conversations to better understand workers’ individual sense of purposeand discuss how they can act on it in their work setting.
For example, for a worker at a clothing manufacturer, a manager can make the role more fulfilling by regularly sharing positive messages, photos, or videos from smiling customers wearing the company’s garments.
This advice may sound basic. We all know how to meet the psychological needs of the people in our lives—our children, our partners, our friends. We might even compliment, thank, and empathize with strangers.
We need to take these positive behaviours and apply them in the workplace as well—not only with peers but with employees at all levels of the organisation. However routine their tasks, we can stop treating workers as cogs in a machine and start treating them as the wonderful human beings they are.
This article was edited by Rick Tetzeli, an executive editor in the New York office.