An employee receives a nice bonus for successfully completing a long and difficult assignment, but the next day decides to leave the company.  How could this happen?  Peter Bergman tells the story in his HBR blog, and in doing so he talks about a point that I’ve been speaking about all year.  Compensation is not about meeting the economic needs of your people, it’s about recognition.

When Janice makes more than Maurice you are saying that Janice is contributing more value to your organization than Maurice is.   You are saying that Janice has more status, more influence; you appreciate her more.  We all want to be valuable and recognized for the contributions that we make, everybody wants their work to mean something.  The most powerful tool that we have to communicate that value and meaning is through compensation.

But pay alone doesn’t make most people feel valuable.  Robust compensation is an indicator, or a result of having done valuable work.  We must give people regular feedback to  communicate the value that people bring to the organization.  This means everything from regular performance reviews to sending thank you notes.  It can be regular one-to-one meetings where you strategize and plan together, or inclusion in “management team meetings”.  It means being free with both praise and constructive feedback, letting your team members hear all the feedback that you get from clients and partners.

Most of us want our employees to bring more than just their head and hands to work, we are putting our heart and soul into our business and we want team members who are in that with us.  To get that kind of engagement we need to be proactive and think about how we can meet their needs for meaningful work, connection and recognition.

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Brad Farris is a small business advisor with Anchor Advisors, Ltd. in Chicago, Il. Since 2001 Anchor Advisors has been helping creative professional firms to grow, by helping them clarify their purpose, get the most from their people, keep their eye on key performance measures, and implement consistent processes. Brad is also the author of The Business Owner’s Champion: 6 Practices to Build your Nerve and your Business.