How do you reward your employees?

In 1905, an immense factory complex called the Hawthorne Works was built on the outskirts of Chicago for 45,000 industrial workers. Managing and motivating that many employees was a big challenge, so in 1924, the plant commissioned a study to see whether increasing the level of light on the factory floor affected worker productivity. The conclusion was obvious: productivity skyrocketed.

But they also found that worker productivity increased when the lights were dimmed as well.  It turned out not to be the level of light that motivated the employees, but the knowledge that they were being watched and that management was interested in their welfare.

At last week’s Entrepreneurship 101 lecture, senior human resources professional Tammy Sturge shared this story as a lesson on the importance of HR. “I spend most of my time dealing with questions of motivating employees,” she said. “Pay attention to your employees.” She recommends 1,001 Ways to Reward Employees as a must-have for every budding entrepreneur.

A common mistake is leaving HR issues too late, discounting the importance of managing human capital. “Anyone thinks they can open a restaurant and do HR,” she says. “But you need to get HR help early, before you get swamped with people issues.” Sturges says she often gets calls from technical entrepreneurs who just want to spend some time back in the lab, but are spending their days dealing with the needs of their staff.

“Hire who you want five years from now,” she says. “Hiring a friend might work for the first two years, but after that there are problems.” Once you have 25 people in your company, there is often a “phase-shift” according to Sturge, where companies  need to craft a solid HR policy for their company. “We used to be a family,” is a common complaint she has heard from companies that grow beyond the 25 person mark.

To attract the right people, Sturge suggests employers focus on “behavioural interviewing” techniques, which consist of questions like “describe a situation in which you displayed leadership qualities for people who didn’t directly report to you.” These are past-tense questions that ask the interviewee to describe the results of their work with other people, rather than focusing on hypothetical scenarios of the future.

Also, be sure to have a program of performance appraisal. It needs to be transparent and equitable for all the people in your employ. “However,” she cautions, “performance is a subjective thing.” Failing performance appraisals year after year is still not a valid reason to fire people without a severance package. You’ve got to do something pretty bad to get landed in the category of “just cause.”

For entrepreneurs, especially in technology and science, it’s easy to think of your product first and your employees last. This is a mistake. Think of the psychological boost the workers at the Hawthorne Works got when they thought they were being attended to. Attend to your own employees and your company as a whole will flourish.

Downloads and resources

CIBC presents Entrepreneurship 101 2009/10 – Week 24 – Human Resources Management from MaRS Discovery District on Vimeo.

Joseph Wilson

Joseph was an education advisor at MaRS Discovery District. He writes on topics of science, culture and city issues for NOW Magazine, the Globe and Mail, Spacing and Yonge Street. He is the Executive Director of the Treehouse Group, dedicated to fostering innovation by hosting cross-disciplinary events. See more…