Transcript: The Best Approach to Deal with Wage Inflation // Giselle Jenkins, Best Christian Workplaces Institute

The Flourishing Culture Podcast Series

The Best Approach to Deal with Wage Inflation

September 26, 2022

Giselle Jenkins

Intro: I'll bet you're hearing a lot about wage inflation and wondering what to do. Well, today we talk about strategies to address wage inflation, that don't cost a lot of money.

Al Lopus: Hi, I'm Al Lopus, and you're listening to the Flourishing Culture Podcast, where we help you create and lead a flourishing workplace. We find the problem many employers are facing today is readjusting to our post-COVID, hybrid world. The great resignation is still evident, where employees are quitting at record levels, filling millions of open jobs, even as we face a cooling economy and record-setting wage inflation. We know that having a flourishing workplace with fully engaged employees is the solution. So this week, we're talking about moving forward on the road to flourishing, no matter where you're starting from.

How do you, as a leader, navigate salary decisions in this season of wage inflation and a tight labor market? Well, are there any specific and important strategies to consider, in addition to salaries, as you seek to build an engaged workforce? Well, we think there are. There's lots of buzz right now about wages and pay structures, and you may feel pressured to respond.

Well, in today's podcast we invite you to pause and consider how to help your employees thrive in an environment that provides not only fair compensation, but other important factors for a flourishing workplace. I'm delighted to welcome back Giselle Jenkins, the consulting director here at the Best Christian Workplaces. Giselle has a deep well of experience in leadership consulting. She's an expert on developing flourishing workplace cultures by designing programs that attract, retain, and develop fantastic people.

Giselle, it's great to have you back on the podcast again.

Giselle Jenkins: It's great to be here, Al.

Al: Great. Well, you know, you talk with many leaders of Christian nonprofits, Christian-led businesses, in your consulting work with Best Christian Workplaces. What are you hearing from leaders on the topic of wages and inflationary pressure? What are the underlying concerns in this season as we face inflation that's higher than it's been in 40 years?

Giselle: Well, let's just start off by just reiterating what you've said. Inflation is higher than it's been in 40 years, and so that's front and center to the minds of leaders. And they're thinking about things like my salary budget cannot possibly compete with this level of inflation, and my pay is now not high enough to attract, especially frontline workers. And, well, if I can't bring wages up fast, then I'm going to lose my talent.

And then there's this sort of uncertainty. Well, do I wait this out? Is there going to be a recession? Is it going to crash? Will I be sorry that I acted so fast? So there's kind of this tentativeness of, should I act at all? What should I do?

Those are the main things that we're seeing, but for absolute certain, I would say that at least 75% of the organizations, when we do their Survey debrief, this topic does come up.

Al: Yeah, this has been a topic, I know, for at least probably a year and a half. And coming out of the pandemic, as we've been to conferences like the Citygate conference, working with rescue missions, their frontline workers are really getting stretched. Well, given all of these concerns that leaders have, what do you advise them? Is it time to overhaul their salary structure or give everyone—and I hate to use the term—but a lot of people are talking about cost-of-living adjustments. What are you hearing out there?

Giselle: Well, I'd say that it depends. When I talk with some organizations, they are up to date with their salary ranges; and then I talk with other organizations, and they're quite a bit behind. So should they update their salary ranges? Well, it depends. When was the last time they did it? And if they really are far behind, are they having problems? Are they losing people? Is it hard to attract?

And then the advice is going to depend on where they are, but here are some basic questions that I ask them, which maybe our leaders could ask themselves and ask other leaders with their organization. Do you have an up-to-date compensation philosophy? Are you winging it, or do you actually have some specific goals that you're trying to do around the area of compensation? And where do you get your source information? There are good sources out there, and there are bad sources out there, and there are sources that are less dependable. So look at your sources. Where are you getting it? And have you increased your ranges recently? And I ask them, what percentage have you increased it?

And when we think about salary ranges, and those of us who have spent many years in the comp field, we do understand that organizations have specific pain points. So we talked just now about frontline, for example, is a pain point. But as you're thinking about your salary ranges, do you have pain points across all of your ranges, or is it just some of them? So do you need to take maybe a tactical strategy, or is it overall? And then, is this even possible right now? So sometimes the budgets are not there. And so it might be the time that it is actually not possible.

But as, Al, in your book that's recently come out, there are eight factors of engagement. So I do ask about these things, and I do have training. I do comp studies for people. But I really dig in, and I say, “Where else are you having struggles within your organization, to understand this is really a comp problem that you're facing.” And from there, I'm really better prepared to advise them. If they've taken an Engagement Survey, so much easier to advise them because I can see where they're struggling and where they're strong.

But one general rule that I would say is don't overreact, because high inflation can only last for a period of time. But high raises to people and high adjustments to ranges, they're really hard to take back. So I advise them, after we've done this discovery process, go through the questions, what about a targeted approach? What would maybe supplements or stipends or even considering just raising what we call the floor of their compensation, so the frontline workers’ pay, because that's the safer direction. You can take away stipends, you can take away supplements, and it would be very unusual for frontline workers’ pay to shrink even if we have deflation. But that's general advice and questions I go through with them.

Al: Yeah. That's really good. And Giselle, you're absolutely right. When you have data through an Employee Engagement Survey, you know exactly where the pain points are and how you can address them. And oftentimes, compensation isn't where the pain point is. But for some leaders and workers, inflation, this is a new experience. I mean, some of us—and I hate to reflect on my experiences in the ’70s, where we were going through high inflation—but others haven't lived through these cycles before. So just so we're clear about terminology, can you talk a little bit about how inflation affects salary and how there's an inflation rate, how it does affect salary ranges overall?

Giselle: Sure. Well, as you mentioned, the ’70s are a good example and the ‘90s are a good example. So there are a few guiding principles, and I've mentioned one of them, that is that high inflation is only for a period of time, And it can be short term and lasts for just a couple of months, or it can be long term, and we've seen that. You and I have both seen that. It was long term in the ‘90s. But in the last decade, when a lot of people entered the workforce, it's amazing but inflation has only been 1 to 2 percent, if that.

Al: Yeah.

Giselle: And so what the normal process has been over the last decade or so and even longer is that you usually take about 50 percent of that inflation, and you build it into the part of your merit increase that might be considered the COLA, the cost of living. So it's about 50 percent of that increase is that. And then the rest of it is your merit. And you could safely, even during this period of time, just raise your ranges. That’d be a pretty safe thing to do.

But now think about today. So if they're right about the annual projections for inflation, then—and let's just say conservatively it's 8 percent—so going from—

Al: Right, yeah.

Giselle: —1 to 8 percent, and then about 50 percent of that is going to be a COLA. That's a 4 percent COLA. And salary increases over the last several decades have been in the 3.8 to 3.9 range. So this is more than all salary increases that most people that entered the workforce in the last 20 years have ever seen. So that's the problem, right? And that's more than the budget for the whole organization.

So where do you move ranges? Well, employees often think if inflation is 8 percent, our ranges should move 8 percent. But that’s not past practice, and clearly, that’s not feasible now at all.

Al: You know, and I remember back in the ‘70s and the ‘90s, there was no correlation between what the labor market moved and what inflation was. So let's keep that in mind, too, that inflation and what the labor-market value of jobs are don't necessarily move in tandem. And so let's keep focused on where the labor market is and talk about that with our employees versus just what inflation is, because people are going to come and say, “Well, inflation is 8 percent. Why isn't my salary increased 8 percent?” And of course, the labor market hasn't moved in tandem with that for good reasons.

But Giselle, I really appreciate —I came back from walking the Camino and discovered that you recently put together a resource called Harnessing the Power of Engagement to Fight Wage Inflation. In there you mentioned that no amount of compensation can make up for someone's desire to see impact, the work that we're doing, and how it makes an impact on others. So what are some of the practical ways that leaders can make sure that their employees are participating in a sustainable, life-giving-work situation?

Giselle: Well, Al, I'm glad to give you a positive surprise when you came back from the Camino. Positive surprises are the best surprises, aren't they?

Al: Yeah.

Giselle: So when we've talked about some of the best practices to adjust to wage inflation, and you just mentioned the labor market and, of course, there is the rub, right? The labor market has been tight. When the labor market’s tight, we just tend to go up. So let's just empathize for a minute with our listeners and realize that they are facing both a tight labor market and inflation that's coming from other sources. So, hang in there, leaders. We’re on your side, and we’re with you.

So after going through that process of, do I need to adjust? do I need to look at it? when was the last time?, etc., all those questions, then we want to talk about the power of raising pay. So we know from research and collecting a lot of data that wage increases in general are a weak solution to retention challenges. And we have to repeat that over and over to leaders because their immediate thought is, “I'll give more money to these unhappy employees, and that will make the difference.” But we can show you statistically that is not true. That is not a powerful way.

So why is that? Well, it's the rare person that took the job because the employer was the highest payer they could find. And that's really true of mission-driven organizations. So if it wasn't my reason for coming, it's probably not going to be my main reason for leaving, because it never was a strong reason. So we do what we call discovery groups. Some may call them focus groups. And we sit down and we talk to people across all the different sectors and organizations, and we ask them this question: why did you come to your organization? I just recently came back from a trip where I did just that, and I can say from confidence from that one and from every one that I conduct, that it's about 5 percent of people that will talk about, “I came for the pay,” out of 100 percent; 5 percent mentioned money. And even if they mention money, they'll usually just say, “Needed a job,” but it wasn't because of high pay.

But what did they say? What are the things they say? And they say, “Well, I want to find meaning. I want to find purpose. I want to work for a healthy organization. I want like-minded coworkers that I can get along well with. It was a great job fit. It’s just the kind of job I've always wanted. It was a career opportunity for me. I could see myself thriving in this organization.” And very specially within mission-driven organizations, “I think I can make an impact, and that is so exciting. It's not going to be just a job; it's going to be an impact.”

So as we at BCWI then categorize this when we give feedback to leaders, what happened to my discovery group? What did people say? Well, we’ll say, well, a lot of it falls into what we call sustainable strategy. So they're looking for an impact. They're looking for effective programs. They're looking to be well resourced so that the job has meaning. They want to be personally aligned with the mission and goals. That falls into what we—or a driver that we call sustainable strategy.

And then, they're looking for this personal meaning. “I'm connecting to the mission. I feel personally effective. I feel like the gifts and talents that have been given to me are flourishing in my role. They're used well.” And we call that driver life-giving work. So there's a series of questions, when we do Engagement Surveys, that fall in that to measure that.

And then, the last category that it falls into is the talent and growth categories. So, “I want to grow as a professional. I want to have a future with the organization or the company. I want to see a path forward.”

And so those are the things that people share upon hire, and they really rarely change. And so what we advise is focus on those stronger drivers. Those are the stronger drivers. Those are the things that keep people. And so when the labor market’s competitive, it's wise to look at the reasons people came, and then make it work for you. Go ahead and emphasize those things and especially fulfilling your promises to them. If you've promised an environment like I just described, are you're delivering it?

And you mentioned this, the resource Harnessing the Power of Engagement to Fight Wage Inflation, download it because this is outlined in much more detail across the drivers in it. But that's the advice. Again, I don't want them focusing on the weakest driver, which is pay. I want them focusing on the more important drivers.

Al: Yeah. And it is interesting as we have reflected over time, which of the eight drivers of employee engagement are more important? Pay is certainly the lower one on the category. And these others, you mentioned life-giving work, for example, is critical. I remember some recent research where it said that if you have a really highly engaged employee that are seeing personal meaning in their work, where they really feel like they're effective, where they're seeing future opportunity in the organization, it would take 20 percent to actually get them to move from the organization. So these are huge. And I know we're going to talk about some other key drivers that make an impact on that as well. But let's keep that in mind.

I trust you’re enjoying our podcast today. We’ll be right back after an important word for leaders.

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Al: And now, back to today’s special guest.

Oftentimes, when I talk with managers—you do the same, Giselle—we ask, “Why did people leave?” And they oftentimes say, “Well, we can't pay enough.” And then we ask the employees. They don't always tell us the same answer. That's often different. Pay is not the big reason. There's other things. People join organizations because of the impact that they're making. They leave managers, in many cases, because of their experience with them.

Well, these are great insights. What other factors are important for leaders to remember now? Are there some other practices that develop employees and help create a healthy environment?

Giselle: Yes. And I will give you the response of the number one response on our Employee Engagement Survey when it says, what would you like to improve about your organization? And I'd love to have this be live and pause for a moment and get people to fill out one of those polls where they click, because they're going to guess it, and it's communication. So people want better communication. And until I started working for BCW, I felt a little fuzzy about communication, too. That’s a vague word, isn’t it? But then I learned that we can actually identify facets of communication. What are they? And that's our driver that we call healthy communication.

So your tool in your tool belt for this is going to be healthy communication, and I'll just describe a couple of aspects of that. So one is inclusive communication. So we hear that word inclusivity happen a lot, but is very natural in our nature to want to feel part of an organization and to feel part of a group. So if we are included in conversations, we feel part of that.

Transparency about change. When leaders are transparent as to why things need to happen, what was behind the reasons for them happening, people have confidence. Their trust is built. They believe in the humility of the leader.

And a close relationship with the supervisor. This has been very challenging during COVID and now that we've moved to such a large amount of people being in remote work. They start to get detached from their supervisor, and the supervisor may very well only talk to the employee when there's a problem, an issue, or a project, and not have that natural relationship that builds up when you see someone and you're around them. So building a closer relationship, if you're a supervisor, with your employees.

And then, listening to people's good ideas and suggestions and acting on them. So having a regular way that people can feel free, empowered, and feel like they're welcome, their ideas are welcome. And of course, there's asking for feedback. We recommend annually asking formally for feedback, but we recommend, as I said, having always having an open way to give ideas and suggestions and not waiting annually to ask for it.

And I can tell you that healthy communication is a much stronger driver than wages, because sometimes people will leave and get paid more, but if you ask them why they left their other job, they're going to say, probably mention one of the things I just mentioned to you. “I didn't know what was going on. No one cared about my idea. I wasn't part of decisions. I'm going to go somewhere where that’s different. And by the way, I got more pay.”

Al: Yeah, right, exactly. Well, that's such an important reminder that flourishing doesn't just come from rewarding compensation, but from a whole set of factors that generate an engaged workforce.

I'll bet you, Giselle, you've got an example of an organization who's really doing this well, someone who's incorporated this holistic approach to attracting or retaining employees, that includes a fair salary structure, but it isn't limited just to financial incentives. You have a story for us?

Giselle: Sure. We deal with an organization that has a worldwide reach. And there, you can imagine over the last couple of years that things that are worldwide have been quite challenging. There's things around COVID and around travel restrictions and work in both developed and developing countries. And they've had very intentional efforts during these challenging periods of time to keep the community, to keep in touch, and to specifically keep building leaders in two facets. One is their spiritual development, and one is their skill development. And so they've worked extremely hard since the beginning of 2020 to encourage spiritual development throughout their leaders, from those that have matrix management all the way to the top. And they've created cohorts of learning and accountability for spiritual development. And they have included in those, key skills that the leaders need to thrive themselves but also to help their employees thrive. And fantastically, during this challenging time, their retention, well, what we would call involuntary turnover, has only been about 5 percent. And compared to other organizations, that's amazing. And they really do not have people asking them about pay. It’s not even a topic that’s coming up.

And this intentional, very meaningful, two-pronged approach to the spiritual leadership and the skill leadership has so engaged their leaders that it’s trickled down throughout the whole organization. It's made them better leaders, and their minds aren't even on the other things, these major challenges that we're facing. And so I think that's a really good example of the leaders thinking about what is strategic. And if they thought, for example, that those two prongs that they're focusing on were strategic, then some of the lesser things that we've been thinking about and talking about today will fall off because we know and now that the actual number one reason that people leave organizations is that they're toxic. They're a bad place to work, right? This is an unhealthy organization. So when the leaders become more healthy, then it becomes healthier. And then they weather through even the most challenging times that I would say, and I've been in the workforce a long time, that employers have ever faced. So to me that was a really good example because how has that fought wage inflation? Well, people aren't asking about the wages, and they aren't leaving. So, amazing, right?

Al: That's fantastic. I really love that idea, Giselle, on what you're talking about: spiritual development, providing spiritual development. I mean, that is such a core part of working in a Christian organization. And so many times there's so much focus on developing in other areas that we overlook the importance of spiritual development in an organization, how people find refreshment in that. And what a great example. As well as skill development; we can't overlook that, for sure. But I love that. Love it. Exactly.

So on the other side, we just talked about a positive example. I bet you’ve observed some strategies that are not working, where leaders have responded to high inflation, but not in a way that's sustainable or even helpful. So you have any examples or maybe even just pitfalls to avoid in this discussion?

Giselle: Yes. And this is something that I share when we do Survey debriefs and I share with leaders when they're bringing up this topic and they're saying, “What do we do? We're planning to do this,” and my birth order is third child. So I really enjoy other people making mistakes, and then I learn from them. So I pass these on to people just like we're passing on today.

So first thing is, don't drop your merit program and just give people cost-of-living increases. So even if people have been talking to you a lot about equity and fairness and these topics that are really just throughout our society today, when it happens, they will say, “But I worked longer hours than that person, and I met higher goals than that person,” and suddenly, they realize, “I like to be paid for my hard work. And I like to understand that those that have not worked hard, that they have accountability.” And when everybody gets a raise, they say, “Well, we're not having any merit increases this year. Everyone just gets the same raise.” It has backfired dramatically on employers and their scores around our area of outstanding talent go way down because they say, “You are not rewarding the talent in your organization,” and the scores around accountability go down. They all go—these are very important questions. And they go down. And then, and here's the rub, which is horrible, the pay question doesn't go up, and you’ve invested in it. So don’t drop your merit program. If you want to slip that a little higher cost of living into your merit program, do it. But don't drop your merit program.

Second thing is that you can't get the kind of reaction you're looking for with a COLA increase. So I have seen several organizations give very fine COLA increases, like 6 percent, and their employees have dropped their scores on pay, and they have said, “What did they think? They gave a 6 percent, and inflation’s 8 percent. This is not right.” It is almost better not to give a COLA, just a straight COLA. So I'd say combine those two ideas. The one is that you cannot give enough to make people satisfied with your COLA unless you're a very unique organization that can give 8 to 12 percent increases. But if you embed it in your merit and keep that, it doesn't have to be as high as that. So keep that in mind.

The other is avoid the pitfall of lopsiding your action plan to pay. Instead, go in and know, what have they been asking for again and again? What have they been asking for pre inflation? What did they keep on saying? So we know that there are certain sectors that we work with that are chronically under-resourced, and I won't pick on them right now, but they know who they are. And so, for example, if people have said, “We don't have enough staff. We're asked to work too many hours. Our shifts are short,” go back to that. They've been asking for that again and again. It's more important. It'll make more impact. Go and work on that. So don't just forget all the other feedback you got to just focus on this one.

And then, we talked about overreacting. Don't overreact, because you're not going to be able to backtrack big raises or big adjustments to your salary ranges.

And then finally, don't just do nothing. So I've seen a lot of employers say, “Yeah, we started noticing this about a year ago, and it's really important to people, but we haven't done anything about it because we just can't decide because then people will perceive that leaders are weak.” So it doesn’t have to be a perfect solution. I think today we've given you a number of different directions you can go, and probably one of them fit your organization really well. It's something you've heard employees ask for, and you need to work on. So take some action. Don't just wait and hope that things are going to work out.

Al: Well, I really agree, Giselle. I remember 20 years ago coming into the Christian sector and seeing organizations that would give everybody the same salary increase year after year. And I call that peanut-butter increases because you're spreading peanut butter across a slice of bread, and that's the same level across the entire slice of bread. And how demotivating that is for your top performers. And so who are you going to lose when you do that? And whether it's a COLA or, again, just an equal increase, you're going to lose your top performers. There's no question. They're going to go and say, “Hey, I work harder than some of these other folks, and I'm not being recognized for it.” So, yeah, absolutely. And you're right, people are never happy with a COLA, but we're going to give you a 5 percent increase and inflation’s 8. Focusing on inflation, focusing on trying to address it with COLAs, it never satisfies people. And listening is such a key. Well, absolutely.

So as leaders are responding to wage inflation and building an engaged workforce, as we're talking about, what would you say to help them focus on the long term? Wage inflation, it may be a short term—you've mentioned that—but what strategies and practices are going to help them keep them growing in a healthy direction over the long term?

Giselle: Well, the general answers are to understand what builds a healthy culture, because as we look at various really prominent leaders that we know in society that are talking about this, they all say, “If you want a sustainable organization, you have to have a healthy culture. That is your number one tool.” So if leaders need to know more about what drives a healthy culture, for sure get your book, Road to Flourishing. It outlines it very clearly. It has the eight drivers.

So in general and the advice is focus on the culture. And the culture is not a “nice to have.” The culture is an essential and is strategic. It is not a soft area. It is a very important area. So focus on a healthy culture.

And then, very specifically in the area of wages and that's what we've been talking about a lot today, is that if you don't really understand how to address compensation in your field, then get some professional help. Get someone who can help you evaluate your ranges, help you develop a compensation philosophy, help you analyze where your people are today, where you might see trouble spots. And that is usually a one-time thing. It'll get you started installing that person should they be listing best practices. So I’d say get some assistance in that area. There are specialists doing that. And the two together, knowing that healthy culture is very important, but also having that hygiene, that regular annual analysis after you've gotten a compensation program that you feel you can be proud of.

Al: Yeah. And what I remember seeing, Giselle, is after a lot, a number of years, and we've now had a couple of wage inflation, and some jobs are going up in the market, more so than others, it's time to actually get some help, as you say. Look at what the market is for each of your individual jobs that you can get some benchmark data on. And it may even cause you to change some of the internal relationships that you've got with jobs. But yeah, that's great advice. Get some help.

And the old saying, build a healthy culture, yes, culture eats strategy for breakfast. And it's a real foundation for you to move forward.

Well, Giselle, we've learned so much from your conversation today, starting with, well, what are some of the issues with wage inflation; why not to use a COLA; how important it is to have, first of all, a compensation philosophy and make sure you've got good sources of wage data. It's so important to focus on other things first instead of compensation around sustainable strategy, life-giving work, talent, and growth. Absolutely. And communication, as you say. And again, other issues of people aren't always looking for just compensation. This idea, that example you gave us of building into people even from a spiritual development as well as key skills was very helpful.

So how about, Giselle, is there anything else you'd like to add that we've talked about?

Giselle: I'll just say that if some of the topics we've talked about today outside of wages and wage inflation interest you, then we do put our resources on our website, and you can search there on the website by topic. So if you're interested, for example, in life-giving work or you're interested in how to recruit Gen Z, we have a number of free resources that are open to the public. So you can go to our website, here on, you're listening to this broadcast and from the website. And just feel free to go there and go to our Resources tab, and look at these different topics because I think they're really going to help you as a leader to understand them, to understand their power. And then, access some of our free resources that we have, and download them. I think you’ll enjoy them. And we set them up to be extremely practical, so you’ve got action steps to take there. And, yeah, we’d love to hear from you.

Al: I think that's great advice. I was just at a workshop with 50 CEOs, ministry CEOs, and they were mentioning the resources that they found on our website, bcwinstitute.org, and look for resources.

Well, Giselle, thanks so much for your contributions today. And most of all, I appreciate your devotion to equipping leaders and building flourishing workplaces, where people can accomplish kingdom work with engaged employees. Thanks so much for taking your time out and speaking into the lives of so many listeners. Thank you, Giselle.

Giselle: You're welcome, Al. It's my pleasure.

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