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Does a pay cut pay off? An antidote to the Great Resignation

A small reduction in the number of work hours can yield a disproportionate improvement in your quality of life. 

Does a pay cut pay off? An antidote to the Great Resignation
[Jirapong/AdobeStock] [Serghei Velusceac/AdobeStock]

This is a seismic moment in professional America. There’s unprecedented employee churn, a Covid-induced surge in burnout, and supply chain disruptions upending companies and industries.

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The instinctive individual response to these pressures is to demand more: more money, more perks, more responsibilities, more status. After all, we’re creatures of maximization.

But there’s another potential response that runs counter to both instinct and conventional wisdom, and promises a profound boost to job satisfaction. Might the optimal response to all these professional pressures involve seeking less, not more?

AT WORK, LOOK BEYOND THE MONEY

In my final semester at Columbia Business School, I was flabbergasted at how some classmates made major career decisions based on the size of their signing bonuses. Can we be bought so easily?

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The most important career decision you can make is to not focus primarily on the paycheck. That means not choosing company A over company B solely because of the money, or staying at a company only because of the pay. This is the opposite of the behavior I observed among some of my b-school cohorts.

To improve career and job satisfaction, shift the focus away from extrinsic rewards (such as money and title) toward intrinsic rewards, such as:

• Job content.

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• Impact of your work.

• Personal growth and skill development opportunities.

• Non-tangible benefits (intellectual stimulation, social interaction).

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• Your value add.

By spotlighting the opportunity rather than the reward, you stand to maximize both professional and personal satisfaction.

THINK TOTAL COMPENSATION

Consider this litmus test: Do you enjoy your work so much you would voluntarily accept a 20% pay cut? Your response reveals the degree to which you value the intrinsic rewards of your job.

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I do not suggest you discount your compensation rate, which is an important measure of worth. But compensation has many components, including cash (salary/bonus), equity, and intangible benefits, such as contributing to the company mission, flexible work arrangements, and accomplishing something meaningful. The goal is to maximize your total compensation, including job satisfaction and the value of your time.

A PAY CUT THAT PAYS OFF

While running an entertainment company as chief executive, I sought more flexibility with my time. I enjoyed the intellectual stimulation and challenge of leading a dynamic international organization. Still, I wanted to focus on family and non-professional priorities. I proposed a 20% reduction in my salaried compensation in exchange for 20% more time. This equated to one extra day a week on top of my vacation entitlement. Ultimately, I had just under 80 days a year to do my own thing. That was a life satisfaction game changer.

My pitch to the company was simple: I would remain 100% accountable and responsible to the business, while the company saved 20% of my salary cost. It was a win-win situation.

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This voluntary pay cut produced one giant unexpected benefit. I enjoyed work much more. Relinquishing 20% of my salary changed my mindset entirely. Before the salary cut, I often thought, they’re not paying me enough. I had been too focused on the financial reward (because, well, that’s what we’re trained to do). After surrendering part of my salary, the focus shifted back to the job content, the people, and all the things that attracted me to the role in the first place.

I was happier at work, and much happier outside work.

WHAT THE RESEARCH SAYS

It turns out that my experience—though uncommon (or at least unspoken) in corporate America—is not an outlier.

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Research by the work management platform Wrike dives into the disparity between happy and unhappy employees. Unhappy employees, it turns out, value compensation the most. But happy employees prioritize meaningful work and flexibility, and nearly two-thirds of employees would be willing to exchange a pay cut for greater workplace happiness.

In a detailed study, The Harvard Business Review found that nine out of 10 employees are willing to earn less money to do more meaningful work.

WORK LESS, DO MORE

Surely productivity will take a big hit, you might be thinking, if we work less.

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In 2019, Microsoft ran an experiment in Japan, a country known for its intense work culture. The Japanese even have an expression for “death by overwork.” Microsoft implemented a four-day workweek and assessed its year-on-year change in productivity. If the Japanese subsidiary worked 20% less, you’d expect productivity to decrease, right?

Guess what happened? Productivity increased 40%—even with employees working 20% less.

Here’s why: There are diminishing returns to both the quantity and quality of our output. After all, we are not machines. We spend so much time at work not actually working. There’s an easy way to work less: Cut out those time sucks. Concentrate your work energy on productive, value-added uses of your time. The less time we have, the more focused, efficient, and productive we become.

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That was certainly my experience after taking that voluntary pay cut. I eliminated all the trivial drains on my time and squeezed 100% of output and KPI performance into 80% of the workweek. I stopped attending unnecessary meetings and expending time on issues for which I did not add value. My number of workdays decreased, but my focus and efficiency skyrocketed. Fewer hours on the job does not mean fewer quality hours.

There’s an even more radical way to work less: a sabbatical. While sabbaticals are common in certain industries like academia, they’re uncommon in corporate America. But that’s rapidly changing as companies and employees race to respond to the surge in burnout. I have taken two sabbaticals in my career—one within a role, the other between roles. These sabbaticals were among my best-ever career moves, and both substantially altered my perspective on work and life.

GO THE OTHER WAY

A small reduction in the number of work hours can yield a disproportionate improvement in your quality of life.  Resist the natural temptation to add more hours to your day, or more dollars to your paycheck. Sometimes the optimal solution is to go the other way.

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Todd Miller, Work-Life Evangelist and Author, ENRICH: Create Wealth in Time, Money, and Meaning

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