More Volatility, Less Motivation

The first official trading day of 2019 picked up right where the last days in 2018 left off—with wild swings in the stock market. In the first three trading days of 2019, the Dow Jones Industrial Average fluctuated by more than 800 points, or about 3.5%. The start of 2019 follows a year in which all major stock indexes recorded their worst performance since the financial crisis a decade ago.

The market’s extended volatility, which dates back to the beginning of last year’s fourth quarter, is an obvious financial and strategic concern for corporate leaders. But experts say it also represents a more latent and potentially more damaging threat: talent disengagement. “To the extent that employees’ views turn more negative amid volatility, employers might worry about decreased motivation,” says Mark Royal, a senior director for Korn Ferry.

Numerous studies have shown that employees’ financial issues affect their job performance, for example. And while unemployment is at historic lows and wages are rising, concerns about a global economic slowdown and trade tensions are prompting fears among talent about their future prospects. Those fears are compounded by the fact that many workers have seen their 401(k)s and other retirement savings plans lose significant value over the last year. As a result, Royal says, the current environment may be creating a “wealth effect” among talent.

“Just as reduced portfolios may lead consumers to pull back on spending, employees who are feeling less secure financially may be less likely to take risks,” says Royal. “That could lead some to remain in their current jobs and play it safe with income and employment stability.”

Keeping talent onboard, however, is different than keeping them motivated and engaged. To do that, leaders cannot ignore the fundamental financial concerns of their workforces. Rather, they must reassure them by optimizing and sustaining reward and performance incentives and transparent communications, says Tom McMullen, senior client partner and leader of Korn Ferry’s North American Total Rewards practice. He says leaders can reassess whether base salries, incentives, equity, and benefits are appropriate if there's an extended bear market; offer differentiated merit increases for high performers and key talent; communicate the value of rewards employees are receiving; and provide regular feedback on how individuals and teams are performing versus what is expected of them. 

Korn Ferry research shows that engagement is not only influenced by employees’ current work experience, but also by their views of the future. Not unlike the financial recession of a decade ago, the anxiety stemming for the current extended market volatility means it is essential for leaders to ensure that employees feel there is a balance between their contributions and their financial stability.

Authors

  • Mark Royal, Ph.D.

    Senior Director

    Bio >
  • Tom McMullen

    Senior Client Partner

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