If you’ve made it this far, it’s safe to say you’re not after quick fixes. You’re here because you want to build something lasting — a business where people want to stay, grow, and contribute.
To do that, you’ve got to move beyond the surface-level HR noise and get into the real anatomy of engagement: what people need at work to feel safe, valued, and motivated.
The missing link: HR hygiene factors
Let’s start with the basics. Herzberg’s Motivation–Hygiene Theory remains one of the most referenced frameworks in workplace psychology for a reason — it explains why so many organisations never quite get traction with engagement, no matter how many team lunches or salary reviews they run.
Hygiene factors — pay, job security, safety, working conditions, and relationships — don’t motivate people. But their absence creates dissatisfaction. They are the baseline conditions that prevent discontent.
Motivators, on the other hand — recognition, growth, meaningful work, and achievement — are what fuel true engagement.
What we’re seeing across Australian SMEs right now is a chronic failure to satisfy even the hygiene factors. Employees are operating in environments with patchy communication, inconsistent leadership, and reactive systems. They’re doing more with less, without clarity or support.
McCrindle’s Shaping Culture report found that being overworked and stressed (26%), toxic co-workers (21%), and poor leadership decisions (18%) were among the top blockers to workers thriving, while positive relationships and seeing the impact of their work were the biggest motivatorsShaping-culture-infographic.
These aren’t abstract HR concepts — they’re human needs.
When employees lack the psychological safety and structure to meet those needs, you see it play out in real time: absenteeism, burnout, and that quiet disengagement that creeps in long before someone resigns.
The psychology behind engagement
This is where Self-Determination Theory adds another layer of understanding. Developed by Deci and Ryan, it proposes that people’s motivation and wellbeing rely on three innate psychological needs:
- Autonomy — the freedom to make choices and have agency over their work.
- Competence — the opportunity to build mastery and feel effective.
- Relatedness — genuine connection and belonging with others.
When these needs are met, employees experience what Gallup describes as engagement — emotional commitment and discretionary effort. When they’re not, you get compliance at best and quiet quitting at worst.
Josh Bersin’s Definitive Guide to Employee Experience takes this further. His “Irresistible Organisation” model defines the six levers that make people want to stay: meaningful work, strong management, growth opportunity, health and wellbeing, trust in leadership, and a positive workplace.
What’s notable is that pay — the factor most business owners still cling to — doesn’t even make the list.
It’s the experience of work that shapes engagement, not the paycheck.
Why conversations matter more than systems
Gallup’s global studies repeatedly find that 70% of engagement is influenced by the direct manager. The Employee Engagement Whitepaper supports this, showing a direct link between regular manager–employee conversations and higher engagement — organisations with ongoing, informal conversations scored 65% or higher on engagement.
That’s not coincidence. It’s culture in action.
When employees are seen, heard, and coached — not just managed — their sense of belonging and competence strengthens. And that psychological connection fuels performance.
This is why leadership capability isn’t a “nice-to-have” — it’s the most powerful engagement system you’ll ever implement.
From managing people to leading humans
Bersin’s Big Reset Playbook puts it bluntly: we are in the age of human-centred leadership. That means leaders who coach, listen, and create psychological safety outperform those who command and control.
It’s about shifting from business-centred thinking (“How do I get more out of my team?”) to human-centred thinking (“What do they need to thrive?”).
Because if your people are burnt out, anxious, or under-supported, no amount of policy or process will compensate for the human cost.
So, where does this leave SMEs?
Many small to medium businesses are still operating in survival mode — focused on keeping up with compliance, cash flow, and client demands. But here’s the thing: if your culture relies on personalities rather than systems, it’s not sustainable.
The next phase of leadership maturity for SMEs will be moving from reactive people management to intentional human systems.
That’s where engagement stops being a “nice workplace thing” and becomes a business strategy.
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