If money doesn’t motivate people, what does?
Conventional wisdom is that financial rewards should be at the heart of an employee engagement strategy. Pay a bonus for a job well done, and you receive more effort and greater attention to detail. Or at least this is the theory. The truth is that people desire more from work, and many studies have shown that paying more money could have a negative effect on output and performance. Why is this, and how can organisations get the best from their people?
Money and its connection to an employee engagement strategy
The general belief is that if you reward desired behaviour you get more of that behaviour, and if you punish it you get less of that desired behaviour. In the business world, reward has been generally accepted to mean financial payment for a job well done. Therefore, the logic is that by paying bonuses based upon performance, that performance should improve. However, as an employee engagement strategy, this has been shown to be flawed. For example, a study conducted by Massachusetts Institute of Technology (MIT) found that money is a motivating factor only up to a point. They gave students a variety of tasks, and coupled these tasks with financial rewards based upon performance. This mirrored how many organisations run an employee engagement strategy based on financial rewards.
What the MIT study found was that performance incentives encouraged better performance if the task was based on mechanical skills. However, if the task related to even rudimentary cognitive skills, larger rewards led to poorer performance.
Why does reward not always work as an employee engagement strategy?
The MIT experiment was replicated in India, to see if it was the size of the reward that made the difference. In this second experiment, rewards of two weeks’ salary, one month’s salary, and two months’ salary were offered.
The outcome was counterintuitive. Higher financial rewards did not lead to better performance. Those offered the lower rewards for mechanical tasks performed better than those offered higher rewards for rudimentary tasks.
In a capitalist society, the disconnect between financial reward and a successful employee engagement strategy goes against conventional wisdom. Yet this pattern has been witnessed in study after study by economists, sociologists and psychologists.
All these studies have found that financial rewards work well to incentivise improved performance in simple tasks, but if tasks are more complicated, financial rewards don’t encourage better performance. Many such studies have found that:
- When people aren’t paid enough, they won’t be motivated
- When people are paid enough, their performance improves
- When people are being paid enough, financial incentives do not improve performance
What is the basis of a successful employee engagement strategy?
So, if money isn’t the motivator you believe it to be, what is?
Dan Pink developed the theory that once you pay people enough to take money off the table as an issue, motivation and engagement depends upon three factors to improve performance. In his book ‘Drive: the surprising truth about what motivates us’, which he based on four decades of scientific research in human motivation, Pink describes these factors as:
Autonomy – the capability to be ‘self-directed’ and choose the course of action you wish to follow – is desired by most people today. However, traditional management thinking engenders compliance and not autonomy and therefore doesn’t promote employee engagement. Of course, this autonomy must be managed.
Autonomy allows people to be creative and find their own solutions. It engenders accountability. Self-selected goals develop the desire to complete tasks for their own sake rather than financial reward, or because they must be completed. Such intrinsically motivated people are more satisfied in their work, more resilient, and perform better.
People enjoy improving themselves, at whatever they do. At weekends, people may play sports, learn musical instruments, take cookery classes, go fishing or running or cycling. Yet they don’t make money from these activities, so why do they do them? The answer is that they enjoy doing these things and each time they do them, they improve.
People care about mastering what they are doing – they care about improving, for their own self and not because they have been told they must improve. To encourage mastery, managers should consider not what their employees must do, but what they can do. Providing tasks that stretch, and providing employees support to complete these tasks, gives employees the space to grow and develop.
People have a desire to work toward something bigger and better. Those people who don’t connect their work to the overall ambition of the organisation are less likely to perform. To remain motivated, people must understand why they are doing something. They must be invested in its completion and buy into the motivations of their employer. People who believe they are contributing to a larger purpose tend to be motivated, engaged and productive.
Dan Pink believes that the connection to a cause that is larger than yourself drives the deepest motivation. This connection is the reason to get up and go to work. It’s authentic and cannot be faked.
Numerous studies like that conducted by MIT have shown that money is not the all-consuming incentive that many organisations believe it to be. If it were, people would not volunteer their services in their spare time, and do unpaid work for charitable causes. Of course, people must earn enough to satisfy their standard of living, but after this, what is most important to people is the connection they feel to their job, their tasks and their employer’s reason for being.
Once personal financial concerns are eliminated, building autonomy, mastery and purpose into people’s work is the employee engagement strategy that really pays dividends.
To understand how our Learning Map could help you improve your organisation’s effectiveness in engaging employees with its business strategy, get in touch with The Big Picture People today.
(To see how putting your people in the picture creates a shared vision and helps set a concrete destination, read this case study.)