For many years, companies have used money incentives as the main motivator for their employees to be more efficient and stay with the company longer. It seems like a no-brainer: You expect people to work harder if they earn more money. In addition, people are expected to stay with their company if they are paid well and rewarded with bonuses, but studies now show that the relationship among compensation, motivation and performance is much more complex than we think.
While monetary incentives can motivate employees, they aren’t as powerful as most people believe them to be. In fact, studies show that only the expectation of earning money in the near future is a strong enough motivator to change behavior. But after an employee receives their money, the power to motivate that came with the anticipation of being paid becomes short-lived.
Moreover, the monetary incentive must be at least 10% of base compensation for the period to impact change in behavior. This raises two important questions that need to be addressed. First, how effective is a monetary incentive when trying to motivate employees? And second, what are other things that motivate people at work?
How effective are monetary incentives when trying to motivate employees?
The impact of monetary incentives should not be dismissed, but we should note that money is not always the best motivator for most employees. This is supported with data from a meta-analysis conducted by Timothy Judge and colleagues where they reviewed 120 years of research to combine findings from 92 studies. According to the results of their meta-analysis, the correlation between salary and job satisfaction is weak.
In addition, Gallup — an American analytics and advisory company — compiled a study based on exit interviews, employee surveys and analyses of companies. Money was ranked fourth on the top 5 list of reasons employees quit their jobs. Money was a bigger concern for disengaged and actively disengaged employees. It was also more of a concern for employees who felt undervalued and that their colleagues were not taking on an even workload.
Attractive fixed salary only ranked 8th in the list of top 10 factors for on-the-job happiness in a survey conducted by Boston Consulting Group (BCG). BCG polled more than 200,000 workers around the world, and results show that being appreciated at work is the top factor of on-the-job happiness for employees.
Money is necessary to meet the most basic needs of employees, but it is not their primary motivator. Monetary incentives cannot compensate for all aspects of how much an individual enjoys their job either.
What works to motivate employees other than money incentives?
Here are other things that motivate people in the workplace:
Being Appreciated and Recognized
A simple thank you when someone does a job well can be impactful. Make it a habit to praise employees when they do something great or just as an every day reminder that you’re happy they’re on your team. Try and be specific to each person, not just using a blanket statement like “good work.” A recognition at a meeting, a well-timed gift certificate or a sincere compliment will go a long way.
Being Part of a Winning Team
People want to see that their efforts are contributing to the success of your company. This also means that they want to know if the company is succeeding, which is why it’s important to celebrate all wins, even the small ones. Grab every opportunity to celebrate success with your team, and remind them that their work matters!
Management should acknowledge and be transparent about if a company is not meeting its goals, but even if your business is struggling, if it starts to move in a positive direction that progress should be recognized. Celebrations send a message to your workers that they’re part of a winning team, and that is one of the things that can motivate people to work harder and stay with their company.
Feeling a Sense of Belonging
Relationships in the workplace can also affect performance. Whether people are motivated to do better at their own jobs, not let others down or contribute for the greater good of their company, a sense of belonging makes employees happier and more inspired.
Taking On More Responsibility
People want to be challenged. The harder the task is, the more pride people feel when they complete that task. If you give your employees more challenging tasks or more responsibility the longer they’ve been at the company, they will feel like their work is increasingly valuable to the company. When you limit your employees to simple (if not monotonous) tasks, you can make them feel underappreciated and less motivated to take initiative and contribute more to the company’s future.
Is money the bottom line?
There are other ways to motivate your employees other than money. People’s motivations vary, but finding meaning in your work is as important, if not more so, than compensation.
This is where human leadership comes in . Leaders who possess empathy, compassion and understanding can do better in making and keeping their employees motivated. Employees will care more about the company when they know you care about them.
Here is your answer: yes, money matters, but no, it’s not everything. People are motivated to do hard work and stay with a company based on more than just their salary. Benefits like enjoying their work environment, bonding with their team members and feeling appreciated at work should be taken into account by management and employees alike.
In love and respect,
Originally published at https://hilarycorna.com on April 13, 2021.