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Fallacy #2: Money Motivates

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The idea that money is an effective motivator is perhaps the most common motivational myth. As Herzberg pointed out many years ago, money is a maintainer — not a motivator. Certainly pay is important and you need to ensure that employees are fairly paid in the context of both their coworkers and of the market in which you operate. But given a fair rate of pay, more money will not provide more motivation.

Good managers intuitively know that different things motivate different employees, says a Purdue University human resource expert, but putting a tailored plan into action is not as easy as it sounds. David Schoorman, who teaches human resource management at Purdue’s Krannert School of Management, also consults extensively with industry. Schoorman says the structured “one-size-fits-all” corporate compensation plan can trip up even the most responsive, creative manager.

“A real challenge for supervisors and managers today is to figure out how to be that bridge between the standard benefit list of ‘what you get’ and what really motivates you as an employee,” Schoorman says. “People putting together compensation and benefit plans often underestimate the value of growth opportunities, both professional and personal, as motivational tools.”

Here’s a very common example. An employee who has been doing an exceptional job, is paid well, and has been with your company for a number of years applies for a promotion to an open position. The position has also been advertised outside the company; in fact, a national search is under way to find the best applicant for the job. The internal applicant believes that he or she is that best applicant. Yet you find that external applicants offer broader experience, more varied backgrounds, and the fresh approaches you’re hoping to inject into your company. You regretfully decide not to interview the internal applicant.

Over the next few months, this formerly motivated, highly energetic, and satisfied employee begins to exhibit signs of unrest. The employee is becoming withdrawn and uninvolved. The manager reports that the employee is taking more time off, refraining from putting in any extra effort, and is openly looking for work elsewhere.

Is it the employee’s rate of pay that is causing the problem? No.

After considering the above example, you’ll probably concede that, at best, money is a good sweetener. While it’s a necessary aspect of any job, it’s not enough to keep performance at a high level in the absence of other things — things like opportunities for advancement, recognition, involvement, and good communication. While a cake has to have sugar to make it taste good, it won’t be a cake unless all the other ingredients are there. In the same way, in any job, money may make a position seem very attractive, but in the absence of other non-monetary aspects of a job, it won’t be enough to keep an employee happy.

“In today’s tight labor market, competitive pay is the price of admission for employers — it is not a key differentiator,” says Rick Beal, a senior compensation consultant at Watson Wyatt and co-author of the firm’s study Strategic Rewards®: The New Employment Deals. The study involved a survey of 551 large employers and over 500 employees. Only 15 percent of those surveyed said that expectation of financial reward had a very significant influence on performance. “Our research consistently shows that intangible factors such as personal satisfaction and recognition of contributions are more effective in driving high performance,” says Beal.

Yes, you need to pay your employees, and pay them fairly, if you want a good job done. After a certain point, though — and this point will vary with each employee — money will no longer serve as an effective motivator. It is at this point that you’ll need to turn to non-monetary incentives.

Motivating Today's Employees

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