Are managers motivated mainly by money? Think again

“Companies around the world are cutting back their financial-incentive programs, but few have used other ways of inspiring talent. We think they should. Numerous studies have concluded that for people with satisfactory salaries, some nonfinancial motivators are more effective than extra cash in building long-term employee engagement in most sectors, job functions, and business contexts. Many financial rewards mainly generate short-term boosts of energy, which can have damaging unintended consequences. Indeed, the economic crisis, with its imperative to reduce costs and to balance short- and long- term performance effectively, gives business leaders a great opportunity to reassess the combination of financial and nonfinancial incentives that will serve their companies best through and beyond the downturn.”

Martin Dewhurst, Matthew Guthridge, and Elizabeth Mohr, MCKINSEY QUARTERLY (November 2009)

The best way to get your employees performing better is to offer them more money if they do it, correct? Performance-based pay has been such a stalwart of organisational practice that we forget to ask whether it is based on sound thinking. People are beginning to ask questions about this ubiquitous policy, and so they should.

Money can indeed be a great motivator – but only in certain circumstances. At low levels of income, where people hover on the edge of desperation, more money is indeed a primary motivator. But that is not the level at which most companies try to motivate their staff with money. That practice is reserved for the middle and upper echelons of most organisations. And that is precisely where the idea is least effective.

In the global McKinsey survey referred to, respondents viewed three non-cash motivators – praise from immediate managers, leadership attention (for example, one-on-one conversations), and a chance to lead projects or task forces – as no less or even more effective motivators than the three highest-rated financial incentives.

And that is the heart of the matter: above a certain level of income where basic comforts are assured, the human animal desires a sense of belonging, a sense of purpose and a sense of appreciation. Let me be blunt: it is the sheer laziness of bosses and HR professionals that prevents those things from being provided. It is far easier just to dangle some money and hope for the best.

In this country we have taken that laziness to new levels. We have created a corporate culture where only material reward is deemed to matter. People go to the organisation which offers the highest pay, and they leave that organisation the minute it stops offering the highest pay. There is no deeper connection at work. That is why we have created a generation of grasshoppers who spring away at the first sight of greener pastures.

How many of you can claim that you have a ‘sticky’ organisation where people feel a sense of bonding and growth that they don’t get anywhere else? Where people stay even though monetary rewards are greater elsewhere, and aspire to spend most of their careers? And where, when people are forced to move, they agonize over the decision? Don’t all rush to answer…

Another problem area is when creative ideas and solutions are needed. Some studies show that where you are asking employees to innovate and break new ground, the lure of financial reward can often be a disincentive, limiting the breadth of thought. Creativity flourishes where people have a shared sense of higher purpose and common understanding – not where they are trying to outdo each other.

Don’t get me wrong: financial incentives can be effective. But they are only a small part of the motivation equation. There is no way around it: if you want highly motivated employees, you have to spend time with them, appreciate and recognise them, and offer them personal growth. Those things, more than the remuneration budget, are the hallmarks of great people organisations.

Like it? Hate it? Engage here