Earning the money we need to live is presumably the main reason we work at all.
But does money motivate us to continuously perform our best work?
Let’s take a peek at what science and research have to say about that:
1) Monetary incentives are great
They put us in a happy mood and give us something to feel good about.
The only problem is that feeling is fleeting.
When incentives are not related to advancement nor having an impact on the organization they are a temporary fix that dissipates as fast as the ink dries on the pay review letter.
2) Money does not create employee engagement
It gets the right people in the door, but it’s not necessarily what keeps us there.
Research interestingly shows no correlation between how much we are paid and how engaged we are: You can be engaged or disengaged wherever you are on the career ladder.
Employers can never create engagement by paying people more. However, they can destroy or disable engagement in a blink of an eye using pay.
3) Money is never enough
It may light a temporary fire, we may get a temporary boost resulting in higher sales or productivity, but the problem with relying on incentives is that it is never enough.
If money is the only employee engagement strategy we are offered, then the only way to keep the team motivated is to continue to offer us more.
The more we are given the more we will expect.
Where does it end?
Could money be just another type of addiction?
4) Yes, money is very much a factor ...
... when it doesn’t provide for basic living expenses or doesn’t reflect the contribution that we are providing to the organization.
Receiving what we feel is fair compensation frees us from worrying about survival needs AND supports our belief that we are in a mutually beneficial relationship with the organization.
But many companies use monetary compensation like a sledgehammer in the delicate china shop of human motivators. Financial incentives reduce intrinsic motivation, leading us to rely on outside rewards only to return to our old ways the moment the payments stop.
5) When the only incentive is money, the outcome will always be transactional
So if we think of a job just as a transaction, the reason why pay is NOT ranked more highly by most employees seems simple: It was important before we took the job but now that we’ve agreed to the pay, it’s more of a settled issue.
What isn’t settled are the numerous other factors at our workplace – how we get along with our colleagues, what we think of leadership, whether we feel appreciated and whether we feel we are making progress.
Seeing work purely as a transaction is not a good way to think about employees.
Seeing work as a relationship is more motivating and boosting employee engagement.
6) Pay is a hygiene factor, not a motivator
Employers need to get it right. All they can aspire to is that employees will not be mad at each other and the company because of compensation.
If handled badly or perceived as unfair, pay will act as a demotivator.
If an organization doesn’t have those hygiene factors (compensation and status) people will experience dissatisfaction with their work.
I like to express it this way: Pay is a satisfier but not a motivator.
Because the opposite of job dissatisfaction is not job satisfaction but rather an absence of job dissatisfaction.
7) Extrinsic motivators alone won’t do anything to make us love our job
They just stop us from hating it. They reduce dissatisfaction to a neutral level.
Thus over-compensating people won't make up for a poor work environment. Bosses can never pay us enough to love our jobs - sustainably.
If money were to “motivate” you to spend the majority of your time in a job you hate, so as to make enough money to spend a part of your time in a life you don’t hate, does that make any sense?
My friend David Wee summed it up best in his book "Great Advice":
Employee: “If you don’t pay me what I am worth I will leave. But I will not stay only for the money.”
8) Only intrinsic motivation lasts
Yes! It's that cocktail of extrinsic and intrinsic motivators that keeps us going.
With a dash more of those intrinsic motivators.
True, it is more difficult to foster intrinsic motivation and it requires fewer organizational resources than extrinsic rewards.
But intrinsic motivation, by its nature, comes from within, there is an unlimited supply of it.
Extrinsic motivation is dependent on constantly maintaining the valence of the reward in the eyes of the employee.
And it is worth mentioning that research has shown that intrinsic motivation and extrinsic motivation are not additive; instead, they are interactive.
That is, the addition of extrinsic motivators may either diminish or enhance intrinsic motivation.
9) Incentives are not the same as motivation
True motivation is getting us to do something because we want to do it. This type of motivation continues in good times and in bad.
Motivation Factors are challenging work, recognition, responsibility and personal growth.
Research shows that pay raises won’t turn us into a productivity machine. In fact, giving creative people bonuses demotivates us and leads to poorer performance.
Incentives only work well in industries with generally uninspiring jobs. Industries where employees aren’t proud of the products or the company and do the work simply to get a paycheck.
To boost employee engagement, leaders have to understand the individual motivations and infuse them into the job regularly. That’s real incentive.
10) Money leads to burnout
We never feel we have enough money because we get used to our circumstances very quickly and need more money to make us happy again.
That’s not you?
Think back to your last significant pay increase. When did you get the greatest satisfaction—on the day your boss told you that you were getting a raise? The day it started hitting your bank account? And how much satisfaction was it giving you six months later?
Yuval Harari may have put it best in Sapiens when he wrote: “One of history’s few iron laws is that luxuries tend to become necessities and to spawn new obligations. Once people get used to a certain luxury, they take it for granted. Then they begin to count on it. Finally, they reach a point where they can’t live without it.”
This, at its core, is the process that leads to burnout aka Hedonic Treadmill.
Have you observed that people’s expectations grow faster than their wealth? The planet is richer than it’s ever been. I don’t think it’s as happy as it’s ever been.
Permanent striving might be good for economic growth as a whole – but it’s not likely to be good for your mental health.
"We need to learn how to want what we have not to have what we want in order to get steady and stable Happiness.” - Dalai Lama
11) Meaning trumps money
Be honest, what engages you more right now? Is it your current pay or is it the meaningful activities and building meaningful relationships?
One of the biggest benefits of the modern workplace is its ability to serve as a platform and catalyst to foster human connection and a sense of belonging among employees.
How close and connected we feel with our co-workers makes such a difference. People don’t leave organizations, people leave people.
By far one of the most important roles for HR right now is to figure out innovative ways to build a sense of belonging, deepen alignment to the organization’s mission, raise engagement and information transparency in a geographically distributed work model.
When we belong, we are simply the best version of ourselves.
When we feel safe and accepted, we do our best work.
12) Pay is NOT the dominant reason why we leave organizations
Yes, salary is an important topic (especially early in our career). But what we really want in a work environment are autonomy, mastery and purpose of our work - the three elements of true intrinsic motivation.
And what we all really, really want more than anything from work is "to be missed the day we don't show up."
Who is with me on that?
Companies need to educate their managers on the reasons why average workers leave: The most common turnover causes in descending order are career development, opportunities for growth, achievement and security, the work environment, management behavior, and job characteristics. (Source: Work Institute survey).
Unfortunately, 5 of the 8 most common turnover reduction actions focus on compensation (Source: OI Global Partners survey) and missing the point.
Management behavior also matters because 30% of employees leave because of a manager’s condescending attitude and 24% leave because their manager harassed them. (Source: BambooHR)
Ask yourself how many people you know have left a job for less money?
Ask yourself whether you would still be happy with working in your very first job but earning what you earn now?
In conclusion, the amount of money you get paid for your work is a huge distraction. If you look at work as just a place to get a paycheck, you're doing a disservice to yourself. It is nearly impossible to avoid work and life merging into one, so you might as well make the most of it and align your goals to create the life experience you want.
This is your life - make the most of it.
Don't allow external incentives to detract your focus on meaningful non-monetary goals.
If you value the wrong things (“more and more money”), it doesn’t matter how hard you work or how productive you are, you’re going to end up in the wrong place.
My thesis: When money isn’t your motivator, you’ll get higher returns. You’ll get paid more - ultimately.
Focusing on the meaning and impact of your investment "work", rather than on the financial returns it will bring, might be the best way to improve not only the quality of your investment into work but also – counterintuitive though it may seem – its financial success.Yes, money is a deeply emotional subject. The way you feel about money dictates how much of it you have, your feelings about earning it, spending it, and saving it, it affects your entire economic situation:
- Look at money as a necessary evil, and you become a slave to it.
- Look at money as the fuel for the life you want to live, and money serves you.
- View money as a byproduct of providing value, and you can enjoy it.
Whatever the work is, do it well – not for the boss & not for the money - but for yourself.
While researching this piece I have read several studies. They all suggest that money (beyond meeting basic needs) is not a factor in getting to higher motivation and employee engagement levels.
Here are some very insightful pieces:
BCG Decoding Global Talent Survey of 200,000: Appreciation for work is the number-one ranked factor for happiness on the job; good relationships with colleagues and superiors are important job elements; “money isn’t everything” is typical of many workers today. Indeed, for most workers, compensation-related factors - including performance bonuses, health care insurance, paid time off and the generosity of any retirement plan - don’t even make it onto their list of top-ten factors.
The 7 Hidden Reasons Your Employees Leave You - "Many companies are still built around the idea that money drives performance. According to a study of almost 20,000 post-exit interviews, 89% of employers believe that their employees left for more compensation, but the reality is that only 12% do. The causes of human motivation are not what most leaders think they are."
And finally, here is a great global overview by the VisualCapitalist.com of which values we care about most. Financial Security is high up there. Money makes it barely into the top 50.
Let me leave you with this thought:
Why do you do what you do?
You really might want to spend some time pondering this question. Because if you don't look for meaning, you'll never find it.