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Money – a motivator back in vogue?

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This article was written by Karen Drury, consultant with Maven International (UK) Ltd.

In the bad old days, the accepted wisdom was that money acted as the prime mover for effort – the more you paid, the more effort you got.

Over the last 40 years, the importance of pay as a motivator has been hotly debated. Those with a strictly rational perspective believed that work effort could be dictated by pay; those with a more humanistic outlook on the human condition required other “payoffs”, such as meaning and control.

Enter Herzberg in 1959 with his motivation and hygiene factors within one of the most replicated research studies in the history of organisational psychology, and you had a business stage set for a steady decline in the importance of pay as a motivator. This view has continued in popular business literature for some considerable time and until recently, showed no sign of abating.

Daniel Pink’s 2009 book Drive looked again at intrinsic and extrinsic motivation and concluded that financial incentives were no longer enough to give a business the edge. What’s needed in an economy driven by service and ideas are autonomy, mastery, and purpose.

A whole raft of management and leadership ideas have supported this – the psychological contract, dispersed leadership, empowerment, engagement. These all assumed that of the tools you could use to encourage staff to perform more effectively, and with greater satisfaction, pay was way down the list.

However, context is important.

I remember a trip to India to talk to call centre companies about recruitment and retention. These businesses had included many benefits in their packages for employees, but attrition was only down to one factor, they believed – base salary.

Even Pink’s book agrees that for some types of work, pay is a motivator; for low skill and repetitive jobs where meaning in the job is scarce, the offer of more money produces the best results.

Three things make me wonder if we have misread the motivational landscape.

First of all, the number of low-skilled jobs in the UK – those Pink describes as being motivated by money – is rising. Employment is becoming increasingly polarised into “top dog” jobs at one end of the spectrum and “underdog” jobs at the other. One view is that technology has replaced many mid and semi-skilled jobs, creating an hour-glass labour market; technology cannot yet replace the MD, but neither can it stack shelves.

Second, historically, the prevailing wisdom was that whatever else was cut – hours, benefits, jobs – the salary stayed the same. The reasons here were sensible – lowering wages increases shirking, results in lower levels of morale and increased monitoring costs. Not to mention the perceptions of fairness.

However, as public sector workers in Ireland, Greece and Italy have discovered, policy makers are challenging this theory, albeit unsuccessful to date. However, earlier this year Swedish unions reluctantly agreed to wage reductions, demonstrating that at least some of the old rules are no longer valid.

And the third is that if you’ve been lucky enough to get a salary increase at all, it’s probably dragged alarmingly behind the Retail Price Index. Are these events enough to change an employee’s primary motivation?

This certainly seems to be the case when looking at the Towers Watson Global Workforce Study 2012, which when ranking what’s most important in attracting and retaining employees, puts base salary at the top of both lists.

I’m not generally a conspiracy theorist, but there does seem to be a vested interest for companies conveniently forgetting the idea of paying people a fair wage to motivate them. After all, saying “thank you” and giving praise is a lot cheaper than giving everyone a decent pay rise, but it doesn’t pay the bills back home.

McKinsey notes that there is a tendency in HR magazine coverage for pay to be undervalued as a motivator. In addition, the current engagement debate often doesn’t measure money as a motivator. So as part of the popularity of the engagement concept, it’s possible that money as part of the motivation mix has been completely forgotten.

I believe it’s time to resurrect it – entirely as part of Herzberg’s theory, of course, which indicates that money is a hygiene factor, but without it you have little to build on.

But let’s put things into context, UK employees are not exactly living in a land of milk and honey. For people on very low wages, it’s very possible that the reason they’re working is because of the money. There’s been a huge rise in part time working and people who are in these jobs are nearly twice as likely as those in full time work to be paid less than the minimum wage, according to the Office of National Statistics. UK employees have the least protection in terms of employment law, and British males work the longest hours of any employee in Europe.

So perhaps paying people fairly is the least we can do if we’d really like them to care about their jobs.

References

http://www.resolutionfoundation.org/media/media/downloads/No_snakes_but_no_ladders_-_Young_people_employment_and_the_low_skills_trap.pdf

http://towerswatson.com/assets/pdf/2012-Towers-Watson-Global-Workforce-Study.pdf

6 Responses

  1. value delivered by what employees value

    Hi

    Apologies for the delay in responding, I’ve been away.  I agree wholeheartedly that employees should be asked what they most value and offered it for good performance.  Although I can imagine how much of a nightmare that would be for a large company to administer. 

    I think that the point I’m trying to make is that employee needs and wants are liable to change depending on personal circumstances, although I think like you, this is rarely acknowledged.  I never yet met a waiter or waitress who would prefer a simple "thank you" over a healthy tip.

    We’re in trying times – George Osborne needing to find yet another £9bn in spending cuts – and at times like this, I think monetary reward starts to head up the charts. 

     

    — Karen Drury

  2. Money, Money Money is what everybody else picks as main reward!

    There is an endless debate regarding money as a motivator with some academics going as far to say it can demotivate. Possibly spurred by many people selecting other reasons than money as the reason they come to work, although most people asked assume money is the biggest motivator for others! Money per se, is just a commodity but it is what it can buy and say about us that is its key attraction (and the ability to use it to pay a mortgage).

    I do not think all the money in the world could keep in a job I loathe but having a decent standard of living is a pre requisite for me in any role I undertake (guess that is why it is called compensation).

    Fredrick Taylor still gets a bad press over 100 years after writing that employees should be paid well for good performance (an argument picked up by Locke and Latham in their Goal theory). Yet although I have found no other way other than at least market sensible pay to recruit good quality staff, having a intrinsic motivational tool-kit is still vital, good development environment and career opportunities, good leadership, flexible working conditions and work/life balance and a "living and learning" culture are still the only guaranteed ways to hang onto good people.

    I am yet to find anybody "motivated" to a higher performance by being offered lifer cover or a pension, yet these items have a real money cost to an employer so my suggestion is to get the maximum "bang for your ‘money’ buck" by asking employees howe they want their money remuneration to be paid (whilst still meeting legal obligations) but ensure you stress and communicate your intinsic rewards though.

     

    — Senior Employee Benefit and Reward Consultant

  3. conspiracists unite!

    Hi Tania

    We-e-e-ll…… Maybe.  Perhaps it’s more to do with everyone getting terribly excited about intrinsic motivation against extrinsic than organisations just being mean.  And it IS a slightly sexier solution than just giving everyone a pay rise.  And again, as you hint, there may well be companies who prefer to spend money on engagement programmes than looking at the basics of take home pay.

    Thanks for the comment – much appreciated!

     

    — Karen Drury

  4. are we agreeing?

    Hi Adrian

    Thanks so much for your comment on the article, I’m glad you like it.  While I agree with you that other elements of motivation are important, my view is you have to deliver the baseline first – which means a living wage. Prices, according to recent figures from the ONS, have risen four times faster than wages – so this is a considerable undertaking.

    My view is that possibly as a result of the increasing gap, the question of wages has been displaced by other elements of motivation, important in themselves, perhaps, but not where you start.  If you can’t support yourself or your family, I believe that this causes anxiety, which will hardly contribute to work performance – except to keep performance high enough to keep you in a job.  Pre-engagement era, this was called coercive commitment – where you stayed because you had few other options.  This "just enough" effort is hardly the stuff on which empires were built.

    And as for your three pillars – yes, who WOULDN’T want to work in such a place?  I’d be interested to know any examples could you point to?
     

    — Karen Drury

  5. Pay as a Motivator

    Companies that push pay down the motivation scale are perhaps those who are looking for reasons not to pay their staff more?

  6. Changing the motivation Conversation

    This is a great article and it demonstrates the reluctance of the vast majority of the stakeholders in the field of employee motivation to accept that there is not one "right" argument.  In Dan Pinks work he clearly states that "once the question of money if off the table" then the factors of Autonomy, Mastery and Purpose become the key drivers.

     

    I see the business model changing, from one still dominated by the paradigm of Financial Capital to one where Environmental Capital, and Community Capital play equally important roles.  A paradigm that is built on these three assets of the business will have much greater potency in generating long lasting motivation.

     

    Environmental capital is the "smell" "feel" "touch" of the organisation.

    Community Capital is the, camaraderie, collaboration, the abundance of effective relationships in an organisation.

     

    From interviews, and from analysing the articles I have read I believe we should now celebrate  that we can include all three dimensions of motivation in generating motivation and inspiration in the workforce.  My framework for a motivated and inspired workforce has three simple pillars

     

    1. Pay employees fairly for a good days work

    2. Create the opportunity for them to make a contribution that matters to them & the business

    3. Create a work environment that they can respect and be proud to be part of

     

    Doesn’t that sound like a place you would love to go to work at? Whether an MD or a shelf stacker!

     

    Adrian Brown Founder of The One Discipline and Community Capital in Business

    @the1discipline @CCinB

    — Adrian Brown Strategy Execution Specialist http://www.theonediscipline.com

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Thank you.