Does Money Hurt Workplace Motivation?

December 17, 2018

Conventional wisdom says that paying people more increases motivation. Research shows otherwise.

“Show me the money!” The line made famous by Cuba Gooding Jr. and Tom Cruise in the hit movie Jerry McGuire speaks to the obsession with money in pop culture, our daily lives and even in our workplaces. But does the obsession come with a price, and are there any consequences to this obsession in the world of work?

Money and empirical thoughts

Edward Deci, professor of psychology and social sciences at the University of Rochester and director of its human motivation program, was one of the first researchers to shed light on the damaging impacts of financial incentives on motivation. In one of his many experiments examining the subject, Deci asked a group of students to solve a series of puzzles. For one group, he offered cash rewards that were linked to their performance, while in another he did not. Deci found that members of the incentivized group did just enough to receive the reward, while the other groups continued to work on the task even after the desired level of performance was attained. He concluded that this is a striking example of how an extrinsic reward can systematically undermine our desire to perform for performance sake (e.g., intrinsic reward).

Another revealing piece of research was spearheaded by a group of scholars from the London School of Economics, who looked at 51 studies of corporate pay-for-performance programs. Their overall conclusion, after carefully analyzing these findings, was as follows:

“We find that financial incentives may indeed reduce intrinsic motivation and diminish ethical or other reasons for complying with workplace social norms such as fairness. As a consequence, the provision of incentives can result in a negative impact on overall performance,” noted Dr. Bernd Irlenbusch, from the LSE’s Department of Management.

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Performance aside, even thinking about money can have profoundly negative effects on our thoughts, feelings and actions. In one experiment conducted by Kathleen Vohs, a McKnight University professor and Land O’Lakes Chair in Marketing, participants were asked to solve a series of word scrambles that constituted two different sets of words. All of the word scrambles for one group were related to income and wealth-related themes. In the other group, participants solved “neutral” word scrambles. Vohs and her colleagues wanted to see how being primed to think about money affected the helping behaviours of participants.

After participants finished these tasks, the experimenter explained that she was an undergraduate who needed help coding her data sheets and asked whether the participant would be able to assist her (each sheet took five minutes). Interestingly, participants who solved neutral word scrambles agreed to volunteer almost twice as much time to support the experimenter than those primed with money.

What about in your workplace?

Controlled environments and experiments are one thing but there are also compelling applications to the world of work and how you manage your HR duties as they relate to compensation and motivation.

In his bestselling book Drive, Daniel Pink writes that research suggests as long as employees feel they are fairly compensated, other rewards are far more powerful in terms of maximizing engagement. He presents a compelling business case as to why mastery, autonomy and purpose (MAP) are core motivators for individual employees. Here are some key ways that HR leaders and senior executives can leverage these insights:

Mastery: Research shows that we feel highly motivated when we have an opportunity to learn new skills and increase our competence. Making sure your employees have an opportunity to grow professionally and personally by providing training and stretch assignments can go a long way in this regard. You can also look at how you can move employees around your organization by using secondments or assignments outside of their original area. This can facilitate new skill and knowledge acquisition.

Autonomy: Do your employees feel they have a sense of control over their assignments at work? Pink suggests organizations can conduct an autonomy audit where employees rate how much autonomy they have over their Time, Tasks, and Team members. Regardless of the scores, look for ways to see how you may be able to increase them. Another idea would be to borrow the idea of “20% time” from Google. Employees were able to dedicate 20% of their time to work on whatever projects they wanted.

Purpose: Simon Sinek famously argued the most successful organizations and executives “Start with Why.” This big idea relates to connecting with our true meaning and purpose. There are several ways organizations can tap into the power of “why.” Once again, Daniel Pink suggests teams can play “Whose Purpose Is It Anyway?” This entails individual team members writing out the purpose of their team. If there is a major disconnect or people are unclear, this provides a wonderful opportunity to maximize alignment and foster engagement. Another approach could be to conduct a “Meaning Audit” where employees go through their calendars to see how much time is spent engaged in meaningful activities. Executives could explore with their team members to see how more time could be focused on these highly motivating tasks.

While employees and employers often mistakenly believe “cash is king,” research strongly questions this assumption. In fact, the available evidence provides a compelling road MAP that shines the light on true employee engagement and fulfillment.

Craig Dowden
An engaging and inspiring coach, Craig partners with leaders and executives to work on their most important challenges. He integrates the latest findings in the science of leadership, team, and organizational excellence into his coaching and consulting work. Craig Dowden Ph.D. focuses on bridging the gap between what science knows and what business does. His firm specializes in the custom design and delivery of evidence-based leadership development programs and services.

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