By Jim Clemmer
"Managers tend to use compensation as a crutch. After all, it is far easier to design an incentive system that will do management's work than it is to articulate a direction persuasively, develop agreement about goals and problems, and confront difficulties when they arise." — Michael Beer, Harvard professor of business administration, researcher, and author of papers and books on organization change
Decades of research and dozens of studies show again and again that while money can be a de-motivator, it is rarely a good motivator. Money always shows up as fourth or fifth on any list of motivational factors. Pay gets people to show up for work. But pay doesn't get many to excel. More important is interesting, challenging, or meaningful work, recognition and appreciation, a sense of accomplishment, growth opportunities, and the like.
But the big problem is that managers have consistently listed money as the number one factor that they think motivates people. So they keep fiddling with pay, bonuses, and financial incentives in a futile attempt to find the elusive combination that will motivate people to higher performance.
Bribing people to perform turns them into mercenaries. It debases, degrades, and demeans work. It sets a vicious, self-perpetuating cycle into motion — incentives, inducements, rewards, and the like leave people feeling manipulated and overly focused on what they get for complying with management's goals and direction (tuned only to WIFM — "what's in it for me"). The emptier work is, the more people look elsewhere for fulfillment; so we demand more money and incentives to continue working in such a meaningless, unfulfilling job (which then "proves" to managers that people won't improve their performance unless they're bribed to do so). Money is rarely an effective rallying point for high performance. That’s because money doesn't provide deeper meaning and inspiration for a bigger cause and purpose.
We’re big believers in paying people very well. We agree with the wag that said, "If you pay peanuts, you get monkeys." We have long believed in, and practiced, profit sharing and organization or team performance bonuses. The people who helped create the profits should share in the rewards in proportion to their contribution (which can be very tough to establish).
But more important than the money are the messages profit and performance bonuses can send. They should make people feel like partners, not puppets on a string. That means rewards should follow, not lead high performance. It also means that education and communications, measurement and feedback, skill development, and the like must be tightly melded to any reward and recognition programs.
A high performing organization is filled with higher performers who are well paid. We should pay people well. But once we're sure they feel their compensation is fair and equitable, don't even mention money again until next year. Fix everyone's attention on the bigger and more meaningful issues of Context and Focus (vision, values, and purpose), customers and partners, innovation, goals and priorities, and growth and improvement. Concentrate on building a culture of success and forward momentum with lots of recognition and appreciation for everyone's contributions.