Does Money Motivate Workers?

Larry Price
By .(JavaScript must be enabled to view this email address)
Wednesday - June 09, 2010
| Share

Compensation experts have an ongoing debate whether managers should or should not understand the motivational basis of incentive plans.

In these tough economic times, any kind of incentive pay is at best psychologically based. That means not everyone reacts to a reward in the same way and not all rewards are suited to all situations.

Go ahead, think of an incentive reward for our public school teachers to get them happy enough to make up for all the instructional days they’ve lost over the past year. If employees have high morale, the people they serve should benefit.

The man who started all this talk about money and motivation was Frederick Taylor (1856-1915). As a supervisor in a steel plant, Taylor noticed a tendency of employees to work at the slowest pace possible and to produce at the minimum acceptable level. His contribution was that he saw a need for formulating what he called a “fair day’s work,” so he set standards of output for each job based on scientific analysis. It was the beginning of the Scientific Management Movement, an approach emphasizing work methods and job analysis.

And he didn’t stop there. He was the first one to popularize the use of incentive pay as a way to reward employees who produced over standard. So incentive pay was born and became widely popular.

But the problem is most employees don’t see a link between pay and performance. The Rand Corporation did extensive research on the correlation between teachers’ pay and student achievement, and found that while pay was appreciated by teachers, it did not improve the quality of their work. All it did was increase their morale, which makes them happier on the job, not better teachers.

As the economy recovers, it would be a good idea for leaders to brush up on some of the more popular motivational theories with particular relevance to designing incentive compensation plans.

Most of them are well-known but forgotten in today’s computerized cybernation, but many of the relevant theories are associated with psychologists such as Maslow, Herzberg, Vroom and Skinner.

There are several key features to a successful incentive pay. One way is for managers to make jobs more challenging, so the job they ask you to do is intrinsically motivating. Another thing to consider is that employees won’t pursue what they find unattractive or where the odds of success are very low. This is especially true when managers place unrealistic quotas on employees. This is the idea of expectancy at work. Just how probable is it that his or her efforts will lead to higher performance?

There is one thing managers can do: Make sure their employees have the skills to do the job and believe they can do the job. But beware: There may be a legal component to incentive pay that must be investigated. It all comes under the Fair Labor Standards Act. As we recover from our painful encounter with a severe economic downturn, many managers are going to be looking seriously at some kind of incentive pay system to increase the productivity of their work force.

Most managers want a fair day’s work and a worthwhile profit on their investment.

E-mail this story | Print this page | Comments (0) | Archive | RSS Comments (0) |

Most Recent Comment(s):

Posting a comment on requires a free registration.



Auto Login

Forgot Password

Sign Up for MidWeek newsletter Times Supermarket



Hawaii Luxury

Tiare Asia and Alex Bing
were spotted at the Sugar Ray's Bar Lounge