Cash disincentive

Money doesn't always motivate us to work harder.

Oh, that suave Don Draper. He's snatched Peggy's idea for a floor cleaner commercial and won an award for it. "It's your job! I give you money. You give me ideas," he explains. Says Peggy: "And you never say thank you." "That's what the money is for!" he shouts.

This may be fiction via TV's Mad Men, but it's got more than a glimmer of truth in it. Money is the reason we work, but precisely how it motivates us and makes us happy in our jobs is a difficult-to-decipher business. "Money is subtle, it's complex. We'd like it to be easy and obvious," says Piers Steel, a professor at the University of Calgary's Haskayne School of Business.

Here's a look at what we do understand about how pay and financial rewards impact work and how you can use dollars and cents to better lead your team.


What's my motivation?

Money does not motivate in the workplace — at least not in a logical manner. When people perceive that they are being paid fairly, they soon forget about the paycheque and focus on more immediate concerns: their coworkers, what's interesting in their work, how they are treated by management and what's fresh in the cafeteria.

The same is not always true for stockbrokers, real estate agents and some entrepreneurs. "In some professions, people do look at the numbers and it's like a scorecard of how you're doing," says Jim Clemmer, president of The Clemmer Group, a training and consulting company based in Kitchener, Ont. But in the majority of jobs, money does not make people tick.

How to cash in: Instead of stewing over numbers, put your energy into great management practices to make sure the nonmonetary aspects of the workplace are as motivating as possible. Share how the company is doing and let your team know how its hard work is helping move things ahead. Be generous with praise, responsibility and options for growth and professional development.


The sweet spot

Money — both too much and too little — can do nasty things to employee morale. When you're underpaying a staffer, you get a stressed-out worker who's worried about paying the bills and if others are getting more, the resentment will inevitably build. That person is likely to be cruising job listings online during work hours just months after signing on.

Meanwhile, paying someone extremely well — a.k.a. danger pay — can turn what could be a desirable job into a chore. Steel compares it to paying someone $1,000 to go on a blind date. You're going to assume this is one unappealing dinner companion, and you'll never look across the table with anything but apprehension. When you treat a job like it's a mercenary position, your staff member will too.

How to cash in: Pay at industry standard and avoid boosting a salary to try to trigger productivity — you won't get it. Keep in mind the 2010 study from Princeton University that found $75,000 a year is the financial sweet spot: when people make more than that, they are no happier.


I'll take that job

Money doesn't always talk in the workplace, but it sure does at hiring time. "Pay is a huge determinant for when people take a job," says Steel. Sometimes to a fault. He says research shows people will claim that work-life balance, happiness and job satisfaction matter to them more than money. Yet those same people, in reality, will take a position that pays extremely well even if it's a long commute, a poor fit or less rewarding than their current job. And once such a person is in a job, and he or she is not actually happy, the money's appeal quickly wears off and motivation and job satisfaction drop off. This makes recruitment a considerable challenge, particularly if you are hiring for a well-paid senior position.

How to cash in: Carefully screen during recruitment to make sure a new hire is truly the right fit for your workplace culture and that his or her skill set is what the job requires. Even if a senior person is clamouring for the job, don't get star-struck: be sure the connection to the work will still be strong when the allure of the money wears off.


Rewarding the wrong stuff

When you reward certain achievements with bonuses, beware. "You can create a whole bunch of weird and even undesirable behaviours," says Steel. People will keep doing what got rewarded and compensate by doing less of unnoticed behaviours. If you offer a bonus for a report done on time, you may get rapid work, but you run the risk of seeing the quality decline.

Also, people can often see through Pavlovian reward systems. "When money is being used as a manipulative tool, people feel it. It's how you treat your family dog: do this and you'll get a pat on the head and a treat. It's highly paternalistic and manipulative," says Clemmer. Instead of motivating employees to please you to get their reward, you may find staffers revolting against your system.

And when employees know a reward is coming for their work, it changes how they perceive that work. One study showed that when staffers know they will get a reward, it reduces their motivation for the task by 36%.

How to cash in: Instead of attaching bonuses to results, simply appreciate your staff members for a wide variety of their actions, contributions and accomplishments on a regular basis. Everyone likes to be appreciated and you're not going to encourage laziness with thank-yous, shout-outs in meetings and friendly emails. If you want to offer extra money, frame it as profit-sharing and explain what actions led to the team's success: hard work, diligence and passion.


The giving factor

When researchers asked a bank to give employees $25 or $50 to donate to a charity of their choice, they discovered that those who gave $50 were happier and more satisfied at work than those who donated $25 or those in a control group who got nothing to donate. In two similar experiments, the researchers found people playing on recreational dodgeball teams who spent $20 on a teammate started winning more games, and pharmaceutical reps who gave a similar amount to a coworker had higher sales. "Not only do people like to give and that makes them happy, but in the workplace where people are used to earning money, they're actually motivated by giving money," says head researcher Lalin Anik, a post-doctoral fellow at Duke University.

But there's a catch: Previous research by Anik suggests that if people suspect a philanthropic program is being staged to trigger workplace productivity, the opposite effect may kick in.

How to cash in: Build giving back and volunteering into your workplace culture. Everyone benefits: the giver, the receiver and the company. But keep your team involved in the decision-making where charity is concerned and don't just do it to make your team and the public love you.

While money is a complex motivator in the workplace, you can look at it in a simpler way, says Clemmer. "Money is often a symbol. It symbolizes how appreciated I am. So if I'm really valued, then money fades into the background." In other words, money is a poor substitute for great leadership. If you run your team using the best practices of business management, money can be transformed from a perplexing problem into a tool used sparingly.