1. Money as a motivator
In the twentieth century Taylor’s instrumentality theory (1911) argued that money is the only reason people go to work, he later endorsed economic man theory (1947), which stated that money is a major motivating factor.
2. Hard rewards alone do not work
Modern approaches to motivation argue that money is not the only factor and that intrinsic rewards play a key part in motivating staff assuming that a certain level of money has been attained. Pfeffer (1998) said, “people do work for money – but they work even more for meaning in their lives”. Other studies have shown rewards only secure temporary compliance (Kohn 1993).
Ariely et al. 2009 found that rewards and incentives increase motivation and productivity for mechanical tasks, but for jobs requiring cognitive skills rewarding a task actually decreases performance. However some might argue that these staged tasks do not reflect the real-life workplace.
3. Motivating across ages
Reynolds (2005) cites studies that find compensation and benefits don’t make it into the top ten employee motivators. She discusses that different age groups require different motivators and rewards.
| Generation |
Most-valued rewards |
| Veterans |
Respect for experience, flexibility: part-time hours, temporary employment |
| Boomers |
Retirement planning assistance and flexible retirement options, training, politically acceptable time off, including sabbaticals |
| Generation X |
Skill development and real-time performance feed-back, immediate, tangible recognition rewards, flexible work arrangements and positive work environments |
| Generation Y |
Learning and development opportunities, credible and positive role models, work/life balance |
4. A new model of employee motivation
Nohria, Groysberg, and Lee (2008) discuss a model of motivation based on new cross-disciplinary research in brain science. They found four drives that underline motivation that are hardwired into our brain:
| The drive to… |
Explanation |
Fulfilled by |
| Acquire |
Acquire scarce goods that bolster our sense of well-being. |
Reward system |
| Bond |
Friendship, collaboration, teamwork, belonging to the organisation |
Culture |
| Comprehend |
Challenge, growth and learning, contribution, to make sense of the world |
Job design |
| Defend |
Justice, security, expression of ideas and opinions |
Performance-management and resource-allocation |
While all four of these drives need to be met the optimum mix of these depend on the individual organisation, industry and geography.
5. Cost-effective approaches
A recent McKinsey Quarterly survey[1] found that non-cash motivators; praise from immediate managers, leadership attention (e.g. one-on-one conversations), and a chance to lead projects are more effective than the top three cash motivators[2]. With the economic crisis putting pressure on salaries these non-cash motivators can play a cost-effective role in talent management.
6. Conclusion
If motivation is a solely monetary endeavour then HRM has to be the main factor of motivation. But I have cited numerous studies that concluded that for people with satisfactory salaries, some nonfinancial motivators are more effective than extra cash in building long-term employee engagement.
Money is an important factor; if you don’t pay people enough they will become demotivated, but beyond a point, money does not enhance performance in cognitive jobs. However finding the hygiene level of salary is not easy; a very public example of this was when Google[3] recently increased staff salary by 10% to mitigate the risk of staff moving to competitors.
Line managers have a large role to play in motivation many of the intrinsic rewards (such as teamwork, recognition, coaching) are most effective at a business unit level. These no-financial ways to motivate require a lot of time and effort from managers and this may be one reason that few companies are embracing intrinsic rewards[4].
7. Recommendations
Based on my analysis HRM should be devolved to line managers with support from a functional HRM.
Functional HRM cannot fulfil the intrinsic rewards of bonding, comprehending and defending this is the realm of line managers. However a lot of line managers do not have the time or training to deal with employees by themselves. Therefore functional HRM needs to act like a project management office[5]; taking a big picture view, spreading best practice, providing training and taking ownership for HRM processes. It also should take ownership for the acquire driver in the organisation with input from the line managers.
The analysis points to paying people what they think they are worth so money is not an issue. Use external markets and perform regular salary reviews to find the correct level of pay. Talent management and retention then needs to be concentrated on intrinsic rewards.
While it would be too time-consuming to perform for all employees; identify high potential and key employees, discover their values and motives and design personalised rewards package. Paul Peterson[6] explains that money always factors it’s often more about flexibility, control and autonomy.
[1] McKinsey Quarterly conducted the survey in June 2009 and received responses from 1,047 executives, managers, and employees around the world. More than a quarter of the respondents were corporate directors or CEOs or other C-level executives. The sample represents all regions and most sectors.
[2] Cash bonuses, increased base pay, and stock or stock options
[3] http://www.businessinsider.com/google-bonus-and-raise-2010-11
[4] Economic Conditions Snapshot, June 2009: McKinsey Global Survey Results,” mckinseyquarterly.com, June 2009.
[5] Project Management Office (PMO) is the department or group that defines and maintains the standards of process, generally related to project management, within the organization. The PMO strives to standardize, spread best practice and introduce economies of repetition in the execution of projects.
[6] Paul Peterson – National Talent Resource Manager at Grant Thornton LLP
Sometimes companies can create totally new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the existing industry boundaries. The classic example is Cirque du soleil who broke away from the highly competitive circus industry and created a new market that blurred the lines between circus and theatre.
Another way to create a new value curve is to ask yourself the four questions in the graphic on the right.
