Monday Mornings with Madison

Money and Motivation

Every business owner grapples with the question of how best to motivate employees.  And for good reason.  Motivated employees are more productive.  Motivated employees also have a better attitude about their work and a better attitude toward others.  And motivated employees are more reliable, punctual, and loyal.  Motivated employees are also less likely to leave their job and go elsewhere.  In short, motivated employees are satisfied employees.  And lots of research has shown the relationship between employee satisfaction and a company’s success.

So what motivates employees most?  The average person would say “money.”  People work to earn a living.  So, more money should result in a more satisfied and motivated employee.  Right?  It depends.  Money can be a huge motivator in certain situations.  And it can also have little or no effect at all in other situations.  A lot of research has been done by industrial psychologists and scientists about motivation, money and employee satisfaction.   What is the relationship between compensation, employee satisfaction and company success?

Money Can Be a Powerful Motivator

Financial incentives can be powerful motivators.  Leading academics have found that money enhances weight loss success, making dieters significantly more likely to lose weight.  One study, conducted by researchers at Harvard and the University of Pennsylvania, divided a group of dieters (in the same weight loss program) into groups.  One of the groups received no financial incentive.  Another group received a double-incentive in the form of a cash weight loss bet.  Each participant wagered up to $336.  As a negative incentive, if the dieters failed to achieve their goal they lost the cash deposit.  As a positive incentive, the dieters were offered a cash prize of up to three times their deposit if they achieved their weight loss goal.  The results were impressive.  Dieters in the incentive group lost almost three times more weight than dieters in the non-incentive group, and dieters in the incentive group were almost five times more likely than dieters in the non-incentive group to achieve their weight loss goal.  “Financial Incentive-based Approaches for Weight Loss: A Randomized Trial,” Journal of the American Medical Association  300(22), 2631-2637 (2008).

In fact, there are websites now that applies that research, offering cash weight loss challenges, such as HealthyWage.  HealthyWage challenges are all based on the double-incentivization model.  A person is more likely to succeed if (1) she stands to lose something if she fails and (2) she stands to win something significant if she succeeds.

While one would think health and vanity would be strong enough motivators for a person to lose weight, a financial incentive provides additional benefits critical to success.  Cash-based challenges seem to help motivate the person to commit to a specific starting point and avoid quitting before the goal is accomplished.

In another study, the Mayo Clinic revealed that a well-designed incentive program produces outstanding, long-term success.  The year-long Mayo study divided participants into two groups:  one group had an opportunity to win money for losing weight and one group did not.  Both groups were given extensive weight loss tips, reminders and web-based tools for weight loss.  The results were definitive.  Participants who received cash incentives were more likely to stick with the weight-loss program and lost more weight than participants who received no incentives. Researchers concluded that 62% of those in the incentivized group lost weight, compared to only a 26% success rate in the non-incentivized group.

In a major real-world test of financial incentives, HealthyWage was commissioned by Optum Health, a wholly owned subsidiary of United Health Group (one of the largest health insurers in the world) to offer its employees the opportunity to make a weight loss bet.  Participants made a $100 loss bet and had six months to lose ten percent of their weight.  HealthyWage awarded $400 to each successful participant.  As with the academic studies, the results were outstanding.  Among the most impressive stats:  almost 2/3 of male participants achieved the 10% weight loss goal.  So clearly money can be a big motivator for something as difficult as weight loss.  But is it also a motivator at work?

Do Higher Employee Salaries Result in Greater Company Profits?

While many believe salary and benefits are the most important factors motivating employees, research shows that there are more factors involved in motivating and satisfying employees than just money.  There are many factors affecting employee satisfaction and motivation.

Frederick Herzberg (1923-2000), a clinical psychologist and pioneer of job enrichment research, is considered one of the greatest minds to have studied management and motivation theory.  Herzberg’s seminal research looked at what factors increase employee satisfaction and what factors increase employee dissatisfaction.  What he found is that the factors that increase satisfaction and motivation are not necessarily the same aswhat increase employee dissatisfaction.  Here is a summary of the variables he found that impact job satisfaction.

The top six factors that decreased employee job satisfaction in the workplace were:

  • company policy and administration
  • supervision on the job
  • relationship with the boss
  • work conditions
  • recognition
  • salary

The top six factors that increased employee job satisfaction in the workplace were:

  • achievement
  • recognition
  • work itself
  • responsibility
  • advancement
  • salary

Interestingly, in Herzberg’s study, salary ranked sixth in both increasing and decreasing motivation.  What does that mean?  Herzberg acknowledged the complexity of the salary issue and concluded that money is not a motivator in the way that the primary motivators are.  However, money was identified as causing dissatisfaction in employees three times as often as employees cited it as a cause of satisfaction.  Herzberg concluded that when salary caused dissatisfaction, it usually revolved around the unfairness of the wage system within the company.  The dissatisfaction typically concerned advancement that was not accompanied by a salary increase.   On the other hand, when it came to money and job satisfaction, salary was seen as something that went along with a person’s achievement on the job.  As related to employment, money meant more than just salary.  It was seen as a form of recognition that said “job well done.”

If a company is trying to motivate employees, increases should be based on merit and given as a way to reinforce a job well done.  It should be handled fairly and equitably within the organization so that there is a feeling of parity.  Most of all, other factors such as work conditions, relationship between bosses and employees and company policies should also be a priority as a way of motivating employees.  Yes, money matters and can be a powerful motivator in some situations, but it is not the “do all and be all” for motivating staff or achieving employee satisfaction.

Quote of the Week

“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.” U.S. President Franklin D. Roosevelt


© 2016, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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