The famous quote from the 1996 movie Jerry McGuire was when Cuba Gooding Jr shouted “SHOW ME THE MONEY!” to his sports agent.
Many senior leaders, and some HR professionals, believe employees always want more money. The thinking is that financial rewards and external incentives will increase employee performance, loyalty, and commitment to organizational goals. But this isn’t always the case. All employees don’t perceive money in the same way. In fact, money may not be a key motivator for employee at all.
Does Money Create More Satisfied Employees?
In an HBR article that summarized the data on how money and motivation are connected, the authors reviewed 120 years of research to synthesize the findings from 92 quantitative studies. The results indicated that the association between salary and job satisfaction is very weak. The correlation indicated that there is less than 2% overlap between pay and job satisfaction levels. This is very significant, because it means that if employees are disengaged, throwing money at the problem won’t help. It also means that highly engaged employees are likely to remain that way assuming their income doesn’t significantly drop.
Furthermore, the correlation between pay and pay satisfaction was only marginally higher indicating that people’s satisfaction with their salary is mostly independent of their actual salary.
These results hold true from a global perspective, as there were no significant differences between the U.S., India, Australia, Britain, and Taiwan in the research results.
Intrinsic Vs. Extrinsic Rewards
In the chapter on Engaging Employees Through Recognition in our book Upgrade Now: 9 Advanced Leadership Skills the concepts of extrinsic and intrinsic motivators are explored.
At a high level, extrinsic rewards are:
- “Carrots” such as money, bonuses, trips, gifts, etc. that are used to drive performance towards a stated goal
- Based on the believe that conditional recognition is the best way to achieve results and retain employees
- Criticized for being narrow in focus and yielding only short-term results
- Most effective when applied through broad recognition criteria
Intrinsic rewards are when an employee feels joy, engagement and empowerment from being able to perform in their roles at a high level. Intrinsic motivation consists of 3 elements:
- Autonomy – the desire to direct our own lives
- Mastery – the desire to continually improve at something that matters
- Purpose – to do things for a purpose this is larger than oneself
The HBR article highlights a study that sampled over 200,000 U.S. public sector employees. The results showed that employee engagement levels were three times more strongly related to intrinsic than extrinsic motivators, but that both motives tend to cancel each other out. In other words:
- when employees have little interest in external rewards (i.e. money), their intrinsic motivation has a substantial impact on their engagement levels
- when employees are focused on external rewards, the effects of intrinsic motives on engagement are significantly diminished
This means that employees who are intrinsically motivated are three times more engaged than employees who are extrinsically motivated (such as by money). Therefore, employees are more likely to like their job if they focus on the work itself, and less likely to enjoy it if they are focused on money. This finding was true in the research even at low salary levels.
How Can Leaders Motivate Without Money?
Given what the research tells us about money and motivation, leaders need to be able to tap into their team members’ motives by apply strong situational leadership skills. They must take accountability for their role in maintaining employee motivation and not use a lack of money (salary, bonuses, pay increases) as the culprit for poor engagement. Leaders needs to uncover and respond to the different motivations and expectations of employees by:
- Identifying which employees are motivated more intrinsically or extrinsically and adjusting their recognition accordingly
- Cultivating an environment that attracts and retains highly intrinsically motivated employees by increasing opportunities to gain mastery, be autonomous and have purpose, through:
o Committing resources to develop employees’ skills to achieve mastery
o Effectively delegating and providing room for employees to manage their own workflow and be as autonomy as possible
o Communicating on a regular basis the meaningfulness of the work employees are doing, making a connection to the big picture, and highlighting the impact it has on others
- Using a blend of extrinsic and intrinsic rewards throughout a project
- Avoiding the tendency to assume that what motivates ourselves will also motivate others
- Communicate the total rewards available to employees – financial and non-financial to tap into different employees motivators