Why Doesn’t Cash Motivate...

By Lorri Freifeld

If money is the root of all evil, is it also the root of all motivation? When talking about workplace performance and training, the experts’ consensus is a resounding “No.”

First, a look at some research:

• A McKinsey global survey on cash as a motivator found that while performance-based cash bonuses were used frequently (68 percent of respondents), employees still viewed “praise and commendation from their immediate manager” as being more effective than cash (67 percent for praise versus 60 percent for cash). (“Motivating people: Getting beyond money,” Martin Dewhurst, Matthew Guthridge, and Elizabeth Mohr, McKinsey Quarterly, November 2009).
• In a LinkedIn survey of 665 respondents, 285 said the motivation of personal satisfaction has the most positive impact on their job performance, followed by potential for career growth (160) and increased compensation.
• Pay did not make the list of HR Solutions’ Top 10 Engagement Drivers. Recognition checked in at No. 1, followed by career development, direct supervisor/manager leadership abilities, strategy and mission, and job content.

“The primary value exchange between most employers and employees today is time for money,” note Tony Schwartz, Jean Gomes, and Catherine McCarthy in their book, “The Way We’re Working Isn’t Working: The Four Forgotten Needs That Energize Great Performance” (Free Press, 2010). “It’s a thin, one-dimensional transaction. Each side tries to get as much of the other’s resources as possible, but neither gets what it really wants. No amount of money employers pay for our time will ever be sufficient to meet all of our multidimensional needs. It’s only when employers encourage and support us in meeting these needs that we can cultivate the energy, engagement, focus, creativity, and passion that fuel great performance.”

Tim Houlihan, vice president of Reward Systems at BI Worldwide, which designs and executes business improvement programs , agrees. “As an incentive for above-and-beyond effort, cash is hopelessly ineffective. The reason is that cash turns the incentive into a deal—it puts us in a calculative mindset, forcing us to compare anticipated effort with anticipated returns in dollars and cents. If we start thinking about our effort in terms of the cash we could earn and we give any consideration to what we’ll spend that cash on, we immediately begin to feel guilty about spending on anything other than the most utilitarian items. That leads us to ask ourselves, ‘Why should I spend an extra six hours at work this week to pay my Visa bill?’” In very short order, Houlihan says, we rationalize why it’s not a good idea to put in the extra effort. “We’ll end up doing what we’ve always done because we’ll rationalize (using the analytical left side of our brains) why it’s not worth what’s being offered to do what’s being asked.”

Or think about it this way, Houlihan says: “Almost every single sales job has a pay-for-performance component: The more the rep sells, the more he or she makes. Why aren’t 100 percent of the reps maximizing their plan if money is such a good motivator?”

That’s the crux of the issue: We’re not saying money doesn’t motivate. But it often may not be the top motivator. That means there are other, often more powerful sources of motivation that many organizations aren’t tapping.

“Money is more like unconditional love from our employer—it’s not a motivating force to get us to go above and beyond the call of duty, to go the extra mile, to really push our limits,” Houlihan explains. “Money gets us in the door at the office every morning. But the stimulants that get us into high achievement are these: our ability to set challenging goals, our ability to get emotionally engaged in our work, and our ability to focus. These common tools are available to all, but only the top performers practice them on a regular basis. We can learn them from books and mentors and online learning systems, but until we internalize them, we won’t exhibit top performance. In the short term, we can use extrinsic motivators, such as incentives, to help facilitate goal setting, engagement, and focus. This way, the extrinsic motivation helps us perform at a higher level, and once we recognize what it takes, we can replicate it more easily.”

Elaine Varelas, a managing partner at Camden Consulting Group, notes that cash as a motivator often depends on how much someone makes: the ratio of the cash incentive vs. their full compensation. For example, she says, if they’re earning $50,000 a year, then $100 might not be a big motivator. But $2,500 might be. “And after a certain threshold of earnings, there are more things to motivate people—fun things such as trips, dinners at expensive restaurants, experiences (i.e., a trip to Disney World with the family and VIP tickets). The VIP treatment may mean more than the actual cash value,” she explains. “Coveted items such as tickets to a sporting event or a luxury spa may be more welcome and motivational. People like to say they got these things from their company.”

Learning for Dollars?

When it comes to training, the most important part of motivating is letting people know what the value of the training is to them personally—will they be more knowledgeable about the stock market; will they learn how to deal with conflict in the office, etc., Varelas says. “You have to communicate the value of the training—that’s where the motivation comes in. Trainers can make things more fun by giving out $10 coffee shop gift cards or giving out points redeemable for incentives for answering questions or coming back the second day, but the big sell is why this training is valuable to them personally.”

Varelas says it really comes down to marketing or selling the training program to learners. “One key part of the marketing is including a participant quote (especially from a senior person or someone known for not liking training) explaining how valuable the training was to them and what they got out of it,” she recommends.

Learning is an individual matter and draws upon personal commitment, interest, abilities, and attitudes to learn and cannot generate identical outcomes in different people just by rewarding them, agrees Roy Saunderson, author of “GIVING the Real Recognition Way” and president of the Recognition Management Institute, a consulting and training firm specializing in helping companies “get recognition right.” He says research shows organizational and managerial commitment to learning will enhance individual motivation to learn. “Managers and supervisors actually have the greatest influence on transfer of learning when they meet with the learner before they start training,” he notes “They can clearly convey the benefits from attending and participating in the training. Managers can establish learning goals with the learner and follow up after the course. Practical application of the instruction can occur with specific goals to be carried out following course completion. Social reinforcement and rewards then can be given as warranted.”

When it comes to online training, Chad Hoke, VP of Sales and Marketing at BlueVolt, a provider of online learning management systems (LMSs) for manufacturing, construction, and service industries, says he thinks the biggest motivating factor is the inherent desire that most people have to master their job or task. “We consistently find that the top 15 to 20 percent of employees usually will find and complete training on their own, simply because they want to improve, regardless of extra help or incentives.”

However, he adds, “the much larger ‘middle group’ of employees is more likely to get distracted from their goals. This group is very responsive to incentives and rewards that help them get on track with training. Even in these cases, though, the incentives don’t have to be rich to be effective.”

For example, BlueVolt recently partnered with Giftango to enhance BlueVolt’s $BlueBucks incentive program, a pay-for-performance system that rewards learners as they successfully complete training through their company’s LMS or online university powered by BlueVolt. The $BlueBucks program has proven to increase online course enrollments up to 10 times. The partnership gives learners the option to redeem $BlueBucks immediately for a virtual eGift card from retailers such as Foot Locker, Nike, and Amazon.com delivered via e-mail or to a smart phone, and viewed through a secure Web browser. Learners also can use their $BlueBucks to pay for additional courses offered in the BlueVolt system, including continuing education courses to keep professional licenses current.

Peder Jacobsen, vice president of Learning & Organizational Effectiveness at BI Worldwide, recommends first ensuring the training is geared toward the actual skills and behaviors that will change results. “Just distributing facts in a PowerPoint is not training,” he says. “It’s like taking a new basketball team and training them by giving them a PPT about the rules, then turning them loose in a competitive league. They’ll get slaughtered. So first is to change or update the training to align with the skills and behaviors that will really get the results you want.”

This is different than aligning training directly to business objectives, he cautions. “It can be a long leap from an individual course to a division’s business objectives. The recommended approach takes into account the actual human behaviors that need to change in order to get the performance that will achieve the business objectives. It also makes it easier to draw a direct line from the training to the overall business objectives by taking it in steps—rather than one giant leap.”

Second, he says, create the incentive rules to reward both the learning of the new behaviors (completing the training course) and then applying them on the job. “One idea to keep costs down is to give a minor incentive here, but use success as a gate or multiplier for actual business results,” he suggests.

Third, Jacobsen stresses, include the first-line managers. “No lasting change happens without them. They provide the oversight and accountability. Include them in the incentive for successfully completing the training themselves, but also consider giving them an override for each of their employees to successfully complete the training and/or start demonstrating results. This ensures that they make their employees comply. As a variation, you also could use the percentage of their employees to complete training and/or demonstrate the behaviors as a gate to accelerate their normal business results.”

In all these situations, Jacobsen believes, an accumulation system has more flexibility and power than cash or gift cards. As an example, he cites a large telecommunications client that created a voluntary incentive program for training within its customer service/sales employee base. It piggybacked on its points accumulation system that was in place to motivate sales. If learners completed courseware and were certified, they received points in their sales reward incentive system.

In the spring program, approximately 25 percent of the population voluntarily participated in the training. Certified employees’ sales increased 12 percent more in one month than those of non-certified employees. The same program was used again in the fall. This time, it included an incentive for first-line managers, as well as employees. Managers received an incentive—and an override—for each employee who reported to them who was certified. Voluntary participation increased to about 50 percent, and month-over-month results were even more dramatic. “One month after certification,” Jacobson says, “certified employees sold 43 percent over baseline, while uncertified reps sold 19 percent less, yielding a whopping difference of 62 percent between certified vs. non-certified.”

Jacobsen does note that while there is a control group, “it’s a self-selecting system and it can be argued that the best people chose to try to improve themselves. However, the improvements listed here were measured against their own individual baselines and then averaged.” Nor does that criticism accommodate for such large deviations in performance, he adds.

Linking Recognition and Rewards

Research has proven that recognition can be a powerful motivator. That brings up the question: Does tying recognition to cash and other rewards have a bigger impact on motivation?

Rewards, such as cash and tangible reward items, are extrinsic and transactional in nature, Saunderson explains. “In other words, if you do ‘x’ then you get ‘y.’ A person knows they will get the reward if they deliver the desired results. Very much like getting paid a wage or salary for one’s job. Recognition, on the other hand, is intrinsic and relational—and is more meaningful in nature. It also is unexpected and influences our emotions, thus impacting us psychologically and emotionally.”

Effective and meaningful recognition—appreciation, praise, and social reinforcement—will directly impact the self-esteem and internal motivation of an individual, Saunderson says. “Coupled with fair and justifiable rewards, you have a winning combination.”

BI’s Houlihan believes recognition is a very sensitive thing and tying awards to recognition must be done without cash or cash equivalents. “Imagine yourself getting up from Thanksgiving dinner and wanting to recognize your grandmother for making an amazing meal. You say, ‘Grandma, this was fabulous! How does $30 per plate sound to you?’ I can guarantee you’d never be asked back to Grandma’s.”

Or, he says, consider the difference between monetary recognition and non-monetary recognition, both costing the same:

Scene 1: You want to express your gratitude to your team member, Susan, for completing a task with exceptional quality. You say, “Susan, you did a great job on that project. Here’s a $5 gift card to Starbucks. Go grab yourself an amazing cup of coffee on the company.”

Or, Scene 2: You say, “Susan, you did a great job on that project. Let’s go down to Starbucks and grab a cup of coffee so we can talk about it.”

“If you want Susan to remain an employee, to stay engaged, and to increase her already promising contributions to the company, choose Scene 2,” Houlihan says. “If you don’t want any of those things, choose Scene 1.”

Stumped on Motivation: Just Ask

Many managers and organizations find it difficult to determine what the best form of motivation is for their particular employees, especially if members of the workforce are at different age and economical stages of their lives. Of course, one of the easiest ways to find out what motivates people is to ask them, says Saunderson. “Motivation is an inside job. Only an employee can tell you what really motivates them, and each response will be unique per individual. Ask employees what motivates them personally in their life and what would influence them to perform at a higher level for the company. Let them know the total rewards options available to you as a manager to draw upon for rewarding desired results.”

These questions can be asked during performance reviews and employee engagement surveys. But be careful to avoid asking too many questions and being overwhelmed with data overload, Varelas cautions. “Figure out what do you need to know now? Where’s the pain? Prioritize your questions. It also helps to ask open-ended questions as that way people will tell you what they are thinking about.”

Also, she suggests that Sales work with managers to identify perks or incentives that might be shared throughout the organization. “Perhaps they get a luxury box at a sporting event that they invite customers to; if there’s an extra seat, that could be given to an employee. Or give people the opportunity to attend an executive dinner. Recognize that networking opportunities some executives might not want to attend might be thrilling experiences for others in the company. For example, CEO luncheons usually have 20 empty seats—there might be ‘high potentials’ at the company who would see this as a networking opportunity and be flattered to be invited.”

A Little Appreciation Goes a Long Way

By Joe Schumacher

For decades, managers viewed money as a powerful productivity motivator. To get more out of the workforce, you simply paid them more. But this is only part of the story. All of us are motivated by money, but money is only a short-term motivator. Looking over the last few decades, you can see more and more attention shifting up the list on Maslow’s hierarchy of needs: We want not only food and health and shelter, but also less tangible rewards such as appreciation and a sense of purpose. Millennials report less interest in the traditional elements of workplace prestige such as status and “perks.” Today, most workers seek more intrinsic rewards, such as on-the-job opportunities to do meaningful, creative, and independent work while enjoying a balanced lifestyle and quality of life benefits.

If money isn’t the main motivator, then what is? What do workers want most from their job and manager? The answer is surprisingly simple. Workers want someone they can work alongside, who is compassionate, and who serves and protects. Someone who understands the complicated alchemy of making people matter.

Employees want a manager who leads by example, with integrity and a defined purpose. Such a leader brings meaning and direction to the team’s work and helps every team member continuously improve. Employees want a leader who provides tools, training, trust, technology, and techniques, as well as opportunities to take initiative, and who galvanizes their team to achieve great results. Workers want to be respected as “talented,” to be intellectually challenged, to be given elbowroom to work toward their defined purpose with ownership and accountability for the final product. Workers want to be appreciated and to have their accomplishments acknowledged, to receive accurate and timely performance feedback, to work a variety of duties, and to be on a career path with a desirable future. Workers don’t want to feel like just subordinates, headcounts, or direct reports; they want to be team members and colleagues and rising talents.

The most exciting part of this: Almost all these best practices of leadership cost nothing. Small gestures of kindness, gratitude, and appreciation bring the most meaning to workers, at the least cost. So go for it! Commit deliberate acts of thoughtfulness and dish out premeditated accolades, because it’s these best practices—which previous generations’ money-oriented managers may have found trifling, unattractive, or troublesome—that can lead to leadership success.

Joe Schumacher is a Training Program director with the Office of Personnel Management, Management Development Center in West, Aurora, CO. He can be reached at joseph.schumacher@opm.gov.

Quick Tips

BI Worldwide Vice President of Reward Systems Tim Houlihan says that while a “Top 10 list of motivation stimulants will not speak to the complexities of any given situation, including the all-important corporate culture, there are some things to keep in mind,” including:

1. Help your people set goals. Think short-term goals (30, 60, or 90 days at a time) rather than annual goals. The CEO of NetApp, Tom Georgans, said in a radio interview that he sets no more than three goals to achieve every quarter. More than that is too many to focus on and longer than that is too difficult to foresee and control.
2. Help your people get engaged. The workplace has a social exchange, as well as a financial exchange. Leverage the social exchange with opportunities to develop healthy relationships with coworkers, and recognize their efforts with non-monetary awards such as smiley faces, thank-you notes, or gifts that do not have explicit dollar values. Edison was already a wealthy man when he spent several years and exhausted 10,000 prototypes to develop a functioning lightbulb. He was committed beyond the dollar.
3. Help your people focus. Communicate clearly what one or two things you want them to do—help them focus on the most important issues only. Stephen Covey recommended we move the boulders first—the sand will fill in the gaps without any effort. Every person’s day starts with a long list of things to do, and every day ends with a portion of that list unfinished. Help people finish their lists by providing clear direction on what it is they should focus on. That will improve productivity and morale.
4. Use non-monetary rewards. Our natural inclination to feel guilty about spending hard-earned income on luxuries turns any monetary reward into a utilitarian tool, or worse, just plain old compensation. On top of that, monetary awards create a calculative mindset, and we immediately ask ourselves: Is this a good deal? Non-monetary rewards—such as a trip or a toaster or the boss taking us to the coffee shop—allow our imaginations and emotions to get involved without any guilt. According to Harvard Professor David Laibson, “Emotions drive behavior.”