NO IT DOESN’T, TIM! YOU ARE AN IDIOT!
Well, you’re half right! I’m an idiot most of the time, but finally we are beginning to see what I’ve been saying for a decade, money is still the best motivator when it comes to getting extra effort.
For almost a decade the media and influencers perpetuated this belief that it was other things, rather than money, that motivated individuals to do more. They sited weak studies, if at all, but mostly it was antedotal evidence from people saying it wasn’t money, it was time off, it was feedback, it was…
A recent study puts this to rest, and it clearly shows that if you want ‘extra’ effort out of an employee, money is the single biggest motivating factor, overall, to get the effort your organization is looking for.
What I love about this study is they went out to over 200 experts in the field and first asked them what they thought. They were comprehensive in their analysis of the results and the most recent literature on the subject and the findings were straightforward:
We find that (i) monetary incentives work largely as expected, including a very low piece rate treatment which does not crowd out incentives; (ii) the evidence is partly consistent with standard behavioral models, including warm glow, though we do not find evidence of probability weighting; (iii) the psychological motivators are effective, but less so than incentives.
Psychological motivators are effective, but less so than monetary incentives!
It’s not that things like working for a great leader or having time off aren’t also effective motivators to getting extra effort out of your employees. They are. But we have to stop telling ourselves that they are more important, because they aren’t!
Again, this is overall. You might have some individuals working for you that are more highly motivated by non-monetary incentives. But overall, in a large workforce, money will still get you better results.
So, why do we love saying that it’s not about the money?
If you think about how this concept became popular, it really tells the story. A decade ago we were coming out of the Great Recession. We didn’t have a ton of money to throw around, so it became popular to espouse the idea that people were really motivated by other things, rather than money.
And, it wasn’t really a lie. We are motivated by many things, money just being one.
The lie was that the other things motivated us to a higher level than money. Those don’t. I’m completely motivated by a great leader, if I’m getting paid what I think I should be. I’m super motivated by extra time off, if I think I’m getting paid what I should be. I’m not motivated by any of that, if I have a monetary issue I’m facing in my life, which most people do.
If my partner is a successful doctor and she makes way more than we need to live very well, money isn’t my primary motivation for effort, it might be a lot of other things. But, if I’m struggling to pay my mortgage, and my kid is about to go to college, I could care less that my boss is nice to me. Just pay me!
Thanks for bringing up a significant topic. I first wrote about this in 2005. Need to update this piece for sure based on new studies.
You’ve written about everything! That’s a lot of updating!
I guess one study done 3 years ago puts the argument to rest even if multiple studies done and meta-analysis done over time say different? Or that Dan Ariely (Predictably Irrational) also has studies showing pizza coupons beat cash?
This experiment is so biased that you can’t make any of the claims you’ve made.
1. This was done with a mercenary work force – Mechanical Turk – 100% of these people they have chosen to work in an environment that is 100% cash-based. No benefits, etc. They are hired guns by definition and to quote research that suggest they more motivated by cash is surprising? Not to me. 99% of the world I work in is different – most are not driven solely by cash. Can you say sampling bias times 1000?
2. This experiment is a moment in time. It doesn’t take into account that if they ran this two, three, or four times, over a longer period of time the results would drop because cash payments are progressive. In other words, I want more after the first time – and I know you’ll pay me because you’ve already set cash as the baseline. Do we want that mentality in our employee base? Only a few roles in our companies do we want that kind of ruthlessness.
3. Zero context between the award and the activity means no real-world application unless your business model is having a bunch of non-connected freelancers pushing buttons over and over. This has zero application in the real world. Talk to me when it is based on selling, coding etc. (cuz studies that have been done in the real world show the exact opposite.) Mazda ran a study in the 90s where they used cash and awards for dealers selling cars. In that study dealers given the cash incentive had a 2.18% increase in sales – those with the non-cash awards had a 15.65% increase. So…
As I tell every client – if you want to only use cash – then I want to compete against you because in the long-term – a cash-based incentive will quickly grow to be expensive, have income-adjusted participants and huge turnover the minute the company decides to either adjust, remove or stop raising the cash payout.
Just let me know who’s using cash and I’ll start calling on their competitors.
I knew this would get you going!
Love you! Mean it!
While still difficult for many (if not most) of the HR/management “gurus” to accept, you are right on regarding the motivation factor in evil money. But money is not only a motivating factor in performance, but also in changing jobs. While the hackneyed “people don’t leave jobs, they leave managers” still permeates our psyche, it is mostly false. Many many stay in jobs with bad managers because the monetary rewards are good.
Conversely, most people leave jobs for reasons other than their management, including greater opportunity, less commuting, better offices, and, yes, more money. I, and countless others I know, have left very good companies and managers for monetary gain. We have also stayed with very bad managers for long periods because of the money, benefits, and other motivators.
Wait, are we agreeing on something for the first ever!?
I agree that employees don’t leave a business because of who their boss is!
Today is a good day!