Does money motivate?

Many clients worry that they can’t give their staff pay rises and how that will affect their motivation. Well the good news is that despite what many businesses continue to do, pay rises don’t motivate, well certainly not in anything but the short term. It’s not quite as simple as that, as money can be a demotivator. So what exactly does that mean in practice?

If you remember back to your last pay rise or bonus, how did you feel? Probably great, that day, maybe that week. But the chances are that you then got used to it and your level of motivation at work went back to the same as it was before. So does that mean that you’d be the same whether you got a pay rise or not? Well it all depends on fairness. Humans need to feel that they’re being treated fairly – are they getting a comparable deal to others doing the same role and is there a fair pay split across the organisation.

So are there any instances where rewards can motivate and increase performance? Normally it’s only for very routine or rule based activities where no creativity or brain power is required. Even then it’s normally better to give the reward afterwards as a surprise.

Daniel Pink has done some extensive research in this area, building on the hypothesis that if a task involves some level of rudimentary cognitive skill, i.e., there’s some thinking involved, then a larger reward leads to poorer performance – interesting stuff!

Our recent article in The Sunday Times gives some more insights into this tricky topic.

The simple answer is, most of the time no. A couple of my clients have recently been asking for help on how they can keep their staff motivated – January and February are typically known as some of the most depressing months of the year, Christmas long gone, still feeling poor and seems like ages before the sun will come out again.