Why Pay Doesn't Motivate Employees (But What Does Instead)

Why Pay Doesn't Motivate Employees (But What Does Instead)

Employers are having more difficulty keeping their employees motivated and engaged than ever before. According to recent surveys, only one-third of employees feel engaged at work. Lack of engagement is coming at a steep price – companies stand to lose $300 billion due to poor engagement.

Brands are exploring solutions to this problem. The general assumption is that they should pay their employees more. However, years of research has shown that this isn’t necessarily the case.

Limits of Paying for Better Engagement

There is extensive research that shows that paying employees higher salaries does very little to bolster motivation.  In 2010, Timothy A. Judge and his colleagues at other business schools across the country conducted a meta-analysis of 120 different studies on employee motivation, which supported this theory.

“This study provided the first meta-analytic evidence on the relationship of pay to job and pay satisfaction. The results suggest that, within-studies, level of pay bears a positive, but quite modest, relationship to job and pay satisfaction. Between studies, there also is little relationship between average pay in a sample and the average level of job or pay satisfaction,” the authors concluded.

Intrinsic Motivating Factors to Focus on Instead

So what makes employees feel more motivated? Making an employee feel more engaged and wanted is usually the best solution. Here are some tips to follow if you are having trouble motivating your staff.

Make their Contributions Feel More Important

Every employee has an important job. However, some employees don’t feel very enthusiastic about doing it right, because they don’t understand why it is important. It’s a good idea to communicate to them what role their work plays in the organization, so they realize they are important.

Express Your Gratitude

Many studies have shown that employees are more moved by regular, positive feedback than wage increases. You want to always give positive feedback to an employee that went above and beyond expectations. You should also check in regularly and let them know how much you appreciate their work.

The important thing is to make sure the complements are sincere. Don’t give them when they aren’t deserved, because employees will notice and they will no longer have a positive effect.

Follow the Platinum Rule when Creating Organizational Policies

It’s easy to set organization-wide policies that you expect all employees will appreciate. However, some employees may feel otherwise. One example is changing the layout of your office to be more public so all employees are more included and can interact with each other more easily.

Keep in mind that some employees may be more introverted and not appreciate this change. You want to know how they actually feel before making this change.

Remember – All Employees Are Different

The National Business Research Institute published a great white paper that plays devil’s advocate on this issue. Human behavior is extremely complex. Every worker is an individual with different priorities. While there is a lot of research that shows that there is a weak correlation between pay and employee motivation, you can’t make a blanket assumption about them. There may be a couple of exceptions to the rule.

For some employees, low pay is one of many indicators that the employer doesn’t have their best interests at heart. Even a pay increase itself isn’t a strong motivator, it could send a signal to employees that you are trying to reform the organization to be more employee-focused.

Some employees are in dire need for money, especially if they are in low-wage jobs or facing serious financial problems at home.

Even though raising wages isn’t usually the best solution, there are some exceptions.

Also, remember that a higher salary isn’t the only incentive. You can also offer a wonderful 401(k), better life insurance packages, membership to a local gym and other forms of compensation. Find out what your employees really want and need, because you will earn more loyalty by catering to their real needs.



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