It's Not the Money: Why Compensation Models Have Limits in Motivating Workers

Everyone wants to earn more. No surprise there. Money can certainly incentivize employees to work harder, seek promotions, and clinch more commission-based sales. However, compensation has its limitations when it comes to how managers motivate employees. Why is this? And what else can managers do to encourage hard work and participation?

Why More Money Loses its Appeal

One might feel extremely motivated when first getting a promotion or a new higher-paying job. Over time, however, things change. It doesn’t take long for most people to begin getting used to their new wage or salary. Once a huge perk, this pay raise becomes normal and perhaps feels as restrictive as a previously lower pay rate. In this scenario, the worker might attempt to earn another raise by working harder – but even then the cycle tends to repeat. Eventually, money becomes secondary to a worker’s overall happiness and sense of meaning in the workplace.

If you’re a manager in charge of employee productivity management, this should raise alarm bells. But if more money doesn’t equate to more productivity, what does?

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Reward Systems in the Brain

The human brain is wired with reward systems. These systems help humans learn, interact with others, and behave in certain ways. Money certainly ties in to these reward systems. The human brain lights up when receiving rewards with perceived value (such as cash, gift cards, rare items, etc.). But money alone doesn’t trigger this response. Something as simple as receiving a compliment or affirmation can yield similar results. Hearing a “Good job,” or “I appreciate you” can go a long way in motivating employees. In this way, creating a positive work environment might be one of the best employee management tools available.

Finding Meaning in Work

Cash and kind gestures feed the brain’s reward system to a certain extent, but humans also want meaning in their lives. Since so many people spend the majority of their time at work, they often seek meaning there. If they can’t find it there, they’ll look to their family, friends, hobbies, or other interests. Meaning can be found in any and all of these places. Still, work can begin to feel like a drag if an employee lacks a sense of purpose in the office or at the job site.

A good employee management system should incorporate information on every employee’s interests, goals, preferences, and unique abilities. This way managers can get to know their people more personally and better find ways to make their work more meaningful, even if it’s just a small way. This might mean creating events for employees with shared interests, asking employees for feedback on how certain tasks get accomplished, or simply utilizing each person’s unique capabilities in the workplace if applicable.

People want to do a good job, but more than that, they want to be recognized for their hard work and feel their work is purposeful. Financial compensation can and should reflect an employee’s value to a company, but without the sense of meaning and gratitude behind it, the money will feel cold and worthless. Managers tasked with overseeing performance management should know that employees will feel more motivated when they feel valued as people.

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