Despite popular belief, money doesn’t motivate people. I ran a few ad hoc polls on this topic with readers in the past, and generally, most people “believe” that money is a significant motivator of behaviour. According to this idea, if you want to get people to do what you want, pay them. And if you want them to do better or do more, pay them more, like a bonus. When they have financial skin in the game, people are more likely to be more productive.
But alas, it’s not true.
Harvard Business Review, the respected business and management publication, as much as I cringe at their hyperbole and corporate rhetoric, produced a good summary of findings back in 2013. Apparently, though, no one listened.
First up is a study by Timothy Judge and colleagues in 2010. They conducted a meta-analysis of studies examining the relationship between pay and life satisfaction. Results from 92 independent samples suggested that pay level was correlated with job satisfaction at 0.15 and with pay satisfaction at 0.23. For those unfamiliar with statistics, results below 0.4 are considered weak. In gross terms, pay has little or no relation to happiness.
In a later study, the same authors said, “Employees earning salaries in the top half of our data range reported similar levels of job satisfaction to those employees earning salaries in the bottom half of our data range” (p.162). Gallup’s research on engagement at work also reported no significant difference in employee engagement by pay level.
A classic study by Ed Deci, Richard Ryan and Richard Koestner in 1999 found that their meta-analysis of 128 studies examining extrinsic rewards had a negative impact on intrinsic motivation. The authors reported that engagement-contingent, completion-contingent, and performance-contingent rewards significantly undermine free-choice intrinsic motivation. In contrast, positive feedback enhanced both free-choice behaviour and self-reported interest. Remember what I mentioned in yesterday’s video on the effects of a positive environment?
In their concluding remarks, the authors say, “Careful consideration of reward effects reported in 128 experiments leads to the conclusion that tangible rewards tend to have a substantially negative effect on intrinsic motivation, with the limiting conditions we have specified. Even when tangible rewards are offered as indicators of good performance, they typically decrease intrinsic motivation for interesting activities.”
Why is this? I explain in the video. Watch it, let me know your thoughts
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