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Motivation and financial and non-financial rewards

In this article, Derek Stockley discusses the link between motivation and remuneration, including financial and non-financial rewards.

Derek Stockley provides training, learning and performance management consulting services from his base in Melbourne, Victoria, Australia. Derek Stockley conducts one day leadership courses in Melbourne, Sydney, Brisbane or London.

Pay for performance

I once had an interesting conversation with the owner/manager of a clothing manufacturing company. He operated a large and successful business, principally supplying uniforms for the corporate market.

He was surprised by some of his workers. They worked on a piece work rate (paid per item) and some of the very efficient staff did not produce as much as they were capable of. They worked hard at the start of the pay period, but then they tapered off. He expected them to work hard the whole time, as they were paid by what they produced - the harder they worked, the more they were paid. He expected that the extra money reward would motivate them.

Motivation is a complex concept. Remuneration is also complex. Individuals react in different ways to pay schemes.

A simple explanation for the clothing worker behaviour is that they did not work just for the money. They enjoyed the working environment and the social interaction it provided. They liked to have work, to be employed, and yes they needed a certain level of income. But once they achieved that, the pressure to work hard was reduced. Given that the actual work task was quite monotonous and repetitious, it was not surprising that they exhibited this behaviour. Drastic work design was required.

People think that money is a motivator. It does have an effect, but motivation involves far more.

Sales people are the classic example. Most are on performance based schemes. But what is one of the main themes sales and marketing consultants write about? You guessed it - how to motivate your sales team! Consultants would not need to write motivation articles if financial reward alone worked.

Equity in compensation practices

Positive effects come from good financial and non-financial rewards.

It is very important to have a well managed remuneration system in place. Fair and reasonable reward is essential and very important for good morale.

I believe strongly in the equity theory of motivation. Simply put, the theory states that people have to believe that their pay is equitable with others. When they compare their salary and benefits with their colleagues and co-workers, they must believe that they are being fairly compensated. If they believe their compensation is not equitable, they become very de-motivated and their work performance suffers.

Financial and nonfinancial rewards

I subscribe to the theory that states it is the nature of the work that is important. Financial compensation is an element, the importance of which increases when the compensation received is not appropriate. Non-financial rewards can be very important for their long-term effect.

Too many employees are "disengaged" from their employment*. It is again time for many organisations and business to look at their human resources and management practices. The figures quoted below are quite disturbing.

Summary

Management should ensure that their organisations and businesses are using the full range of financial and non-financial rewards available to them. An over-reliance on financial compensation may lead to ongoing problems.

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Related articles

Achieving fair financial and non-financial rewards - Employee motivation and performance management depend on good systems that offer both financial and non-financial rewards (non-monetary rewards). This article outlines the essential features of a good reward system.

Disengaged workers

*AAP Report dated 1 April 2005:

"Disengaged workers are costing Australia's economy about $31.5 billion a year. A new Gallup Australia study found 20 per cent of employees were "actively disengaged" at work, costing the country billions of dollars.....Employees who are actively disengaged are less productive, profitable, loyal, less likely to provide excellent customer service and are often disruptive.

See also Employee disengagement costs $31.5 billion.

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This page was last modified on 24 January 2011.