December 22, 2014

Small Business Advice

Money is not always the best motivator for staff

"There is only one way to get anybody to do anything. And that is by making the other person want to do it." ~Dale Carnegie

Jerry Osteryoung | 4/4/2014

FBMC Benefits Management

For so many years, I have talked about the power of incentives to motivate staff -- especially monetary ones. However, more and more research is showing incentives do not work in all cases and can sometimes even produce the opposite effect.

Recently four economists from MIT conducted a study on whether or not money motivates people to work harder. Their research empirically showed that money was ineffective and it actually demotivated employees as the incentive levels rose.

There are a couple of exceptions to this theory. One is commissioned salespeople who really enjoy increasing their income. I believe people who enter this profession are very money-driven.

Another exception is jobs that require physical skills like factory work. Employees in these positions appreciate and value these monetary rewards.

Employees with cognitive or creative jobs, however, do not respond to incentives and in some cases are even demotivated by them. As research has shown, monetary incentives lose their effectiveness once a comfortable salary has been established.

Scientists found that if workers with an adequate base salary are asked to do additional creative work, there is a strong disincentive to push forward. Simply stated, the incremental value of additional income is not the motivation these workers really need.

So why is this? I think it goes back to the notion of cost-benefit analysis. For workers who are paid an adequate salary, the benefits of more money just do not make up for the cost of having to produce more work.

To use myself as an example, I have always enjoyed getting paid well, but what really drives me is the feeling that I am in control of my own destiny and the mission of the organization. Most of the successful people I know feel the same way.

In the book, Drive, author Daniel Pink makes the same point. He suggests that what really motivates workers today is autonomy, mastery and purpose. You can view his points in animated framework here:

Researchers’ findings also support the theory that the best motivating factors are job autonomy and the mission of the organization. These workers just want to have more control in their jobs and be involved with firms whose missions they can relate to.

Undoubtedly, your staff enjoys getting bonuses, but the real question is if these incentives are producing the behaviors you desire. I have seen so many businesses pay bonuses and incentives that have no real effect at all.

Now go out and see if your incentives are working or if they are even necessary.

You can do this!


Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an Amazon.com bestseller. He can be reached by e-mail at jerry.osteryoung@gmail.com.

Tags: Florida Small Business

Florida Business News

Florida Trend Video Pick -

Benefits management trends in Florida
Benefits management trends in Florida

David Faulkenberry, president, FBMC Benefits Management, explains what benefits most employers want to offer staff and what impact the ACA has had on public sector clients so far.

Earlier Videos | Viewpoints@FloridaTrend

Ballot Box

How do you feel about the historic decision to remodel US-Cuba relations?

  • Well, it's about time!
  • I'm cautiously optimistic...
  • I'm skeptical about this at best...
  • Not in favor at all: Keep the embargo strong!

See Results

Ballot Box
Subscribe