3 Myths about Performance and Reward

Talking about money is challenging for lots of us, and specific conversations about performance and reward, bonuses or lack of them, can make us anxious.  We can be so worried about de-motivating people that sometimes we end up not giving a clear message at all.   Here are three things that might help.

1. Pay satisfaction is not the same as job satisfaction

I’m sure you know people in relatively low paid work who love their jobs, even though they might wish it paid more.  And you may know others who are relatively highly paid, but dislike the work and stick with it merely for the money.      Multiple pieces of research show that having a higher salary does not increase your satisfaction with your role.

2. Money is not a motivator

Many years ago Frederick Herzberg showed that money was a ‘hygiene’ factor – you need enough money to take the issue of reward ‘off the table’.  More money than that will not create higher performance.  Beyond that, offering more money will not motivate them to work harder.  An annual bonus plan is unlikely to impact performance on a wet Wednesday in February.   Indeed, an intriguing piece of academic research entitled ‘Large Stakes, Big Mistakes’ reports that when significant sums are available, say 20% or more of an annual salary, employees can often ‘bottle out’ and not perform as well as they would normally do.

3. Money drives decisions rather than performance

Of course, some people choose to be investment bankers and some choose to be bank robbers.  These are choices made about money, amongst other things.  The amount of money at stake does not influence how good a banker or a bank robber will be at their ‘job’.   High performance comes from conscientiousness, persistence and resilience, and the ability to learn from experience. The offer of more money does not have much impact on these behaviours.  For example, people develop resilience rather than choose whether or not to be resilient depending on the bonus they are offered.

Of course, having to give people news about their reward that they probably won’t like is not easy.  The important factor for you is to establish why people are working for you – what is their trade off between job satisfaction and pay.  You can recognise their contribution, and create meaningful pride and satisfaction in a ‘job well done’, even if you have no control over the purse strings.