Does Paying a Bonus Increase Motivation?

I was in a conversation with a friend recently, and we were discussing whether he should introduce bonuses into his organisation. And it reminded me of Maslow’s Hierachy of Needs. The American Psychologist, Abraham Maslow introduced the Hierarchy of Needs model in 1940-1950. Many would argue that his theory is still relevant today for understanding human motivation, management training, and personal development. And when it comes to money and business, human motivation is a critical thing to understand.

So I’d like to explore his thoughts and the thoughts of another psychologist in answering my friends question. It’s very easy to think that finance is always the strongest motivator in work, ‘Pay more, and you can expect them to work harder’ but I believe that if Maslow were involved in our discussions he would argue otherwise. I certainly would strongly disagree that paying more always increases performance.

Finance may be essential in ensuring someone’s ‘Physiological and Biological Needs’, but just slapping a bonus as an additional motivator for someone to work ‘above and beyond,’ perform to a higher standard, and produce outstanding results does not always work. I mean after all, look at the pay of many senior bankers, big bonuses and poor performance……..ooh did that slip out. How careless of me.

In fact, research has shown that money may only typically be a temporary motivator.

‘How much’ it motivates and for ‘how long’ is another matter. Yes if the person is strapped financially, it will have the ability to get them working hard. But similar to an itch, when you scratch it, you only bring relief for a short period of time. Finance often only brings that short sense of relief, but it is in danger of not creating that long-term sense of motivation and satisfaction. (I’m sure you’d like to be the guinea pig that is used to test and prove that this theory isn’t correct).

In answering the question ‘Does Paying a Bonus Increase Motivation?’ I felt Frederick Herzberg’s ‘Motivation and Hygiene Factors’ would be helpful. Herzberg (1923-2000), pioneer of ‘job enrichment’ and a clinical psychologist, is recognised for his insights and work in management and motivational theory.

Herzberg showed that whether someone was satisfied or dissatisfied at work arose from different factors. What motivated people at work and caused them to be satisfied was different to, and not simply the opposite of the factors which cause dissatisfaction.

Herzberg went on to say: “We can expand … by stating that the job satisfiers deal with the factors involved in doing the job, whereas the job dissatisfiers deal with the factors which define the job context.”

The Maintenance Factors are most important for a manager to look at before you try to add the ‘Motivators’ in place. Someone is not going to be motivated by recognition until they have job security in place. Equally, to try to motivate someone to think bigger, achieve more and go above and beyond, by dangling a carrot of ‘better work conditions’, will make very little difference if they are happy with their work surroundings. Instead they may respond far better to more responsibility, which recognises their capabilities. Understanding whether people’s ‘maintenance factors’ are met, helps to know how to motivate someone.

Which brings us back to the original notion of introducing bonuses. Is it a strong motivator or not?

A lot of it depends on the persons ‘interpretation’ of whether they have their basic financial needs met. And that’s a hard one to determine, because financial needs have become elastic for many as an affluent western society constantly pushes and expands on what someone should possess to feel like their ‘basic financial needs’ are met.

How many people do you know who are content with what they have? As a boss employing people, you’ll find it hard to compete with this lack of contentment mindset. Just one more digitalized, apped up, downloaded, flat screened, ecological and ergonomic ………(fill in the gap for yourself). Then I’ll be content.

John D Rockefeller, the German American oil magnate, and one of the richest men of all time famously was asked,

“How much money is enough?” Rockefeller replied: “Just a little bit more!”

And this feeling is the same for many. A little more. Just a little bit more. As we grow and develop in our thinking we understand the truth that money has less to do with how much our income is, and far more to do with how we manage what we have.

You may work with some people who always have a specific view of money, whose identity is based around the importance of more, and some personality types are certainly more prone to that way of thinking. For them money may always be a very significant motivator, until they are in a position to stand back from it, critique and where necessary to challenge the real significance of it.

But if people’s financial needs are met, they are being paid fairly, and they are not in ‘want’ for providing for themselves, families or dependents, then you may find a far greater level of motivation, that is not centered on more money.

As Herzberg puts it, this motivation may be in achievement, recognition, work, responsibility, advancement or personal growth. And as Maslow illustrates ‘Belonging, Esteem, Cognitive, Aesthetic, Self- Actualisation and Transcendence Needs’ become increasingly more important than purely money or job security.

An important emphasis in motivating others is to understand where your team, the individuals you work with and even yourself, would be in this process of development and motivation.

The danger is looking to motivating other people with what would motivate you.

The two are often very different and it can lead to disappointing results when you project what motivates you onto other people.

So does a good bonus structure motivate people to work? Yes and No. No and Yes. A bit of both. It depends on the people and the circumstances they are in.

And so it’s over to you. Please write and let us know where finance has motivated you and where it hasn’t. There’s no right or wrong answers- just give us some examples from your experiences. I’d be fascinated to hear your thoughts.

  • Jonathan Whiteman

    I like it Caleb.

    I would go as far as to say pay can nearly only be a demotivator.

    People very quickly believe that they are “worth” what they are being paid and shortly after that start to think they are worth more.

    A pay rise or bonus satisfies for a short while before the bar is psychologically raised again and the cycle continues.

    This doesn’t mean I think my boss should ignore £s in my next review ;-)

  • Harold Gardner

    I think that part of the problem is assuming that all bonuses are the same.  A bonus paid at the end of the year is just a different compensation strategy.  Any behavior changes related to it are tough to measure because it is typically across the organization, expected, and a long way from the employees actions.

    On the other hand, a much smaller bonus that is paid quickly preferably in cash can have a large temporary impact.  Sales spiffs work.  On a slow day, a hundred dollar bill taped to the sales board  for the next sale can generate a ton of energy.

    • http://www.calebstorkey.net Caleb Storkey

      A really great point Harold. 

  • http://twitter.com/ManuTosi Manuela Tosi

    Interessante.