I like to keep an eye on a few Radio National podcasts, particularly All In The Mind and The Law Report as they often have interesting discussions which link back to the workplace.
A recent All In The Mind episode looked at the 'psychology of money' interviewing Claudia Hammond. While it explored the psychology from a social sense rather than directly from an employment perspective I still found it discussed a number of useful concepts worth expanding here.
Below us a mix of items both discussed in the show and from my own readings and experiences.
1. Consider salary increases in the right perspective.
This isn't referring to positions which are being paid well out of their relevant banding / market rate - that needs to be rectified as you may be filling the position with candidates operating at a completely different level to what you need or have a flight risk. This is referring to salary increases within appropriate bandings.
The value of $5,000pa increase to the incumbent of a role paying $60,000 will be substantively different to someone on $90,000. If you have a star performer and are providing a salary increase consider strategically how you position those increases.
For instance, if you had a budget for up to $8,000 increase on a $65,000 role (about 12.3%) there's a few options on the table. An employee on $65,000 would probably be pretty chuffed with a $5,000 increase and changing that to $8,000 probably won't provide a huge engagement benefit relative to the $5.000 already on the table.
Splitting it up however and providing the remaining $3,000 as part of a structured development program provides sustainable recognition over the longer term. I would argue with a greater net gain in employee satisfaction as you now have two meaningful increases rather than one plus a development plan.
In terms of organisational benefit you have the direct financial impact of paying the $3,000 at a later date. Furthermore at the end of this process you've either got an employee who has successfully developed to a new level of performance; or you've identified development gap and can bank the $3,000 for a more appropriate time or reinvest elsewhere.
2. Money as a motivator needs to directly link to behaviour you wish to see rather than a vague end goal.
This was touched on in the Radio National program. A study was done in America researching at the benefits of financial incentives for students and exam grades, the money was reasonably substantial ($1,800).
One group of students was provided the money if they simply produced good marks but was not provided further structure on how to achieve them.
Another group was paid to achieve specific tasks selected to assist them in reaching the goal (i.e reading specific books, researching and revising particular items. etc). It was this group that performed significantly better than the former.
If you have a performance and incentive scheme make sure it's specific enough that it targets relevant behaviours and actions that achieve your ultimate goal. A end of quarter bonus on meeting sales targets is nice and simple but how are your staff meeting that goal? is it in line with your organisational values? Do they know how to meet the goal or are they just swimming furiously up stream? Sure, too much structure can be an administrative burden and cause you to loose focus, but not enough and you might be inadvertently rewarding the wrong thing or ending up with an empty association.
3. Money isn't necessarily the motivator you need.
Not surprisingly if you ask an individual they will always tend to say they want more money and that it will motivate them more (why not!) but the research shows the link is not as strong as one would think. Thomas Chamorro-Premuzic wrote a great little piece summing up research on the subject here.
The results indicate that the association between salary and job satisfaction is very weak. The reported correlation (r = .14) indicates that there is less than 2% overlap between pay and job satisfaction levels. Furthermore, the correlation between pay and pay satisfaction was only marginally higher (r = .22 or 4.8% overlap), indicating that people’s satisfaction with their salary is mostly independent of their actual salary.
In addition, a cross-cultural comparison revealed that the relationship of pay with both job and pay satisfaction is pretty much the same everywhere (for example, there are no significant differences between the U.S., India, Australia, Britain, and Taiwan).
What I've tended to find from speaking with other senior HR practitioners is that its when employees start to experience gaps in the non-financial motivators that money comes in to fill the gap. Money on it's own isn't a great motivator when you're already paying in band for a role or beyond a certain point. This is somewhat mirrored in Thomas' own discussion from the research he reviewed "Quite simply, you’re more likely to like your job if you focus on the work itself, and less likely to enjoy it if you’re focused on money."
Do employees have a manager that provides an opportunity to learn and grow? Do they view their job as important for the organisation? Have they been praised recently? - these are the things that can make a real difference.
4. Money can backfire as a motivator if you're not careful.
A great example was discussed in the podcast where a fee was being introduced as a disincentive - unfortunately it didn't work.
And there are examples where it completely backfires, paying people things at all. And one of the best known of these is a series of studies that were done in nurseries in Israel, and they decided that what they would do was fine parents if they turned up late, which lots of nurseries now do, because they were fed up with parents constantly turning up a bit late to pick up the kids and one member of staff had to stay with some kids that were behind. And they thought this will be a brilliant idea, and they charged them quite a bit.
And yet it went so wrong, this plan, that within a week every single parent was late at least once, which was extraordinary. And so it changed a favour of the member of staff staying late and parents feeling guilty about that into a paid-for service. And so then if people were running late at work they thought, oh well, I'll just pay the money, it's worth it, I'll just pay the money. And so it is curious in a way that it went so wrong. And then they stopped making the payments and it didn't turn back again afterwards, which is really worrying, which means if you do want to bring in some sort of incentive scheme you really need to be sure it's going to work and to try it out to see what unexpected side-effects of that it might have, because if you going to crowd out people's altruism and people's kindness, then you need to be very careful about that.
Here money created the framework for new expectations and when those expectations became behaviour, removing the framework (money) didn't make a difference because they were already ingrained as standard practice. What's also interesting is that providing a fee became compensation for any social/emotional guilt.
Associating money with something can always bring with it subtle, but impact meanings - make sure you've considered potential consequences first before opening up the coffers hoping for an easy fix!
