



Do Your Employees Want Extra Pay or Extra Praise?

Thu, Feb 14, 2013


People like to toss money at problems. Leaders, managers and employers are no exceptions. A method to motivate employees and bring out their full productivity potential is needed. Till today, businesses rely heavily on money to get things rolling, but are these strategies effective?


Are Monetary Incentives Effective?


Are Monetary Incentives Effective

Eh, Sort of


To a certain extent, money can motivate people. This is especially true for low pay and low skill jobs. Money becomes an objective for certain individuals, motivating them to work harder in these instances.


Mechanical jobs which require little interest in them are best when incentivized through cash. These jobs are repetitive in nature and require little thinking. Given that, a less complex incentive will do the trick.


When comparing which incentive is the most convenient, money wins out without fail. It requires little thought on the part of an employer and little investment of time. As long as cash is in hand, an incentive exists. This is one reason why employers tend to gravitate towards cash incentives –they are easy, fast and effortless to provide. In comparison to indirect or intrinsic forms of motivation, monetary incentives do not need much skill on the side of the employer in order to be used.


But there are Problems


According to Maslow’s Hierarchy of Needs, once an individual has enough cash to sustain their basic needs, they will strive to achieve emotional and personal needs. Money can satiate a workers desire only if their basic ability to sustain themselves are lacking. Given that most modern workplaces deal with white collar workers, money as a motivational approach is ineffective for leaders to use. Instead, followers and employees yearn for higher order needs –as Dan Pink puts it: mastery, autonomy and purpose. Money cannot facilitate these desires.


Another problem exists: money destroys creative thought. The nature of the modern workplace is one that demands a worker to think beyond black and white. Money as a source of motivation is awful in achieving this. Rather than feel a connection to their job, as thus strive to be good at it, employees build a connection with the money you offer. Their performance is restricted by their own minds, where they only appreciate the cash and not the overarching purpose of their job.


Studies by economist Dan Ariely have shown that money narrows down thinking. This is useful when the task is repetitive as it facilitates concentration. However, the modern workplace rarely is in need of narrow thinking. Tasks often require some degree of critical thinking, not mere mindless concentration on detail. In this case, a monetary incentive may be unsuitable.


The Big Picture


Convenient it may be, but don’t consider it your silver bullet as a leader. Identifying the need for a monetary incentive is far more important than the actual incentive. Use it sparingly; acknowledging that at times, money may actually work against your desires as a leader.

Google+ Comments

3 Responses to “Do Your Employees Want Extra Pay or Extra Praise?”

  1. Sarah Park Says:

    I believe both extra pay and extra praise are equally important. Though most people if not all work for money, but being praised keeps people from continue to do good performance. Being praised boosts a person’s confidence that he can work a lot better more than what is expected of her.
    Sarah Park recently posted..Approaches to Human Resource PlanningMy Profile (dofollow)

  2. Naser Says:

    Both are required in equal proportions because people demand money and at the same time they demand self respect and praise.
    Naser recently posted..3 Most Fuel-Efficient CarsMy Profile

  3. Annetta Powell Says:

    @ Sarah Park:

    Thanks Sarah. I agree with you. These two are always needed to ensure that your employees are always inspired. I really appreciate your input all the time. :D

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