Money – Motivator or Demotivator?

Whenever we discuss motivation in our courses, the common response is, “Yes, money is a motivator.” To test this, I say, “Imagine I could magically ensure you all receive a 50% pay increase starting tomorrow.” Initially, everyone seems pleased. But then I ask, “Will you work 50% harder, faster, or more efficiently?” The answer is usually no. You’ll just be 50% less dissatisfied with the aspects of your job that irritate or annoy you.

For almost 100 years, psychologists and management experts have tried to determine whether money is a motivator, demotivator, or a neutral factor. Throughout this time, the nature of work has evolved significantly. Nowadays, organizations don’t pay employees based on the number of widgets produced per hour. However, the mentality of such systems persists, especially in call centers where employees are compensated for the number of calls answered, not the number of satisfied customers or resolved problems.

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Key Questions about Money as a Motivator

• Does money make our job more enjoyable? 
• Does money buy engagement?
• Does money make us work harder or faster?
• Does more money produce better results?
• Does satisfaction with pay vary across cultures around the world?

The Role of Money in Motivation

Research shows that the answer to the above questions is generally no. But what does motivate and engage people at work? The answer is complex and varies by situation because people are inherently complex and different. However, certain basics emerge from the research:

1. Focus on Pay vs. Job Enjoyment:

• People focused primarily on their pay cannot enjoy their jobs.
• Those who dislike their jobs tend to focus more on money.
• Those who like their jobs focus on their work and the satisfaction it brings, rather than the money.

2. Link between Motivation and Salary:

• There is no direct link between motivation, engagement, and salary levels. Lower-paid workers exhibit the same tendencies as higher-paid ones.
• Financial incentives do not affect motivation when tasks are stimulating and use human skills.
• Financial incentives increase motivation for boring and repetitive tasks, but the effect is limited.

3. Impact of Salary Focus:

• The more people focus on their salaries, the less they focus on satisfying intellectual curiosity, using their experience, and learning new skills—essential elements for top performance.

4. Psychological Relationship with Money:

• People’s tendency to think or worry about money varies significantly. Different people value money for different reasons, such as power, freedom, security, or material possessions.
• Financial rewards based on pursuing power or overcoming self-doubt are less effective motivators than those based on intrinsic issues like self-improvement, family support, and leisure time. 

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Implications for Senior Management

If organizations aim for an engaged workforce, money alone is not the answer. In fact, even if the goal is to have employees satisfied with their pay, money is not the solution. To motivate employees, organizations must understand what their employees genuinely value, which will differ for each individual.

While personality traits (e.g., stable, extraverted, conscientious, agreeable) are better predictors of engagement and motivation, the biggest cause of disengagement in organizations is incompetent leadership. Therefore, management behavior and manager personality significantly impact whether employees are motivated and engaged. Organizations must design jobs and responsibilities that match the skills, experiences, personality, and desired level of intellectual challenge of each employee.

In summary, money does not buy continuous motivation or engagement. To foster a motivated and engaged workforce, organizations must look beyond financial incentives and understand the diverse values and motivations of their employees.