Money, in the form of pay or some other sort of remuneration, is the most obvious
extrinsic reward. Money provides the carrot that most people want.
Doubts have been cast by Herzberg et al (1957) on the effectiveness of money because, they claimed, while the lack of it can cause dissatisfaction, its provision does not result in lasting satisfaction. There is something in this, especially for people on fixed salaries or rates of pay who do not benefit directly from an incentive scheme. They may feel good when they get an increase; apart from the extra money, it is a highly tangible form of recognition and an effective means of helping people to feel that they are valued. But this feeling of euphoria can rapidly die away. Other dissatisfactions from Herzberg’s list of hygiene factors, such as working conditions or the quality of management, can loom larger in some people’s minds when they fail to get the satisfaction they need from the work itself. However, it must be re-emphasized that different people have different needs and wants and Herzberg’s two-factor theory has not been validated. Some will be much more motivated by money than others. What cannot be assumed is that money motivates everyone in the sameway and to the same extent. Thus it is naive to think that the introduction of a performance-related pay (PRP) scheme will miraculously transform everyone overnight into well-motivated, high-performing individuals.
Nevertheless, money provides the means to achieve a number of different ends. It is a powerful force because it is linked directly or indirectly to the satisfaction of many needs. It clearly satisfies basic needs for survival and security, if it is coming in regularly. It can also satisfy the need for self-esteem (as noted above, it is a visible mark of appreciation) and status – money can set you in a grade apart from your fellows and can buy you things they cannot to build up your prestige. Money satisfies the less desirable but still prevalent drives of acquisitiveness and cupidity.
Money may in itself have no intrinsic meaning, but it acquires significant motivating power because it comes to symbolize so many intangible goals. It acts as a symbol in different ways for different people, and for the same person at different times. As noted by Goldthorpe et al (1968) from their research into the ‘affluent worker’, pay is the dominant factor in the choice of employer and considerations of pay seem most powerful in binding people to their present job.
Do financial incentives motivate people? The answer is yes, for those people who are strongly motivated by money and whose expectations that they will receive a financial reward are high. But less confident employees may not respond to incentives that they do not expect to achieve. It can also be argued that extrinsic rewards may erode intrinsic interest – people who work just for money could find their tasks less pleasurable and may not, therefore, do them so well. What we do know is that a multiplicity of factors are involved in performance improvements and many of those factors are interdependent.
Money can therefore provide positive motivation in the right circumstances, not only because people need and want money but also because it serves as a highly tangible means of recognition. It can also be argued that money may be an important factor in attracting people to organizations and is one of the factors that will influence their retention. But badly designed and managed pay systems can demotivate. Another researcher in this area was Jaques (1961), who emphasized the need for such systems to be perceived as being fair and equitable. In other words, the reward should be clearly related to effort or level of responsibility and people should not receive less money than they deserve compared with their fellow workers. Jaques called this the ‘felt-fair’ principle.
Doubts have been cast by Herzberg et al (1957) on the effectiveness of money because, they claimed, while the lack of it can cause dissatisfaction, its provision does not result in lasting satisfaction. There is something in this, especially for people on fixed salaries or rates of pay who do not benefit directly from an incentive scheme. They may feel good when they get an increase; apart from the extra money, it is a highly tangible form of recognition and an effective means of helping people to feel that they are valued. But this feeling of euphoria can rapidly die away. Other dissatisfactions from Herzberg’s list of hygiene factors, such as working conditions or the quality of management, can loom larger in some people’s minds when they fail to get the satisfaction they need from the work itself. However, it must be re-emphasized that different people have different needs and wants and Herzberg’s two-factor theory has not been validated. Some will be much more motivated by money than others. What cannot be assumed is that money motivates everyone in the sameway and to the same extent. Thus it is naive to think that the introduction of a performance-related pay (PRP) scheme will miraculously transform everyone overnight into well-motivated, high-performing individuals.
Nevertheless, money provides the means to achieve a number of different ends. It is a powerful force because it is linked directly or indirectly to the satisfaction of many needs. It clearly satisfies basic needs for survival and security, if it is coming in regularly. It can also satisfy the need for self-esteem (as noted above, it is a visible mark of appreciation) and status – money can set you in a grade apart from your fellows and can buy you things they cannot to build up your prestige. Money satisfies the less desirable but still prevalent drives of acquisitiveness and cupidity.
Money may in itself have no intrinsic meaning, but it acquires significant motivating power because it comes to symbolize so many intangible goals. It acts as a symbol in different ways for different people, and for the same person at different times. As noted by Goldthorpe et al (1968) from their research into the ‘affluent worker’, pay is the dominant factor in the choice of employer and considerations of pay seem most powerful in binding people to their present job.
Do financial incentives motivate people? The answer is yes, for those people who are strongly motivated by money and whose expectations that they will receive a financial reward are high. But less confident employees may not respond to incentives that they do not expect to achieve. It can also be argued that extrinsic rewards may erode intrinsic interest – people who work just for money could find their tasks less pleasurable and may not, therefore, do them so well. What we do know is that a multiplicity of factors are involved in performance improvements and many of those factors are interdependent.
Money can therefore provide positive motivation in the right circumstances, not only because people need and want money but also because it serves as a highly tangible means of recognition. It can also be argued that money may be an important factor in attracting people to organizations and is one of the factors that will influence their retention. But badly designed and managed pay systems can demotivate. Another researcher in this area was Jaques (1961), who emphasized the need for such systems to be perceived as being fair and equitable. In other words, the reward should be clearly related to effort or level of responsibility and people should not receive less money than they deserve compared with their fellow workers. Jaques called this the ‘felt-fair’ principle.
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