Wages: Sharing the Wealth

Penny-pinching bosses would like to believe that financial incentives don't motivate staffs and research has supported their claims. But one study confirms what employees have known all along: money matters.

Nina Gupta, Ph.D., professor of business administration at the University of Arkansas, analyzed 39 studies conducted over four decades and found that cash motivates workers whether their jobs are exciting or mundane, in labs and real-world settings alike.

So why the belief among some corporate consultants that money is irrelevant? "It's a myth," she says. Among the other fictions the study destroys: The beliefs that financial incentives are punitive, make workers lazy and lead to diminished quality.

Employers guarding their payrolls needn't worry. Gupta acknowledges that money isn't the only thing that concerns employees. Money's influence has its limits. Beyond a certain point higher salaries will make employees happier, but it won't buy better performance. Still, she warns that employers who dole out small merit raises -- less than 7 percent of base pay -- may do more harm than good. "Small raises can actually be dysfunctional in terms of motivation because employees become irritated that their hard work yielded so little," she observes. She advises employers who must give small raises to be careful about linking them to results, and scrupulous about being fair.

Find a Therapist

Search for a mental health professional near you.

Gupta says that her study should put an end to debate about the power of money, but probably won't. "If you admit that money is important, then you have to spend it," she notes, and many employers aren't ready for that. "They'd rather do gold stars. They're a lot cheaper."

Current Issue

Let It Go!

It can take a radical reboot to get past old hurts and injustices.