Wages: Sharing the Wealth

Money really does motivate workers. So why the belief that money is irrelevant?

By Peter Rebhahn, published on May 1, 1999 - last reviewed on August 16, 2005

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.

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."