The question of what motivates employees more-financial compensation or things that are more intrinsic-is the subject of ongoing debate and new research. New research that shows no link between rising GDP and life satisfaction/happiness complicates the issue even further.
According to a 2010 Monster.com survey, the top-rated item on would-be employees wish list (87%) was an employer "that truly cares about the well-being of its employees." A challenging and fulfilling job was rated second, job security third, and an attractive benefits package was fourth. Financial compensation was rated much lower at 5th (66%).
This search is consistent with another research study conducted the employee benefits company Unum, in collaboration with Harvard Business Review analytic services. The study found an ethical, transparent corporate culture, and caring about the well-being of employees were more likely to be viewed in attracting and treating employees as was providing a high base salary.
According to the research of psychologists Tim Kasser and Richard Ryan, published in the Journal of Personality and Social Psychology, "the more people are driven by a desire to be wealthy, the poorer their psychological health on a range of measures."
G. Douglas Jenkins, at Arizona State University, writing on the issue of financial incentives, concludes when it comes to the issue of performance, incentives don't help, a finding that psychologist Janet Spence, in her research, reiterated. Alfie Cohen, author of Punished By Rewards, a long-term critic of extrinsic rewards as a motivator for performance, argues "no controlled scientific study has ever found a long-term enhancement of the quality of work as a result of any reward system." Cohen argues that employers and executives need to think about what employees need to be happy and fulfilled, rather than what rewards can be offered to get them to do what they are told.
A striking conclusion from other new research about the happiness-income paradox is that over the long-term-10 yeas or more-happiness does not increased as a country's income rises. According to this research, conducted by economist Richard Easterlin and his colleagues at the University of Southern California, it contradicts the conventional wisdom research that claims a rise in happiness levels occurs with improvements in GDP. Easterlin found measures of life satisfaction and happiness increased with improvements in democratization, in contrast to no connection between long term increases in life satisfaction/happiness with GDP improvements.
Recent evidence points to increasingly income inequality in North America, notably in the U.S., and the prevalence of media focus on the lives of wealthy celebrities, athletes and business people as though there was a clear correlation between the increased wealth of individuals and their absolute state of well-being and happiness.
So too, corporations continue the practice of attracting and retaining the best talent by focusing on financial compensation and incentives. Both perspectives are increasingly myopic and ignore the increasing mass of search that underscores what really motivates employees and creates conditions for improved performance.