Managers ignore employees' motivation at their own peril. Gallup estimates that disengaged workers cost businesses $300 billion in profit each year. Motivating people to do their best work, consistently, has been an enduring challenge for executives and managers. Yet, managers cling to obsolete and counterproductive beliefs about what motivates employees, beliefs that actually harm productivity and employee well-being.

Definition of Motivation

What do we mean by motivation? It's been defined as a “predisposition to behave in a purposeful manner to achieve specific, unmet needs and the will to achieve, and the inner force that drives individuals to accomplish personal and organizational goals.” And why do we need motivated employees? The answer is survival. Motivated employees are needed in our rapidly changing workplaces, and to be effective, managers need to understand that and do something about it.

 Some Myths About Employee Motivation

There are persistent myths about employee motivation in organizations, perpetuated by leaders and managers, that actually harm productivity and employee work satisfaction. Here are some of them:

Myth 1: Money is the best motivator. It seems like business leaders in North America have never met a problem they didn't think could be solved by throwing money at it. The myth that high pay is the biggest motivator in the workplace persists partly because it's such an easy fix from a management standpoint. Psychologists Tim Kasser and Richard Ryan published a study in the Journal of Personality and Social Psychology on the topic, in which they argued “the more people ae 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 in the Journal of Applied Psychology, concludes that when it comes to the issue of performance, financial incentives don’t help. Alfie Cohen, author of Punished By Rewards, and a long-time 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 financial reward system.” And according to a 2010 survey, the top-rated item on would-be employees wish list (87 percent) was an employer “that truly caress 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 lower at fifth.           

 Myth 2: The “Carrot and the Stick” Is The Best Motivation System

The traditional framework and argument for this myth is essentially telling employees one of two things: “Do this and you’ll get paid well and maybe a bonus,” or “don’t do this, and you’ll get an unsatisfactory appraisal, demoted or fired.” Stephen P. Robbins, author of The Truth about Managing People, argues the system ignores the problem of how rewards will flow from performance appraisals; the assumption that good individual performance will lead to good organizational performance; and that no all employees want the same kind of rewards.

 Myth 3: Happy Workers Are Productive Workers

Many people assume satisfied workers are naturally more productive. This theory often plays out as flexible work hours, onsite childcare and workout facilities, and generous benefits packages. While these amenities are excellent benefits, they aren’t really incentives for high performance. While studies show a correlation between job satisfaction and productivity it is not a strong correlation. The evidence suggests that productive workers who take great pride in and have a strong sense of meaning in their work are more likely to be happy workers, rather than the reverse.

What Research Tells Us About Motivating Employees

McKinsey & Company noted that employee motivation is sagging throughout the world—morale has fallen at almost half of all companies, according to another McKinsey survey —at a time when businesses need engaged leaders and other employees willing to go above and beyond expectations. Organizations face the challenge of retaining talented people amid morale-sapping layoffs that tend to increase voluntary turnover over the medium term. Often, top performers are the first to go. Strong talent management is critical to recruit new ones from, for example, the financial sector, who have been laid off from their employers or feel disenchanted with them.

A McKinsey study looked at the issue of motivation. The participants viewed three non-financial motivators—praise from immediate managers, leadership attention (for example, one-on-one conversations), and a chance to lead projects or task forces—as no less or even more effective motivators than the three highest-rated financial incentives: cash bonuses, increased base pay, and stock or stock options. The survey’s top three nonfinancial motivators play critical roles in making employees feel that their companies value them, take their well-being seriously, and strive to create opportunities for career growth. These themes recur constantly in most studies on ways to motivate and engage employees. The study found that these three nonfinancial incentives are even more effective motivators than the three highest-rated financial incentives. Yet executives themselves may be equally influenced by other things, they still think that bonuses are the dominant incentive for most people. “Managers see motivation in terms of the size of the compensation,” explained an HR director from the financial-services industry.

Dan Ariely, a behavioral economist, has studied the issue of employee motivation and given a great Tedx Talk on the matter. “When we think about work, we usually think about motivation and payment as the same thing, but the reality is that we should probably add all kinds of things to it: meaning, creation, challenges, ownership, identity, pride, etc.,” Ariely explains. Among the conclusions he makes is the following:

  • The less appreciated we feel our work is, the more money we want to do it;
  • The harder a project is, the prouder we feel of it;
  • Knowing that our work helps others may increase our unconscious motivation
  • Positive reinforcement about our abilities may increase performance;
  •  Images that trigger positive emotions may actually help us focus.

Writing in The Harvard Business Review, authors Nitin Nohria, Boris Groysberg and Linda-Eling Lee describe a new model of employee motivation. They outline the four fundamental emotional drives that underlie motivation as: The drive to acquire (the acquisition of scarce material things, including financial compensation, to feel better); the drive to bond (developing strong bonds of love, caring and belonging); the drive to comprehend (to make sense of our world so we can take the right actions);and the drive to defend (defending our property, ourselves and our accomplishments).

Norhria and associates argue that managers who try to increase motivation must satisfy all of these four drives. Best practice companies have initiated reward systems based on performance; addressed the bond drive by developing a corporate culture based on friendship, mutual reliance, collaboration and sharing; addressed the drive of comprehend by instituting job design system where jobs are designed for specific roles, and those jobs are meaningful and foster a sense of contribution to the organization. And finally to address the defend drive, best practice companies restructure their leadership approaches to increase transparency of all processes, ensure fairness through the organization and build trust and openness with everyone.

In his new book, Drive, Daniel Pink, describes what he says is "the surprising truth" about what motivates us. Pink says that true motivation boils down to three elements: Autonomy, the desire to direct our own lives; mastery, the desire to continually improve at something that matters to us, and purpose, the desire to do things in service of something larger than ourselves. Pink, joining a chorus of many others, warns that the traditional "command-and-control" management methods in which organizations use money as a contingent reward for a task, are not only ineffective as motivators, but actually harmful.

Research from Amy Wrzesniewski, a Yale School of Management professor of organizational behavior, and Barry Schwartz, a Swarthmore College professor of psychology reported in the New York Times Gray Matter column analyzed data on the motivations of more than 10,000 West Point cadets, as well as evaluations of their eventual performance at the school and later in their military careers, the researchers looked at what sort of motivation is most effective. Is it best to have an internal motive (i.e. to serve one's country), an instrumental motivation (like having a good, solid career with the military), or a mix of both? Instinct suggests the more motivations the merrier, but that's not what the data showed. Put simply, doing the work for its inherent rewards alone proved a surer path to success than doing it for both its more intrinsic joys and external rewards like good pay and acclaim. The implications go far beyond military academies, the scientists claim. "Our study suggests that efforts should be made to structure activities so that instrumental consequences do not become motives. Helping people focus on the meaning and impact of their work, rather than on, say, the financial returns it will bring, may be the best way to improve not only the quality of their work but also--counterintuitive though it may seem--their financial success," they state.

Despite the substantial amount of research that points to intrinsic factors having the most positive impact on employee motivation, managers in organizations continue to favor extrinsic motivation, particularly financial incentives as the preferably method to improve employee motivation, productivity and job satisfaction. It’s time that practice caught up with behavioral science.

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