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People work in a context that influences their behavior. Part of that context is formed by the HR practices that aim to ensure that people want and can perform. Compensation is an important element of that. After all, people do work to generate an income. And then the question is how to shape a remuneration policy with the aim of obtaining the desired behavior sustainably. Especially in times of change, when people are asked to develop new habits and show resilience, it is good to take a closer look at reward practices. Because as is the case with many HR practices, compensation policies often have some undesirable effects. We have invited Dr. Hermina Van Coillie, motivation expert, to outline what to look out for.
The impact on Motivation.
A reward, such as a Salary, Bonus, or Appreciation Can Seriously Reduce Our Intrinsic Motivation.
If you reward for tasks that employees enjoy, find fascinating or meaningful, then this behavior comes under “control” of the reward and you increase their external motivation. Your employees will only work to get the reward. If you reduce or take away this reward, the intrinsic work motivation also decreases. The result is that instead of doubling motivation, both intrinsic and external motivation disappear.
I have never seen a bag of money make a goal
This negative impact of rewards on intrinsic motivation is called the ‘crowding out’ effect: Intrinsic motivation is pushed away by extrinsic rewards. What remains is external coercion: your behavior is controlled by others who decide whether or not to give you the reward. This controlled form of motivation is of lower quality, creates stress, negative emotions, and lower performance. And once the reward goes away, there is no motivation left.
When we experience rewards as controlling, i.e., when the salary, bonus, or compliment comes across as coercive, evaluative, or manipulative, our “want” motivation and well-being lowers. We then no longer engage voluntarily but from coercion. The reward is so central that the ‘overjustification effect’ occurs: when you are rewarded for an interesting or enjoyable activity, you will attribute the reason for your behavior to the reward and not to your initial interest or enjoyment. With all the negative consequences that come along: you feel controlled and develop external motivation. The quality of your performance deteriorates and you feel less good. But if rewards offer correct feedback, then they primarily have an informational function and increase our “want” motivation. Important in this story is that only this ‘will’ motivation improves performance and well-being.
What Should You Pay Attention to When Giving a Reward?
Here are the 5 questions you should ask yourself if you want to assess the motivational impact of your pay scheme.
Question 1: Is the reward tangible and noticeable, or is it verbal and discrete?
The negative effect of rewards on our “will” motivation is greater for tangible than for verbal rewards. This is because tangible rewards are more conspicuous. The more conspicuous the reward, the more likely employees will attribute their behavior to the reward, and the greater their undermining effect.
Question 2: Is the reward expected or unexpected?
Expected rewards lower our “want” motivation: If you do not expect a reward while working on the task, this reward cannot affect your ‘will’ motivation either. Thus, you do not get the impression that your behavior is “controlled” by the reward. Unexpected rewards do provide clear feedback on your performance and thus increase your “will” motivation. There is a catch here, however. Employees can begin to expect the “unexpected” rewards if they occur frequently.
Question 3: Is the reward dependent or not dependent on the task?
- You get the reward anyway.
Rewards that are not related to your performance do not put pressure you, but they also do not provide information about how well you did. Therefore, these rewards have little impact on your motivation and performance.
- You get your reward because you started the task.
To receive the reward, you don’t have to finish the task. Your monthly base pay is a classic example. These rewards provide little feedback on how well you have done something, and there is a risk that you are no longer really engaged in the task, but mainly in the reward that follows it. The intrinsic motivation then doesn’t get a chance, causing you to feel less good and perform less well. In a laundry, they wanted to use a material reward to lower absenteeism. And it worked for those who were regularly absent. But those who thought they had no chance of getting the reward that month, were even more often absent. The positive effect also proved to be short-lived: As soon as the program was stopped, absenteeism rose again. And not only for those who were frequently absent before the intervention, but also those who had excellent attendance records, were absent more often. And their efficiency dropped by 8%. In short, the program had negative financial consequences for the laundry. Managers had expected that the cost of the reward would easily “pay off” in increased attendance and productivity gains. But the program turned out to cost more than it brought in.
Be aware also that a higher base pay is indeed important and motivating. After all, employees see this as an expression of appreciation by the organization.
- You get your reward as soon as you finish your task, regardless of your performance.
Rewards that employees receive only because they have completed a task, put pressure on these employees. Again, you run the risk that their attention is no longer focused on the task itself, but on getting the reward. On the other hand, receiving the reward implies that you have performed well. That (implicit) positive feedback can partially compensate for the negative effect of the experienced control, but never completely. As a result, even this form of reward will undermine their “will” motivation, well-being and performance.
- You get your reward when you achieve a certain result.
This is the most familiar form of the classic pay-for-performance system. You get a higher salary or bigger bonus as soon as you meet certain performance standards. Think of bonuses for top managers and bonuses for sales people.
Performance-based rewards are “logical”: “when employees meet their goals, we can reward them, right?” “If performance fails, we don’t reward.”
There’s a hefty catch here, though. When rewards are tied to their performance, employees experience this as controlling. They have to meet a certain standard to get the reward. This negative effect may be somewhat compensated by the fact that they also provide information about their competence. But this positive effect does not outweigh the increased pressure. Thus, these rewards increase the “should” motivation and undermine the “will” motivation. As a result, the well-being of the employees decreases and the very best performance paradoxically stays out.
Employees who want to get their bonus at any cost, look for short-term routes to achieve their results and have less regard for those things that are not rewarded but still valuable to the organization. Think of knowledge sharing, helping colleagues and taking on extra projects.
In an insurance company, performance between employees with a stable base salary was compared with those with a sales performance bonus. It turned out that the base salary increased their “want” motivation. The bonus, on the other hand, did the opposite.
In a more extreme “Pay-For-Performance” program within the telecommunications industry, salespeople were not given a base salary, so their pay depended entirely on their performance. As it turned out, three-quarters had left the company within a year. A sky-high cost to the organization.
Question 4: Do you pay for simple or complex tasks?
Those who receive a bonus for doing “more of the same” in a simple task, with a focus on quantity, will perform faster and better. If, on the other hand, the work is complex, then a reward will just undermine the quality of your performance. It is harder to be creative and innovative when you are under pressure or looking forward to a reward. Speed does not go hand in hand with quality work here.Do you want quality, innovation, and creativity? Then a focus on intrinsic motivation or meaningfulness is much better for motivating than a reward.Glucksberg explored this through the “candle problem”. In the complex version, people are given a box of thumbtacks, a candle and matches. They have to fix the candle against the wall without the candle wax dripping onto the floor. They usually try to melt the candle with candle wax against the wall, use the thumbtacks to make a shelf, etc. It takes a while for them to realize that the thumbtack box can serve as a candle holder to attach to the wall with thumbtacks to put the candle in the candle holder. When given a reward, people take longer to arrive at this solution.
Why does this not work when rewarded? The task is relatively difficult. It requires creativity to see the box as a possible candlestick because it is presented as a holder for the thumbtacks (functional fixation). When people are initially given thumbtacks, a box, matches, and a candle, it is obvious that the box can also serve as a candle holder. In this easy version, the reward has no negative effect on the speed with which people solve the problem.
Question 5: Is the reward fair?
It is important that employees feel that rewards are distributed in a fair manner:- either because they get a fair share of the cake (distributive justice).
– or because the procedures followed to distribute rewards are fair and transparant (procedural justice).
What Does the Ideal Pay Look Like?
Do you want to reward your employees, and at the same time, do you want them to
- Work because they ‘want to’ and not because they ‘have to’?
- Deliver top performance?
- Feel good in their own skin?
- And do you also want this effect to spread over time?
Then give a fair remuneration that is not directly dependent on performance. Especially for more complex tasks. If you still want to reward your employees for their performance on these complex tasks, then know that a reward gives the best results and the least damage when it is unexpected, task-independent, non-controlling, and informative.
On the other hand, do you want to reward for simple repetitive work? Then consider a performance-based reward. This will mainly increase the quantity (and not the quality) of work in the short term (and not in the long term), but has no impact on ‘will’-autonomous motivation or well-being.
By the way, do you want to emphasize the connection with your reward? Then consider rewarding the entire team or organization when a team achievement is achieved.
Another fun case to close:
An international software company organizes a city trip every year if the overall business results are good. Everyone is invited to this, from the cleaning lady to the highest executive. Many companies provide trips like this only for salespeople because they are directly responsible for sales, but this company recognizes in this way the individual contribution of all its employees. The trip lasts three days: departure on Thursday afternoon, return home on Saturday evening. So it’s half private and half work. How do they determine whether the trip will take place? In the communal coffee room, there is a transparent tube. Every time a deal is struck, operations fill this tube with confetti. Everyone can follow the progress. As soon as the line ‘city trip’ is covered by confetti, the trip continues. Also important: no one has to go. It is on a voluntary basis. Because fun team activities are organized, this also benefits the involvement and connection. In this way, this organization involves and motivates all employees in its success in a fun way.
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”Otolith helps organizations to put their strategy into action by radically focussing on human behavior. Motivation is one important aspect of this. Often managerial practices and HR-processes generate undesired behavior. Work with us to get it right.David DucheyneFounder