Salary review: Show me the money

When it comes to salary there’s only one motto: “show me the money”… If pay generously people will work harder. Right? Unfortunately when it comes to money it’s not as straightforward as it might seem. Very often people don’t choice the job with the biggest paycheck nor do they stay because of the benefits. Boosting performance only by putting a bonus in front is also not necessarily the most effective thing to do.

But how can you boost performance? The AMO-model states that there are three elements that define performance: Ability, Motivation and Opportunity. Knowhow as in ability can not directly be boosted with money. From an opportunity angle, well maybe the possibilities grow ever so slighty if you provide a faster laptop but still, all within margins at best. Leaves us with motivation.

There are two types of motivators; extrinsic and intrinsic. If you do (or don’t do) something because of a reward (or punishment) we speak of an extrinsic motivator. Intrinsic motivators are more complex and linked directly to your personality traits (see the blog on The Big Five). Motivation for work is a combination of the two. However it’s not as simple as adding 1 and 1 together. The next example will show you as much.

A manager wanted to stimulate her employee by adding a task she did in addition to her normal workload to her performance management goals. This way something she really liked doing without strings attached would exactly benefit her financially. Win-win! Unfortunately that year the employee didn’t reach her goals at all. The cool job she picked up volantarily became ‘work’ an obligation. Her intrisic motivation dropped instantly, and the bonus.. ah well..

Everybody needs to pay their mortgage, but if there are no money problems the impact of pay should not be overestimated. This doesn’t mean you can just replace this year’s bonus with a personalized christmas card. Rewards should do just to the position, the performance and the (labor) market. One final tip, please don’t wait for your employee to come and ask for more money with a competetive offer in hand. Even if you top the amount, the immaterial damage is done.