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Any conversation around motivation and retention as it relates to financial rewards as incentive needs to consider a fundamental question: To what extent is the organisation interested in the evidence relating to the validity of incentives/rewards and performance? The research that exists on the relationship between performance and financial incentives reveals that, unless the employee is engaged in repetitive tasks, say in a manufacturing or piece work setting, performance reverts to what it was before the incentives were introduced, and then over time actually degrades it.

The evidence also indicates, and the work of Dan Ariely and others supports this, that when organisations are challenged as to the validity of using financial rewards to improve performance, they normally ignore the evidence and carry on as before. The financial sector is the best example of this, and you can understand why: aside from the clamour from outside the sector, financial institutions have every incentive not to change how they reward people so long as they connection between financial incentives and performance is not made.

So that leads on to another question: What is the fundamental reason why people coming to work, and what actually motivates them?

Douglas Macgregor back in the 60’s talked about 2 different mind sets about people and their motivation at work. Either they are generally lazy and either need a big stick or a carrot to perform (theory X) or that people genuinely come to work to do a good job and that an organisations role was to provide them with the tools they needed to do a good job which would be intrinsically satisfying (theory Y). That doesn’t mean to say that reward isn’t important, but what it does mean is that once people feel they have ‘enough’ it ceases to be a motivator. However, the whole question of what ‘enough’ is an interesting one and we could debate this endlessly!

And Dan Pink has arguably successfully debunked the notion that carrot & stick is a valid way of motivating people in organisations, pointing to three key factors in what really drives people:

  • Autonomy – am I trusted to do my job, and given sufficient and appropriate autonomy?
  • Mastery – do I have the skills/tools to do the job, and does my employer support me to develop them?
  • Purpose – what is my ‘why’? What meaning is there in what I am here to do?

Our Management Agenda 2014 research identified varying work motivations with age.  Financial rewards and the opportunity for promotion are most important for those of us in our twenties or thirties.  But as we get older these motivations decline and less tangible factors come into play such as the nature of the job, helping others succeed and a sense of fit between personal and organisational values.

A lot of people focus on the what of motivation, but forget about the how. The mental calculation that sits behind the how is normally based on 4 things:

  1. What is the performance standard that I’m expected to achieve and how clear am I on that?
  2. Do I have the skills, abilities or means to actually achieve that if I tried?
  3. Is there any way of me getting sufficient feedback to tell me how near or far from that goal I am, either from the task itself, or from my boss?
  4. Even if I do achieve what’s expected of me, will it lead to something I value? …and here we come back to Dan Pink and Mastery, autonomy and purpose for intrinsic rewards, or bonus, package, opportunities for extrinsic rewards?

The role of managers in the above is vital. The Management Agenda 2014 research found that 48% of managers are considering leaving their job because of poor management.  And managers themselves feel the challenge as they cite maintaining staff morale and engagement in their top three leadership challenges – managing change and managing workload are the other two.

Managers cannot motivate their staff, but they can create the conditions in which they could be motivated…sometimes simply by setting clear goals, giving them the tools they need, giving feedback and saying thank you when they’ve performed well…not rocket science but they will need help in achieving this.

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