As business owners one of our jobs is to get the best our staff.  From time to time we get asked about performance related pay and bonuses and our response is always the same – beware!

Somewhere it has entered business culture that offering financial rewards or perks is an effective way to motivate staff.  Unfortunately study after study by psychologists disprove the theory.

There are numerous studies we could quote from but the one we have chosen is a study on the effects of rewards on children done by Mark R Lepper and David Greene from Stanford University and the University of Michigan.

A cohort of children were selected for their interest in and fondness of drawing.  The test consisted of inviting them into a room by themselves and asking them to draw for 6 minutes.  A randomly selected group were also told they would get a reward if they performed this task.

Then over the next few days the children were watched to see how much they continued to draw of their own accord.

The study revealed that those who had been rewarded almost spent half as much time drawing and the drawings produced were found have less artistic merit.

The implication is for these children the reward damaged their desire to draw.   The theory is that the reward interrupts the natural flow of enthusiasm for a task and introduces the idea that the task is something we are suffering for.  After all if we weren’t suffering why would we need to be rewarded for it?

If we follow the logic of these studies, clearly we will ditch rewards as motivational tool but it begs the question – how then can we motivate staff?

Here are Crunchers recommendations for an alternative:
  • Only employ people with a natural motivation to do the job you have in mind.  People need money to live, but some people do also love doing their jobs.  People who do their jobs well generally have an intrinsic love of the job well done.  We need to stop thinking we can provide that motivation to do the job well if they don’t have it innately.   Recruit in such a way that you find the people who just love the work, doing it well and your company.
  • Cultivate a culture of appreciation for the job well done.  We need to acknowledge and thank people publicly for the job well done and weed out those who fall below accepted norms otherwise those who perform well will feel like no-one cares about their good work.
  • As far as possible get pay to disappear as a motivation for doing the job.  This is a tricky one because people need a job for money.  They also don’t want their pay to communicate to them that they are not appreciated.  This will happen if you pay markedly less than the norm and is also a danger to anyone paying the minimum wage.  However we say that if people are doing the work for the money they probably won’t be doing a great job.  We recommend to have a transparent pay policy that everyone understands and takes away any question of why one person is getting paid more than another.  Our recommendation is to pay people at or a little above the market rate.  You don’t want good people leaving because they can get paid better elsewhere but you equally don’t want people staying because they can’t…that just leads to people staying for the wrong reason.
  • Find out as much as you can about what naturally motivates someone apart from enjoying the work and doing it well.  Then as far as possible see how you can facilitate them achieving what motivates them.  Perhaps someone loves organising social events – put them in charge of the Christmas party.  Perhaps someone really wants to progress in their career, provide them with that pathway even it means them eventually leaving you.  This is why regular reviews with staff are important so you can keep in touch with what is motivating your staff.
Finally having warned of the dangers of rewards, there is one type of reward that the above study found to be at least benign and perhaps even beneficial.  As well as telling some children about a reward for doing their 6 minutes of drawing some children were given a surprise reward for their efforts.  Those children went on to draw just as much as those who had not been given any reward and in fact drew slightly more, although not a statistically significant amount.

So if you are going to reward someone for their good work, do it without telling them, as a thank you, but make sure it doesn’t turn into something that is expected.