EMPLOYEE BENEFITS

Stop Paying Bonuses: Money Doesn't Motivate Employees

Paying bonuses and high salaries only makes things worse.
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Conventional wisdom says that people will work harder and smarter in order to earn more and more money.  Turns out that conventional wisdom isn't just dead wrong; it's tragically wrong.

According to author Dan Pink, extensive research shows that paying creative people bonuses for good performance not only demotivates them, but almost guarantees they will fail.

The research says that there are four things that lead to better performance:

  1. Fairness.  Knowing that you're being paid a reasonable amount for your work so that money no longer becomes an issue.
  2. Autonomy. Controlling events in your work life by choosing what you want to do and when you want to do it.
  3. Mastery.  Excelling at a craft that you enjoy and being recognized as a master by peers that you respect.
  4. Purpose.  Feeling that what your work is helping other people and changing the world in a positive way.

Anybody who's worked with a top engineering team knows that the above is true. The most creative and potentially profitable work usually gets done in the "skunk works" where the engineers aren't beholden to management.

I've seen the same thing in sales organizations. The top performers do make big money but what actually motivates them is beating the competition while remaining independent from the regular corporate BS.  The money is just the scorecard.

Ironically and sadly, though, many executives believe that to be effective they should 1) minimize salary costs, 2) control employee behavior, 3) encourage uniformity/predictability and 4) promulgate laughable "mission statements."

Such executives then try to use bonuses and stock options to motivate a handful of key employees (including themselves) thereby creating the mediocrity that's so characteristic of so many corporations, large and small.

With this in mind, I believe that if there were one true secret to motivating your employees, it would be this: Get out of the way!

Secure the resources your employees need: reasonable salaries, top quality tools and a business model that works.  Then make yourself available to settle differences, make the trade-off decisions, and provide coaching as necessary.

Then get out of the way and let your employees do their thing.

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Last updated: Oct 24, 2013

GEOFFREY JAMES | Columnist

Geoffrey James was recently named a "Top 40 Social Selling Marketing Master" by Forbes, and his blog has won awards from the Society of American Business Editors and the American Society of Business Publication Editors. His writing has appeared in publications as diverse as Wired, Brandweek, and Men's Health, and he is the author of numerous books, including The Tao of Programming, Business Wisdom of the Electronic Elite, and, most recently, Business Without the Bullsh*t: 49 Secrets and Shortcuts You Need to Know.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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