To What Degree is Money Can Be A Motivator for Employees to Perform Better?
Tenner (2018) stated that one of the most effective ways for leaders to gain their members’ enthusiasm and cooperation is by positively influencing their motivational needs. While Lipman (2013) stated that one of the steps to motivate employees is to Align individual economic interests with company performance. From these two statements, we can conclude that economic interests (in this case, money) can be one of the motivators for employees to perform better.
However, according to the survey done in 2005, it was found that the impact of money as a motivational factor will depend on the company culture itself. For example, for Industrial company employees, the most important motivators are challenging tasks, open and honest communication, credit for well-performed work, result-oriented culture, and influence. While the most important motivators for a commercial company where the culture is sales and result-oriented are money, challenging tasks, a good working environment, credit for well-performed work, and open & honest communication.
However, money only affects the lowest order needs of Maslow’s Hierarchy of Needs, which is the physiological needs. Thus, money will be considered significant only for the employees who are still struggling to fulfill their basic needs, while employees who have a different level of needs tend to not consider money as the most essential motivational factor.
According to the research done by Thomas Chamorro in 2013, the association between salary and job satisfaction is very weak. The reported correlation (r = .14) indicates that there is less than a 2% overlap between pay and job satisfaction levels. Furthermore, the correlation between pay and pay satisfaction was only marginally higher (r = .22 or 4.8% overlap), indicating that people’s satisfaction with their salary is mostly independent of their actual salary.
Nevertheless, this finding is only valid for the middle-up workers who already fulfilled their basic needs. As for the workers who work at a monetary-based commercial company or for workers who work at low-wage jobs, money will be an important factor.
What have we learned about the relationship between pay raises and performance from experts?
A monetary reward system that credited well-performed work is a good motivator for employees to perform better. Tying the pay raises to the performance of the employees will encourage a competitive workforce, thus increasing the level of productivity that will lead to profits.
The employees will be encouraged to innovate and improve their techniques to work more efficiently. By tying pay raises and performance, the company shows to their employees that they value and encourage good performance by monetary rewards which will increase the morale of the employees and increase the loyalty to the company itself.
References
Does money really affect motivation? A review of the research. (2013, April 10). Harvard Business Review. https://hbr.org/2013/04/does-money-really-affect-motiv
Mcleod, S. (2020, December 29). Maslow’s hierarchy of needs. SimplyPsychology.org. https://www.simplypsychology.org/maslow.html
Does money motivate performance and employee behaviour? (2020, September 23). SmartHR. https://www.smarthr.co.za/does-money-motivate-performance-and-employee-behaviour/
Laegaard, J. & Bindslev, M. (2006). Organizational theory (1st ed). Ventus Publishing & Bookboon.com.
Note:
This article is written based on University of The People Organizational Behavior (BUS 5113) written assignment by Fristy Tania in September 2021
