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Thoughts on Motivating With Money


We All Like and Need Money but Should We Use It to Motivate Employees?

I think we can all remember our first real job and how much money we were going to make. We were going to be able to buy that new house, the new car, pay off some bills, etc. We could buy more nice things for ourselves and our families.

Then, we get our first paycheck and see how much Uncle Sam takes, and we take a step back from our dreams of grandeur. That high level of motivation we had suddenly was not quite so high.

We soon became accustomed to that level of income. But, were we highly motivated because of the money? It seemed like our standard of living matched our income and in order to raise our standard of living, we needed more money. And so the cycle began – we get more money, and then our standard of living improves, our expectations for money increases, and so on.

In my consulting business, I have helped many companies work on methods to motivate employees. Money is always a part of the discussion. Bonuses, raises, performance-based incentives, cost of living increases, etc. are all considered.

My advice has always been that if you are going to make adjustments to employees’ income, make sure you plan it out, get a lot of perspectives on it, and dry run the plan several times. Even then, people will get nervous when they hear their money is going to be affected in some way. And yes, even if they get increase people will be skeptical. If you are looking for ways to motivate with money, here are some things to consider.

Money does not equal job satisfaction. Simply because an employee gets a substantial raise in income does not mean they will all of the sudden become more engaged in their work. Credible research by companies like Gallup have over and over found that job satisfaction levels at the top pay grades are pretty much the same as job satisfaction levels at lower pay grades. So, in a nutshell, more money does not mean employees will be highly motivated.

You cannot give money fast enough. Most people, when their incomes go up, find some use for that additional money. We all know that adequate savings are a challenge for American workers. When we get a raise, we feel great about it but our standard of living soon catches up to that income. As an organization, unless you have unlimited funds to keep doling out to keep people happy, you cannot give money fast enough to keep people motivated to achieve more.

More money can be a demotivator. The strongest form of motivation for humans is what is called intrinsic motivation. This is also known as self-motivated. Having high levels of self-motivation is what drives us to achieving greater levels of performance. Research has found that higher levels of pay actually cut into self-motivation. If we start seeking more and more money, our internal drive to achieve diminishes. Research has also found that once our basic needs are met, the effects of more money are questionable. Daniel Kahneman and Angus Deaton reported that, in the U.S., emotional well-being levels increase with salary levels up to a salary of $75,000 – but that they plateau afterwards.

Giving money is easy. Time and time again, when I have met with executives to discuss workers being dissatisfied I heard, “Can we just give them more money?” Money is easy to quantify and measure, so it is often the default fix. More and more money will certainly increase greed but the jury is out as to whether or not it truly increases performance and motivation. I have worked with companies that have an “up or out” culture. Either employees get promoted or they get terminated. More money and power are the incentives to get promoted. In those cultures, teamwork and collaboration are typically sorely lacking.

Performance-based incentives are challenging. To get around the arbitrary nature of across-the-board increases, many companies tie increases directly to performance. In theory this is great, but to do it properly requires a lot of training and coaching. Managers must be educated on how to write solid goals and get employees engaged in achieving those goals. Not everyone has equal ability, so do the goals reflect the differences in ability? Setting individual goals and tying money to them may have a dramatic effect on cross-functional collaboration. People may be looking only for number one.

There are a lot of things to consider when thinking about using money to motivate. Certainly, everyone wants more money to make their lives more secure and joyous. Money is just one piece of the motivation puzzle. Make sure your management team is skilled at all the other pieces of the puzzle – coaching, praise, listening, caring and development. Those are the true motivators in the long run.


Steve Schumacher is a management consultant, trainer and public speaker with more than 25 years of experience in numerous industries throughout North America, including aggregates operations. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..