BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

If Money Can Buy Engagement, Should Happy Employees Earn Less?

Following
This article is more than 9 years old.

Much has been said about the link between money and motivation. It is less intuitive, and more complex, than people think. Here's a three bullet-point summary for you:

1. Money does motivate: in most circumstances, it changes people's behaviour even if they are not more satisfied as a result - this is why most people say they would rather take a pay cut and work less, without actually doing it.

2. After a point, money does not motivate much, and it may even demotivate: this is why the correlation between pay and job satisfaction plateaus around the average salary.

3. Absolute pay motivates less than relative pay: relative to what? (a) how much you expect to earn; (b) how much you think you deserve to earn; and (c) how much your colleagues earn (the irrationality of human thinking has been highlighted numerous times by studies showing that people would rather take a 5% pay rise if their colleagues get a 0% rise, than a 15% pay rise if their colleagues get 40%, and so on).

In addition, the relationship between pay and satisfaction can be explained by adaptation theory, which posits that significant changes in happiness caused by extrinsic events (like a big bonus, promotion or pay rise) are quickly "spent" psychologically. So, most people may experience some excitement after they are rewarded for their efforts at work, but it is also true that they will soon revert to their previous levels of happiness or misery. As Oscar Wilde once said, "there are only two tragedies in life: one is not getting what one wants, and the other is getting it".

But what are the implications for employee engagement? Despite varying estimates of engagement levels, it is safe to assume that many managers around the world are concerned about engagement, not least because higher engagement tends to translate into higher productivity and vice-versa. This explains the proliferation of company-wide climate surveys, though employees are often sceptical about their value, particularly in the absence of any clear action following the survey results, which makes the whole process a box-ticking exercise.

Perhaps employers can look into customising their reward systems based on the results of their climate surveys. Of course, engagement data should remain anonymous but if employees reported their approximate income in these surveys, that would allow employers to examine the relationship between pay and engagement. If the science is correct, poorly paid people would be less engaged, but highly engaged workers should not earn a lot more than the average salary. If that were the case, employers may want to increase the salary of their worst paid employees, as well as lowering - or at least freezing - income for the most engaged workers. In fact, a side effect and added bonus of this could be attenuating the typical Pareto distribution found for performance and productivity rates across all jobs and organisations.

One problem is that this would probably lower people's engagement scores without changing their actual engagement levels. That is, as soon as people realise that they may get paid more if they are unhappy, and less if they are happy, everybody would try hard to come across as unhappy. In short, if disengagement led to higher financial rewards, even engaged employees would fake disengagement. Yet, that would leave us with a relatively smaller problem to solve, namely how to capture genuine engagement data: perhaps big data or behavioural metrics can replace or at least complement self-reports? Note also that the main goal of organisations is not to measure engagement, but to boost productivity.

Although this idea may sound crazy, and perhaps even unsettling, to some of you, there are plenty of real-world examples where similar reward schemes have been implemented:

1. Football: Wayne Rooney, Lionel Messi, and Luis Suarez were all rewarded with substantial pay rises or new contracts as soon as they displayed a lack of enthusiasm for staying in their clubs or expressed their openness to consider alternatives; moreover, their engagement and performance levels increased immediately afterwards (these are just some examples, and the same applies in other sports);

2. Academia: top universities around the world often pay lower salaries to most faculty than less prestigious institutions do; because they don't need to buy engagement with money (by the same token, weaker institutions often attract great talent because they pay them well - sometimes, then, money can buy engagement);

3. Most jobs: As this simple chart suggests fun jobs tend to pay a lot less than tedious ones, especially after controlling for social class and education; of course there is still substantial variability in engagement levels within each job type, but the point is that there already is a negative, compensatory, relationship between pay and engagement in some contexts.

Thus happy employees are often earning less than their alienated counterparts.

It would also be beneficial if employers - and especially managers - could begin to understand the individual needs, motives and drivers of their employees. Quite clearly, money does wonders for some people but it is a rather trivial incentive to others. And while money may still be the most effective career motivator in general, there are other powerful drivers that have been curiously neglected, such as the desire for knowledge, recognition, and particularly freedom. There appears to be a clear tension between money and freedom, whereby money is mostly used to constrain employees' freedom. This does not work well for everyone. As Bill Cunningham, the legendary New York Times fashion photographer said in a recent documentary about his life: "money is cheap; liberty and freedom are expensive". In the end, there is no universal currency for engagement.