Money is a motivator that is effective in the short-term
In my experience, money is an extremely effective short-term motivator that excited people and gets them moving, but it also leads to employees ‘gaming the system,’ fraud, and lower quality work in order to achieve high outputs. If I offer a bonus to every employee, for instance, billing over 160 hours of professional services, for instance, my employees will search for time to bill and bill for low-quality idle time as well, in order to achieve their bonus. Need and greed are some of the motivators for fraud, and high money rewards (pay and bonuses) for performance increases can create an attitude of greed and entitlement rather than proper motivation to perform good work (Coenen, n.d.).
The National Business Research Institute says that “money is a crucial incentive,” but also claims that in order for money to work as a motivator, money has to be important to the person, it has to be a direct reward for performance, the employee has to think the reward for performance is big enough, and higher-performing employees must be rewarded with more money (Reed, n.d.). Money is a need in society as well as a “psychological symbol,” but there are many differences between people and their values that make the effectiveness of money vary widely (Chamorro-Premuzic, 2013).
A study cited by the Tomas Chamorro-Premuzic in his Harvard Business Review article shows that there is less than a 2% overlap between pay and job satisfaction, indicating that money is not the largest contributing factor to job satisfaction (Chamorro-Premuzic, 2013). Job satisfaction is not necessarily the same as motivation. People are motivated by a lot of factors. If an employee is in a position where making more money is crucial to survival, for instance, they will be highly motivated to by money. The Harvard Business Review article does state that intrinsic motivations (happiness, enjoyment, curiosity, challenge, joy of learning) are much more effective motivations than external motivations like money (Chamorro-Premuzic, 2013).
Intrinsic motivators are better than money
Intrinsic motivation in the workplace can be developed by giving employees autonomy to be creative and control their work, giving them the tools and responsibility to master their work, and giving them a vision and purpose toward the business objective (Hearn, 2018). Employees need to know how their work leads to success and they need to be recognized for it, hopefully by celebrating it (White, 2015).
On a short-term basis, money is an effective extrinsic motivator toward a specific goal, but should only be used when absolutely necessary, as it is not sustainable (Hearn, 2018). Money is overused as a motivator, and may be the most frequently used motivator (White, 2015). Pay is viewed as a basic hygiene factor, rather than a motivator, in the long term (Hearn, 2018). People always want more money. In order to motivate in the long run, it is important to develop intrinsic motivators.
Chamorro-Premuzic, T. (2013, April 10). Does Money Really Affect Motivation? A Review of the Research. Harvard Business Review. Retrieved from https://hbr.org/2013/04/does-money-really-affect-motiv
Coenen, T. (n.d.). Greed and Need as Motivators to Commit Fraud. allBusiness. Retrieved from https://www.allbusiness.com/greed-and-need-as-motivators-to-commit-fraud-4969123-1.html
Hearn, S. (2018, December 21). Money as a Motivator – why it’s intrinsically meaningless. Retrieved from https://www.thehrdirector.com/features/reward-and-recognition/money-motivator-meaningless/
Reed, C. (n.d.). The Truth about Motivating Employees to be More Productive. National Business Research Institute, Inc. Retrieved from https://www.nbrii.com/employee-survey-white-papers/the-truth-about-motivating-employees-to-be-more-productive/
White, D. & P. (2015, June 23). Money Is Nice, But It’s Not Enough to Motivate Employees. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/247333