Money, motivation and performance
This report aims to evaluate the statement: ‘the way to motivate employees is to pay them as much as they want'. It will review through several researches and counterpoints of money and motivating factors. By discussing and evaluating them, the report would have its approach to different perspectives on employees' motivation and performance.
The findings discovered different points and counter points on money as a motivation factor. These points also lead to different motivation theories which are the Maslow hierarchy of needs theory, the two factors theory, and the equity theory. Firstly, money seems to be the most important factor in motivating people. After a few decades, as the economy have its transformation and more studies and theories were conducted, the idea of motivating employees also altered by both businesses and scholars. However, none of these studies support the statement that paying employees as much as they want will motivate them to perform.
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It is clear that money has certain role motivating employees' performance and influence in most of the studies of motivation. Different researches and different theories were developed on this field, but none of them support the idea of motivating employees by paying them “as much as they want”. It is more reasonable to set up the payment base on employees' need, performance and equity than paying as much as employees want.
Work performance can be defined as the level efficiency and effectiveness of a person's actions, while motivation can be described as a ‘driving force within individuals by which they attempt to achieve some goals in order to satisfy some need or expectations' (Amaratunga & Baldry, 2002, p. 328). From the past few decades employers have had a need to understand what motivates their employees to do their best work. It can be explained by the growing and more competitive economy, in which businesses try to get the best productivity from the human resources of their organisation (Wiley, 1997). Follow (Amaratunga & Baldry, 2002), the report would assume performance as motivational determinant because of the essential influence of motivation on performance.
The purpose of this report is to discuss about employees' motivation. Focusing on the financial factors, it will reveal whether paying employees as much as they want will motivate them to perform. In addition, the report would discuss on different motivation theories.
It firstly discusses about studies that identify money as a motivation factor, and then evaluates the counterpoints. Additionally report will go over different motivational theories that regard to money. These theories will display different perspective of money as a motivating factor.
2.1 Money as a motivational factor
There have been numerous surveys revealed that money is one of the top factors that motivate people in the past few decades. Wiley (1997) reviewed that 40 years of motivation surveys in the U.S showed number one of the top five motivational factors ranked by the respondents is good wages. The analysis additionally concluded that pay or good wages is valued by all employees regardless of their gender, occupation, and income or employment status.
The analysis also explained money ability to satisfy needs of various levels on Maslow's Hierarchy of needs (section 2.3.1). Money allow people to purchasing items not only to satisfy their psychological and safety need such as food or shelter, but also cover higher-order needs such as the need of esteem.
On the other side of the Atlantic Series of research on Europeans business during the 1980s and 1990s that detected a strong relationship between performance and pay. From Institute of Personnel and Development (1998), cited in Brown & Armstrong (1999), 74% of employees responded to improve their performance after the business using the performance-related pay (Brown & Armstrong, 1999).
Both studies revised that money certainly is the motivation factor, but it appeared that money motivate employees more by satisfied what they need, not by paying the ammount that they want.
Eventhough the importance of money is undeniable as a motivating factor. There are also several researches questioning the role of a good wage. In (Wiley, 1997) the survey “factors that motivate me” in 1992 revealed that most people see money as the main motivation for their work. But also there are two groups that did not rank money as their first in their 1992 survey: the high income group (>50000$) and group of ages over 55. The group of high income employees rank good wage as their fifth most motivated factor, while the group of ages over 55 rank good wages as their second most important factors. Although the article did not discuss much about these two groups because of the insignificant difference of data in the analysis, there seems to be a trace that employees' motivating factors were changing regard to the economy and especially employees' income.
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Average income of the United States, from 1992, at the time the survey reviewed by Wiley, (1997) has significantly changed. According to (Saez, 2004) average income (including capital gain) of the U.S at the time of 1992 was 42 940 USD, but in 2004 it increased to 50820 USD. The data show that if the survey in 1992 classified employees who have their wages more than 50 000 USD as “high income”, then in 2004 the same wage of 50 000 USD would be considered “average income” (see figure 1). The change of income appeared to effect employees view of motivation factors.
Herzberg ( 2003) confirmed a change of how employees are motivated from the previous decades. The research presents the factor of good salary only contribute less than 8% to job satisfaction while a bad salary cause about 10% to job dissatisfaction (see figure 2). The article concluded salary was one of the Hygiene Factors, which contribute more as job dissatisfaction factor. It is always important for employers to understand that employees also need other motivation besides a good wage.
2.3 Motivation theories and money
2.3.1 The Maslow's hierarchy of needs theory
The theory was used to explain the result of the 1992 survey in Wiley( 1997). Maslow theorized that every human being has five needs: Physiological needs, Safety needs, Social needs, Esteem needs, and self-actualisation needs (Rossiter, 2009). Wiley(1997), conluded that the ability of money covers from the level of physiological needs to esteem needs.
* Physiological needs: these needs relate to life necessity such as food, shelter, and clothing. These needs can be satisfied mostly with money earn from work
* Safety needs: these need not only describe the context without physical danger, but also include a general comfort and security. These needs can be also be assure by a regular pay check;
* Social needs: these needs include human needs of relationship and acceptance. In this level of needs, money appeared to play a more supporting and less tangible role of purchased items than the main factor compare to physiological and safety need
* Esteem needs: these need involve with respect and admiration. In this level of needs, money contributes by purchasing high value items, and being recognised by its value of pride more than financial value.
* Self-actualisation needs: these need include self-improvement, growth, and achievement.
The theory identified the role of a good wage is to satisfy various needs, but there was none recommendation that employees should be paid as they want.
Even though the theory had no support and was not considered as a contemporary theory, it is wide known and remained popular because of its simplicity and certain application in psychology and business study (Robbins et al, 2008).
2.3.2 Two-factor theory
Mentioned as a counterpoint to the view of money motivating factor in the previous 2.2 section, Herzberg (2003), not only contributed research on motivational factor, the article also proposed the Two-factor theory. The theory suggested a separation between the factors that cause job satisfaction from those factors that create job dissatisfaction. In other words, the data suggest that opposite with “satisfaction” is not “dissatisfaction” but “no satisfaction” and therefore opposite of “dissatisfaction” is not satisfaction but “no dissatisfaction”. The theory also characterised various work factors into two groups: hygiene factors and intrinsic motivators (see figure 2).
* The hygiene factors, such as administration, salary and work condition, is considered is to make employees' work more comfortable, rather than motivate them
* Motivators are the factors that really motivate employees, such as achievement, recognition and the work itself.
As mentioned in the previous section, salary was measured as a hygiene factor, which means that a bad wage causes job dissatisfaction, while a good wage rather comforts the employees than motivates them. Paying as much as an employee wants, according to the theory, will not motivate employees to perform.
Additionally, Herzberg, in his study, recommended motivating employees with job enrichment. He stated at the beginning of the study “Forget praise. Forget punishment. Forget cash. You need to make their jobs more interesting” (Herzberg, 2003).
Like Maslow's theory, Herzberg studies was not supported and considered a contemporary theory of work motivation. Despite all criticisms, the theory is well-known and has great influence to business managers and scholars. (Robbins et al, 2001)
2.3.3 Equity theory
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A more contemporary and pay-related theory developed by Stacy Adams, in general, the theory believe that individuals motivations are provided by the inequity between their job inputs(effort, experience, education, and competence) and outcomes ( salary levels, raises, recognition) with others. Employees can compare themselves to friends, co-worker, neighbours, or past job and position they have. Those comparisons can be grouped into four types
1. Self-inside: the comparison between different position inside one's organisation
2. Self-outside: the comparison between positions outside one's organisation
3. Other-inside: the comparison to another individual or group inside one's organisation
4. Other-outside: the comparison to another individual or group outside one's organisation
When employees recognised inequity, the theory predicts they could make six choices:
1. Change their inputs
2. Change their outcomes
3. Change perceptions of self
4. Change perception of others
5. Choose a different referent
6. Leave the field.
Regard to payment, the theory also proposed:
* Given payment by time, over-rewarded employees will produce more than fairly paid employees. Hourly and salaried employees tend to increase their input side to bring back equity with the increased outcome
* Given payment by time, under-rewarded employees will produce less or poorer output. Hourly and salaried employees tend to decrease their input to create equity with the decreased outcome.
* Given payment by quantity of production, over-reward employees will produce quantity but more quality work unit.
* Given payment by quantity of production, under-reward employees will produce more quantity but less quality work unit.
The theory concluded that for most employees, motivation is influenced by reward. It is important for employee not only how much a business pay for him or her, but also the amount other employees got paid. It also suggested that money has symbolic value in addition to its financial values. Both under-paying and over-paying will have certain effect on employers' performance (Robbins et al, 2001). The theory generally recommended the motivating amount of payment should base on equity, not as much as employees want.
.Even though the theory had been developed originally decades ago; it is stilled validated by different researches despite the changing social and economic values (Shore, 2004).
Different perspectives and concepts about money and motivation have been developed during last couple of decades. In regards to the changing economy, more and larger study on the field of organisational work motivation was conducted. Answering the question: whether paying employees as much as they want would motivate them to perform? This report suggests ‘no'. After reviewing several studies and theory, the report recommend that in order to get better performance from employees, their payment should be based on employees' need, performance, and equity rather than paying employees “as much as they want”.
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