Motivation and emotion/Book/2016/Employee motivation and money

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Employee motivation and money:
How effective is money as a motivator for employee performance?

Overview[edit | edit source]

The study of motivation is to answer the question: why do people do what they do? There are many different answers to this question, [grammar?] the same action can be performed for different reasons on different occasions, meaning that there can be many different motivators for the same behavior, or it may be that a combination of many motivators are required to finally result in action. So researchers are constantly trying to investigate even further, changing the question to be slightly more specific such as: how much does a certain factor contribute towards a certain behavior. Organizational researchers are specifically interested in employee behavior and motivation. There is constant research being conducted to find out what motivates employees to work. An obvious motivator for employment is money, [grammar?] at the most basic level, the primary motivation for a person to seek employment, or to work is for them to get paid for their work. Money alone is not enough to keep employees engaged in the work, but it is a major motivational factor to work in the first place.

Key questions to consider:

  • Why is money such a powerful motivator?
  • At the same time, why is money ALONE not enough motivation?
  • What factors (other than money) drive employee performance?
  • How influential is money when making a career choice?

Money[edit | edit source]

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History of money[edit | edit source]

Figure 1. Coins and bank notes are modern forms of currency.

This is a brief overview of the rich and complex history of money, to help contextualise its meaning to society today, which will aid in understanding its motivational power. Money is as any valuable object that is accepted as an exchange for products or services (Laidler, 1969). People have been using this medium of exchange for thousands of years, even before the common money systems that we know today such as coin and paper money currency, or digitally represented money such as the money that is in bank accounts.  The earliest known exchanges were in the forms of livestock and grains (Hudson, 2004). Depending on the area, or what the society at that time considered valuable items such as shells, beads or pebbles could also be exchanged as monetary which then became exchange of metals such as gold or silver, where from there the idea of coins originated (Trubitt, 2003). Paper money originated in China during the 11th century and is commonly found in the currency of most countries today (Von Glahn, 2005).

Money in today's society[edit | edit source]

"Money is the motivation". This is a phrase that is said quite often, in rap songs, in business, on inspirational quotes, but what does it really mean? The world and society is built around money (Friedman, 1970). Businesses are designed to generate money, and create jobs to hire people who will earn money, so that they can afford to buy things from businesses and the cycle continues. So, in a sense it is true that "money makes the world go round".

Especially in a first world economy where a nation's performance is measured in financial units. Money has become a symbol of success on a personal level as well. The [which?] society today is a consumerist society, which means its success is reliant on the cycle previously mentioned, on creating products and paying people to be able to purchase those products, and repeat (Soddy, 2015). Even in the poorest countries, where money is scarce, the value of money to increase the quality of life is even more obvious. Most important fact about money, is that it is a limited resource although the human demand for money is unlimited, which is why although it is highly desirable to be rich, only a few can truly reach those limits.

Money as motivation for unethical behaviour[edit | edit source]

The incentive theory best explains the use of money as a prize for engaging in behavior that people normally wouldn’t partake in. Money is used as an incentive for many various things, such as a reward for reporting a crime, a reward for finding someone’s pet or a bonus package at work for doing a good job (Locke, 1968). In the workplace, sometimes the incentive of money can be the basis for acting unethically. Unethical behavior is defined as any action that lies outside of the moral code of conduct of a person, the organization they belong to, or the industry they are operating in. A study on unethical behavior found that occurrences of unethical behavior were more frequent when the behavior was rewarded with money as an incentive, than when it was not rewarded at all (Hegarty & Sims, 1978).

This is also seen in real life cases where multiple fraudulent trades are made on Wall Street, with large sums of money being the root and cause of the fraudulent behavior, which continues to happen because of the reward that it brings. Therefore these workers are intentionally breaking their own moral code, the ethics of the trading business and the rules of the industry which outline what kind of behaviors are unethical or fraudulent, all because, to them, the reward of making millions of dollars is much higher than considering the morality (Santoro, 2013)

Money as motivation for employees[edit | edit source]

It has been established that money alone is not enough motivation for employees, however, even if the perfect company existed, that provided the right kinds of intrinsic motivators and rewarding experiences where the employees felt valued, challenged and recognized for their work in every way that does not involve money, the employers would not stay to work in that company if they were not paid[Rewrite to improve clarity][factual?]. Therefore, money is still a very key element for why people seek employment in the first place. It is the first source of motivation to get a job, in order to make money, then all the other forms of motivation are in order to maintain the engagement of employees (Kuvaas, 2006).

Motivation[edit | edit source]

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Categories of motivation[edit | edit source]

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Natural Motivator vs Rational Motivator[edit | edit source]

People can be motivated in a number of different ways. There are natural motivators and rational motivators. The difference between the two is that natural motivators are needs and desires that drive behavior that meets that need or desire, and these occur naturally.

Rational motivators are based on how meaningful they are, weighing the pros and cons, basically involving a cognitive process to evaluate the importance of performing the behavior against the potential benefits or avoidance of losses that would result as a consequence of acting on that motivation (Doring, 2007).

Natural Theories of Motivation[edit | edit source]

McGregor developed Theory X and Theory Y to explain employee motivation. Theory Y is more in line with a natural perspective, stating that human behavior in the workplace is highly reliant on the higher order needs, in this case money is an ineffective motivator (McGregor, 1960). The theory also states that human needs are hierarchical, a very similar concept to Maslow’s hierarchy of needs (Lorsch & Morse, 1970). Physiological, safety, social, ego and self-fulfilment are the needs that Douglas McGregor identified. In the workplace they are as follows: physiological needs are natural needs involving hunger and thirst, once those are satisfied, the next level is safety. In terms of a work environment, this refers to a feeling of job security, fairness and unbiased work conditions, so if managers are not conscious of making fair and unbiased decisions, then the safety needs of their employees are at risk. Social needs are those concerning friendship, love and connection with others, in the workplace [grammar?] this simply means that a work environment where workers are able to form close connections with one another will most likely result in a better working and more productive cohort of workers. Equally, if the social needs of an employee are not being met, they are more likely to be non co-operative in the workplace. Ego needs, which are the second highest order needs, are slightly more difficult to fulfill. These are needs that involve a person’s self confidence, independence and a feeling of being a competent member of the team at work. Once these ego needs are met then the highest form of natural needs, according to McGregor’s Theory Y are the self-fulfillment needs. This is the need for a person to truly reach their full potential, including making improvements on any areas that need this improvement and also provide an opportunity for people to express their creativity.

Content Motivator vs Process Motivator[edit | edit source]

Motivation can also be categorized into content-based motivation, which looks at motivation from the perspective of WHAT the motivator is. So money would be an example of a content motivator. [grammar?] Versus process-based motivation, which involves looking at how a motivator motivates, therefore investigating the process in which the motivator actually becomes the driving force behind behavior (Malone, 1997)[for example?].

Types of motivation[edit | edit source]

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Intrinsic[edit | edit source]

Intrinsic Motivators are internal factors that motivate an individual’s behavior. Intrinsic motivation is stronger and longer lasting than extrinsic motivation, as it is rooted within the individual themselves in accordance to their values, interests or personal drives and desires[factual?]. This is why it is important for employers to create a working environment that the employees find internally rewarding, because that is what will keep them engaged much more than any amount of money[factual?]. These motivations are based around purpose, mastery and autonomy. Which means the employees must feel that they have a purpose at work, that they are a valuable asset and useful contributor towards the overall functioning and success of their particular department, or the company. Mastery needs involve the need for the employee to be good at what they do. This means that they require recognition for their efforts, feedback and constructive criticism to continually develop and master their skills in the workplace. And finally, autonomy is the need for an employee to drive their own behavior, such that they feel they are personally responsible and accountable for their decisions and actions. This means that the managers of an organization should avoid micro-managing, as that can take away the employees[grammar?] feeling for autonomy and ultimately take away their engagement with the organization (Vallerand, 1997).

Extrinsic[edit | edit source]

Extrinsic Motivators are external factors that motivate behavior. The most common form of external motivators are in the form of rewards or punishments, so the behavior is the result of an expected reward or it is done to avoid a possible punishment. A monetary payment for completing work is an example of an extrinsic motivator. Research has shown, though, that extrinsic motivation has a less lasting effect than an intrinsic motivator[factual?]. Therefore [grammar?] further proving that money alone would not be enough to keep an employee motivated, although it does provide a starting point for someone seeking employment in the first place. The challenge for the employer is to create a working environment where an employee can be intrinsically motivated to do good work of a high quality, as well as the ongoing extrinsic motivation which is the worker receiving their payment as per the agreed schedule (Ryan & Deci, 2000).

Conclusion[edit | edit source]

Motivation is a complex concept that works in many different ways, depending on the source of the motivation and the action requiring the motivation. Employers are constantly trying to find the most effective way to motivate their employees, which is important to create a productive work environment. Intrinsic motivation is a stronger and longer lasting source of motivation, than purely extrinsic motivation, therefore it is much more important to intrinsically motivate employees. However, having said that in some cases an external motivator such as money, is the starting point for all work related motivation, so although it alone is not enough, it is still a key component attracting and retaining workers. The conclusion then, is that money is a motivator for employment, although it is not sustainable on its own, [grammar?] it used in conjunction with other motivators is the key to creating a balanced and productive work environment.

See also[edit | edit source]

References[edit | edit source]

Doring, S, A., (2007), Seeing What to Do: Affective Perception and Rational Motivation, Dialetica, 61: 363 – 394, doi:10.1111/j.1746-8361.2007.01105.x

Friedman, M. (1970). The social responsibility of business is to increase its profits. New York, 122-124.

Hegarty, W, H., & Sims, H, P., Some Determinants of Unethical Behavior: An experiment, Journal of Applied Psychology, 63: 451- 457 doi: 10.1037/0021-9010.63.4.451

Hudson, M., (2004), The archaeology of money: debt versus barter theories of money’s origins. Credit and state theories of money. The contributions of A. Mitchell Innes, 99-127.

Kuvaas, B. (2006). Work performance, affective commitment, and work motivation: the roles of pay administration and pay level. Journal of Organizational Behavior, 27: 365-385

Laidler, D., (1969), The definition of money: theoretical and empirical problems. Journal of Money, Credit and Banking, 1(3), 508-525

Locke, E, A., (1968), Toward a Theory of Task Motivation and Incentives, Organizational Behaviour and Human Performance, 3: 157 - 189

Lorsch, J., & Morse, J., (1970), Beyond Theory Y, Harvard Business Review,

Malone, T., (1997), Is 'Empowerment' Just a Fad? Control, Decision-Making, and Information Technology. Sloan Management Review. 23 (38)

McGregor, D., (1960), The Human Side of Enterprise, New York

Ryan, R, M., & Deci, E, L., (2000), Intrinsic and Extrinsic Motivations: Classical Definitions and New Directions, Contemporary Educational Psychology, 25: 54 – 67 doi: 10.1006/ceps.1999.1020

Santoro, M, A., (2013), ‘Moral Moral Hazard’, the SEC and the Restoration of Wall Street Values, The Huffington Post

Soddy, F., (2015), The Role of Money, Scholar’s Choice, 240

Trubitt, M, B, D., (2003), The production and exchange of marine shell prestige goods. Journal of Archaeological Research, 11(3), 243-277 doi:10.1023/A:1025028814962

Vallerand, R, J., (1997), Toward a Hierarchical Model of Intrinsic and Extrinsic Motivation, Advances in Experimental Social Psychology, 29: 271 – 360

Von Glahn, R., (2005), The origins of paper money in china. The origins of value: the financial innovations that created modern capital markets, 89.