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‘Just Give Me the Cash’ -

Do Non-Financial Rewards Really Motivate as well as Money?

Stephen OverellAssociate DirectorThe Work Foundation

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So what makes for a meaningful job?

• Social purpose – doing something useful to others

• Moral correctness - the justifiability of work processes and results

• Achievement-related pleasure -enjoying job and developing potential

• Autonomy - use of skills and judgement

• Recognition - adequate salary and affirmation

• Positive relationships - trust and interesting contact

Source: Estelle Morin, The Meaning of Work in Modern Times, studies since 1997

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Differing orientations towards work

• Apathetic workers: Work is unimportant, low financial expectations, moderate expression, low sense of obligation, modest entitlement, moderate work quality, half under 30, not highly motivated, some skills used, moderate responsibility. (12.1%)

• Alienated workers: Low work centrality, low expressive values, relatively high obligations. Non supervisory roles, high proportion of young and female. (19.4%)

• Economic workers: Very high economic work goals, low expression, entitlement norms higher than obligation norms, low work quality, repetitive jobs, low autonomy. (13.1%)

• High rights and duty economic workers: High economic work goals, but both strong entitlement and obligation, tend to be older, male, low education.(8.3%)

• Techno-bureaucratic workers: Low economic goals, high identity with employers, above average income and feeling of belonging, low sense of entitlement, moderate work centrality, high occupational satisfaction, half would choose same job again. (5.6%)

• Duty-oriented social contribution workers: High work centrality, low economic, but high expressive orientation, above average education, 25 % above 50, keen to contribute to society. (12.1%)

• Work-centred expressive: High work centrality, expressive orientation, high job quality, high education, wide variety, good skill utilization, high for managers and professionals, high income. (10.9%)

• Work centred and balanced values workers: Balance between economic and expressive orientations, typically middle aged and male, job responsibility and skill utilization above average, across occupational categories, high work involvement and working hours. (18.5%)

Source: The Meaning of Working, 1987 – 15,000 workers in 8 countries – 8 key orientations to work

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Money and meaning

• No one meaning predominates. But economic meaning comes out highest (63.2%).

• Task (50.4%), social contribution (33.8%), adding value to something (41.1%) and a feeling of belonging (29%) also very important.

• Strong resistance to identifying work with unpleasantness or meaninglessness.

• 86 per cent said they would continue to work even if they had enough money to live comfortably for the rest of their life

• Other studies – from Affluent Worker in 1960s, to New Economy studies found broadly similar things.

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What do people want from work?

The Gallup Organization surveyed 80,000 managers in 400 companies on what matters to workers. Core 12 are:

1) Do I know what is expected of me at work? 2) Do I have the materials and equipment I need to do my work right? 3) At work, do I have the opportunity to do what I do best every day? 4) In the last seven days, have I received recognition or praise for good work? 5) Does my supervisor, or someone at work, seem to care about me as a person? 6) Is there someone at work who encourages my development? 7) At work, do my opinions seem to count? 8) Does the mission/purpose of my company make me feel like my work is important? 9) Are my co-workers committed to doing quality work? 10) Do I have a best friend at work? 11) In the last six months, have I talked with someone about my progress? 12) At work, have I had the opportunities to learn and grow?

Source: Gallup

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What is Good Work?

• Performance: that work helps employers perform efficiently and is directed towards excellence in delivering goods and services; and that it develops the sense of pride and craft that potentially lives in all types of work;

• Engagement: that work engages the creative potential of human beings and adds to their capabilities through extending autonomy, control and task discretion; and that work is based on strong workplace relationships (social capital);

• Fairness: that jobs are of decent quality; that they enable and encourage individual security and wellbeing; and are founded on respect for rights, procedural justice and a balance between effort and reward.

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Job Satisfaction in the UK

61739308Involvement in decision-making

37195517Work itself

511225013Job security

132824314Pay

716264011Training

311284512Influence over job

38185220Scope for using initiative

38195218Sense of achievement

Very dissatisfiedDissatisfiedNeitherSatisfiedVery satisfied

% of employees

Source: Workplace Employment Relations Survey, Job Satisfaction, Inside the Workplace, Kersley, B, et al. (2004), 33.

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Claims made for pay

• Attraction of staff Moderate support

• Improving quantity Moderate support

• Improving quality Weak support

• Improving attendance Weak support

• Improving retention Weak support

• Improving teamwork Weak support

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Conventional Wisdom on Pay

• Motivation is…’how behaviour gets started, sustained, stopped and what subjective reaction is present while all this is going on’

• Nobody is agnostic about the link between pay & motivation

• Evidence is patchy & contradictory

• Most analysts agree that pay does motivate, but only weakly relative to other drivers – and that getting it wrong is both easy and damaging

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Alfie Kohn

• PRP punishes. A promised reward that is not received is psychologically as bad as a punishment

• PRP ruptures relations. High performance often requires teamwork. This can be damaged in a divisive win:lose climate

• PRP ignores reason. If a company is not performing, to simply offer a financial incentive to bolster performance ignores the many possible root causes. If the only tool in the box is a hammer, then everything gets made to look like a nail

• PRP deters risk taking. When money is at stake, individuals are far more likely to take the easy, tried and tested option which may sub-optimise the desired outcome

• PRP undermines interest. The enjoyment of a task is a far more powerful influence than any incentive can be

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CLC Study of 17,000 Employees

• Employee commitment is the central driver of employee performance and that pay satisfaction is a poor predictor of such commitment

• Employee perception of pay fairness was a 25 times stronger predictor of employee commitment than pay satisfaction

• Pay process fairness is the most important element of overall pay fairness

• Every 10% improvement in ‘process fairness perception’ increases employee commitment levels by 5%, leading to a 2% increase in discretionary effort

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The Mixed Model: Financial and Non-Financial Reward in Tandem?

• The difference between a ‘reward’ and an ‘incentive’ is important to clarify…

• …as is the behaviour or performance being rewarded or incentivised…

• …and how this will be measured

• It is essential that both managers and employees are clear where both fit in the overall reward ‘strategy’

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Positioning Reward Strategy

Business Strategy

Reward Strategy

Base Pay ‘Architecture’

Variable Pay Processes

Employee Benefits

HR Strategy

Non-Pay Reward & Recognition

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What is meant by a non-financial reward?

• Thank you

• Learning Opportunities

• Exposure

• Career Progression

• Formal recognition

• Non-cash Gifts

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Non-pay rewards can...

Recognise that motivation is complex and not just about money – other forms of recognition can be more important to the individual

Communicate the organisation’s values and performance objectives

Drive and support desired behaviour by indicating what sort of behaviour will be rewarded

Produce significant performance leverage and motivation, often at disproportionately low cost.

Compete in the employment market by offering competitive packages which attract and retain good quality staff

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Attribute Choice Considerations

Focus individual or team Defining teams, equityOrientation incentive or reward Up-front or retrospective?Payment cash or non-cash Propriety, valueStructure discretionary or formula-driven Equity, inflexibilityTiming immediate or deferred Desired impactValue high value or symbolic What motivates?Location department-wide or local Flexibility, consistencyNominated by management or self Rewards or awards?Rewarding effort or outputs Results or behaviour, equity

Non-pay rewards & recognition framework

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Measuring Impact - Impact on What?

• Recruitment, motivation, engagement, retention, innovation, teamwork, equality, performance & productivity?

• A question of attribution

• Evidence of a direct and sizeable causal impact is weak

• Reward can reinforce existing initiatives & practices, but will rarely drive them

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Measures

• Vacancy rates

• Employee survey data

• Exit data

• Evaluations of PRP/merit systems

• Equal pay audits

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Future Challenges

• More realism about the motivational impact of rewards

• Non-pay reward & recognition can work, so too can team pay

• Line management capacity – ‘scheme’ versus everyday good management

• Simplicity wins every time