Headlines: March 26th, 2015

Reward specialists and HR professionals have challenged the received wisdom about performance related pay with an alternative view that could significantly increase staff motivation with a better understanding of the science behind the impact of pay and reward on behaviour.

A report from the Chartered Institute of Personnel and Development, the professional body for HR and people development
‘Show me the money! The Behavioural Science of Reward’, discusses how money may not be the straightforward motivator that many claim.

The report highlights how alternative approaches to reward may be more effective in increasing intrinsic motivation to succeed. By evolving the reward structure, organisations can take more control over the complex array of factors that determine their employees’ motivation and effectively enhance their organizational success.

According to the report, employees’ perceptions of rewards are defined by the circumstances in which they are received. For example, a bonus received during tough economic times will be perceived as having much greater value than the same reward given in times of prosperity. On the other hand, a bonus may be perceived as having less value if the recipient considers their own performance to be stronger than other employees who receive the same amount as part of a team reward. Given the tendency of people to overestimate their own abilities when performing familiar tasks such as those at work, reward and HR professionals need to be particularly wary of promoting a performance-based pay scheme to avoid disillusionment if employees’ rewards don’t match their expectations.

Jonny Gifford, Research Adviser at the CIPD, comments: “These are interesting and challenging times for reward specialists. We need to recognise staff when they go the extra mile and add increased value, but there are a number of behavioural factors that should be considered when shaping a reward programme. Crucially, we must acknowledge that monetary rewards aren’t everything and that they can even distort people’s motivation. For example, enticing the workforce with financial incentives and a strong bonus culture can lead to unwanted, risky and even unethical behaviours.

Equally, because we tend to overestimate our ability as individuals, many if not most people find performance-based pay attractive in the first instance, but ultimately disappointing and demotivating. The key is having a flexible reward package that takes into account behavioural nuances and doesn’t rely solely on a wad of cash as the only means to motivate staff. It’s a change in direction for many but should also be welcome news for organisations who, in a challenging economic context, need to be more creative with their rewards package.”