Employees value job satisfaction over pay and reward

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Charles Elvin, chief executive at the Institute of Leadership & Management (ILM), explains why performance bonuses may not be the best use of funds when it comes to rewarding and motivating staff

In the same day that the High Pay Centre unveiled significant increases in boardroom pay, the CEB reported that UK workers need little more than a 5% pay rise to be persuaded to take a job at a new firm. In this light, it certainly appears that employees in Britain are fundamentally motivated by money. However, recent ILM research has revealed that while a good basic wage is an important motivator for staff, bonuses and other financial incentives influence only a small percentage of workers.  

A bonus culture is firmly embedded in UK business as a means to reward and motivate staff. Between 2012-13, £36.9 billion was spent on performance bonuses in the UK. Yet ILM’s research suggests the practice no longer fulfils its purpose.

Our study found that receiving a bonus or other financial incentive has little or no impact on the levels of performance or commitment of staff. In fact only 13% claimed that they felt motivated by money. In a survey of more than 1,000 employees, enjoyment of the job came out as the single most powerful motivator for almost 60% of staff, followed by a good relationship with their colleagues, and how well they feel they are treated by their manager.

The study highlighted the importance of workplace environments and the support and feedback received from managers in inspiring employees to go the extra mile. This suggests that, instead of costly bonus schemes, employers could receive far greater return by investing in improving their workplace and management capability, as more effective drivers of focus and commitment.

Of course, changing a deeply entrenched workplace culture can be daunting, with no quick fix solutions. For many businesses, handing out bonuses is simply easier than challenging embedded organisational behaviours. However, our research suggests that a shift away from a bonus culture over time could improve workplace productivity while potentially saving billions of pounds.

There are many ways for companies to enhance their workforce without splashing the cash. Almost a third (31%) of staff claimed better treatment and more praise from their manager would make them work harder. However, while the majority of managers (69%) stated that they are "always giving feedback" to their staff, just 23% of employees agreed, showing clear room for improvement here.  

Good managers are paramount to productivity, as they are key staff motivators who can make a real difference. When it comes to encouraging teams, you can never really overdo what we call the ‘five fundamentals’ of good management: coaching, giving feedback, listening, rewarding and recognising success and performance management.

While CEB’s report suggests that money is an effective way to tempt workers from their current role, it is no guarantee of high commitment and performance. If employers want to retain and inspire their staff, short-term incentives are not the answer: in-depth improvements to management and the working environment are more likely to reap long-term rewards.

Charles Elvin is chief executive at the Institute of Leadership & Management

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