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Stephen Bevan: financial rewards don't motivate workers

As top pay comes under scrutiny in annual meetings, it becomes clear that financial incentives aren't the best motivators.

This week we are expected to believe that investment bankers and other high-flyers in finance are only motivated by money. All that woolly stuff that Maslow, Herzberg and Vroom told us about the importance of ‘intrinsic’ rewards, or ‘self-actualisation’ can be binned because workforce motivation – at least for the elite – can be neatly distilled down to a simple financial transaction. ‘Pay us more or we quit’ they threaten. Until the next time. 

This approach means that we can forget boring old HR orthodoxy like giving people interesting work, variety, challenge, opportunities for learning and development, the chance to innovate, job satisfaction and a clear sense of purpose. Attracting, motivating and retaining people are the three most common words used in company reward strategies (check yours out). Yet the evidence is that financial reward is only any good at ‘attracting’ and pretty poor at motivating or retaining. Why?

The first thing a line manager hears of one of their team’s imminent departure is an awkward one-to-one meeting and a letter handed over. The manager often wants to know three things: where are you going (is it to a competitor?); why are you leaving (it’s not because of me, is it?) and how much more are they paying you (can I trump their offer?). Most leavers start looking elsewhere because they are hacked off with their boss, their job, their prospects and so on, rather than their pay alone.

If you do make a financial counter-offer to someone who has just resigned it’s likely they will wonder why it takes a resignation letter to prompt a pay rise. It certainly won’t make them feel any more valued. Employees mostly resent the employment relationship being reduced to transaction, even if that’s how some line managers would like it.

Before the recession The Work Foundation carried out research for a professional services firm. We were asked to find out why 1,500 graduate-level employees had left them in the previous few years and what the risks were that 1,400 of their current crop might also ‘jump ship’ in the near future. 

We found the strength of the relationship between satisfaction with rewards and job satisfaction was, by some margin, the weakest whereas satisfaction with training and development opportunities was much stronger. Overall, the correlation between job satisfaction and ‘turnover intentions’ – the intention to resign in the next six months – was very strong. Before you ask, there is lots of research that shows that ‘turnover intentions’ are a good predictor of actual quitting behaviour. So, if ambitious graduates in very benign labour market conditions rank rewards so low as a determinant of resignation, why should we believe that investment bankers are that different?

Well, the bottom line is we shouldn’t. After the founding of the NHS, Nye Bevan honestly admitted that in getting sceptical doctors to accept a publically-funded health system would be in their best interests, he’d ‘stuffed their mouths with gold’. What we’re witnessing now are the same tactics as those deployed in 1948 but in an allegedly sophisticated, globalised, 21st century knowledge economy. Either human nature really is that basic, or we’re being taken for a ride. You decide.

Stephen Bevan is director of the Centre for Workforce Effectiveness at The Work Foundation and an honorary professor at Lancaster University.