Now that the economy is back on track and unemployment rates are at its lowest level since a long time, we all expect a good pay raise by the end of the year, but we might be disappointed. The signs in Europe and other parts of the world show that we shouldn't be expecting too much.
So will this have an effect on our motivation? When asked most people would believe that more money would increase their motivation. But will it?
According to research our ideas about money, motivation and performance are not so accurate.
Social norms and market norms
If I ask you to help me run some errands, you might do it because we're friends. You would not expect money. If I give you a euro for it you won't say 'hurray, I'm getting a euro to help my friend', instead you would feel less interested to do it and probably feel insulted. And if I ask you to run errands on a daily basis you would be less motivated to help me out for free and would feel misused. It would probably even hurt our friendship.
According to behavioral economist Dan Ariely we apply social norms in a social relationship and market norms in a business relationship. We are perfectly fine to accept money from our employer in order to do our job but will not accept money from our friend to help out.
Sometimes we will only do something if we don't get paid for it
When lawyers were asked to help out people who couldn't afford legal help for a mere 10% of their normal fees they were not willing to do so. But when they were asked to help out for free they were happy and eager to help. This example shows what happens to our motivation whether we apply market or social norms. When money is involved we tend to use the market norm to consider our actions and 10% of market value is way too low to be interested. However if you would consider helping someone for free the social norm comes into play. This change in context makes all the difference.
Does money improve our performance?
The first effect of money on our performance is that we actually become more excited and motivated to improve our performance. However if we can't control the result (because we need others or it's too complex) it actually has an adverse effect on our performance. We see this happen already with the simplest tasks and the smallest bonuses at stake. As soon as we can earn a bonus our performance tends to drop. The higher the stakes, the more excited we become and the lower our performance. This is called choking. What we learn from this is that higher motivation does not necessarily lead to better performance.
This is exactly what Ariely shows in one of his experiments in rural India. He divided people into 3 groups who could earn 4, 40 or 400 rupees (the latter being the equivalent of 5 months salary) by playing games testing their memory, creativity and motor skills. He found that those offered the highest incentives would actually perform the worst.
How money changes our motivation
A group of children who loved to draw were divided into 3 groups.
- Group 1 would receive an expected reward for their drawing,
- Group 2 would receive the same reward as a complete surprise, and
- Group 3 would not receive nor expect a reward for their drawing.
Then, during the next days, the children were watched through one-way mirrors to see how much they would continue drawing on their accord.
What happened was that Group 1 showed a considerable decline in spontaneous interest in drawing compared to Group 2 and 3. So, those who previously liked to draw were less motivated once they expected to be rewarded for the activity. The reward reduced their intrinsic motivation and joy for drawing almost by half.
Money is not the best choice
Extrinsic motivation is short-lived and less powerful than intrinsic motivation. If this mechanism of external motivation is used, such as a monetary bonus you will be less motivated if you don't get it. Moreover you usually want more to keep you motivated. The 'intrinsic' motivation you had for doing something will be replaced by the money you can earn and when the external motivator is removed your intrinsic motivation will not just reappear.
Trying to motivate others with money is the least effective, the most expensive and short-lived method you could choose.
If your organization doesn't offer any other way of recognizing or rewarding you for good performance then money is the only substitute.
The effects of money on motivation and performance
money reduces both your sense of autonomy and intrinsic motivation which results in reduced performance.
money is influenced by the context you're in - a large bonus will probably make you happy, but if you hear that your colleague received more than you, your joy quickly fades.
money makes you less creative, by focusing on money you tend to lose your creativity. Your focus becomes fixed on money. This has to do with the part of your brain being active. Your prefrontal cortex is for focus and creativity normally needs the whole brain to be involved. Focus makes us too rigid and because we channel our focus we don't see opportunities that may arise outside of our limited scope .
money makes you more selfish, less cooperative and more competitive - we all have examples of colleagues who are fighting their own battle and becoming a competitor instead of working together to fight for a common cause.
So, what does work?
compliments are as good as cash - when you receive earnest compliments the same brain region is activated as would be activated by cash.
tap into your inner drive, your purpose or WHY, will keep you motivated to perform well.
making progress through your efforts will keep you motivated.
your need to feel autonomous, to feel competent and feel close to others will motivate you to do your job well
when tangible rewards/gifts (if the price is not mentioned) are given, the social norm applies.
focus on the effort and the joy of doing is better than focusing on the result of the performance.