Financial and Non-Financial Motivators at Work
Motivation is the “why” behind our actions. It’s what gives our life meaning and drives us to be our best. In life, our families, friends, and passions are just some of the factors that motivate us. In the workplace, employers leverage both financial and non-financial motivators to bring out our best. But motivation is highly personal and differs for each employee. How can an employer tap into the “why” of each individual employee and structure motivation in a way that is as unique as each of us?
Financial and Non-financial motivators: what’s the difference?
Employee motivation in the workplace are the ways in which you motivate and energize your people to produce their best work. Typical methods for employee motivation can be financial or non-financial in nature.
Financial motivations are most common in the workplace and involve monetary rewards. These are your carrots and sticks or extrinsic motivations that serve to incentivize and reward employees for particular achievement actions. When clearly communicated, financial incentives motivate employees and let them know what they stand to gain or lose based on their performance. This type of incentive is tangible for the employee, allowing them to better provide for their families and materially improve their life outside of work. Financial motivators can also improve short-term productivity and morale. Of course, not everyone is motivated by financial rewards and Gallup has found that there is no correlation between engagement and pay level. Additionally, due to their monetary nature, financial motivators tend to have points of diminishing returns, and eventually require higher rewards for the same performance.
Non-financial motivators, which are less common, are often intangible and do not involve money directly. Examples of these include recognition, added responsibility and trust in a role, participation in decisions, flexible schedules, mentorship, feedback, and others.
Financial and non-financial motivators speak to the culture and atmosphere of your organization. Do you have a culture that encourages employee recognition, fosters cross-collaboration, and overall enjoyment at work? Which kinds of behaviors do you reward and promote implicitly in your organization?
Notice that non-financial motivators are often psychological, value-based, and are tied to the internal drivers for the employee and go much deeper than surface-level rewards, they are personal.
Since the term “intrinsic motivation” was first coined by the American psychologist Harry F. Harlow in his 1950, more studies have looked into human behavior and intrinsic motivation. Studies suggest that intrinsic motivators offer a more sustained source for increased engagement and productivity. A study of over 200,000 U.S. public sector employees showed that employee engagement levels were more strongly correlated to intrinsic motivators rather than extrinsic ones. While extrinsic incentives – such as bonuses, raises and promotions – do motivate, those who are intrinsically motivated are three times more engaged than those who are extrinsically motivated. Simply put, there is more to be gained through intrinsic motivation.
Meet and Connect to People Individually to Increase Intrinsic Motivation
Your employees get individualized experiences in most areas of their lives and the employee experience is no exception. The buzz in HR around intrinsic motivation has given a significant boost to development in this area. Employers now have more tools available to scale intrinsic motivation through the personalization of the employee experience. And the research shows that for most employees, their individual values are better indicators of performance and engagement.
So, get to know your employees and their personal values. And, get comfortable with the idea that your organizational purpose may not be the main driver for your people, even though for some there may be alignment. Ultimately it is an employee’s individual why, their purpose, that gets them to show up each and every day.
When looking to get the best results from your employees, both financial and non-financial motivations are needed. After all, compensation and benefits packages are not going away. While they each have their merit, tapping into intrinsic motivations is becoming more important.
How You Can Intrinsically Motivate Your Team
Motivation in the workplace is about creating conditions and environments that encourage employees to perform at their best. While financial motivations are important, relying solely on them reinforces the carrot and stick paradigm and can only go so far. Daniel Pink, in his book Drive, notes that extrinsic motivation does not work for the candlestick problems of the 21st century. These are the types of challenges in today’s workplace that require creativity, and engagement, and out of the box problem-solving.
Here are some ideas to promote intrinsic motivation through the lens of its three key components:
- Autonomy – People want to feel a sense of control. Allow your people’s inner drives to dictate the work they do and provide autonomy support.
- Give your employee’s time to work on things that are personally important to them. For example, Google allows employees to spend 20% of their time on personal side projects, which gave us Google News, Gmail, and AdSense.
- Increase choice at work as a way to increase intrinsic motivation.
- Mastery – Give people the opportunity to showcase their mastery and progress. It increases their engagement.
- Give them opportunities to showcase their mastery and transfer their skills through mentorship.
- Invest in your employee’s education and development, and connect them to resources your organization provides to do this.
- Provide opportunities for advancement.
- Purpose – Purpose ties it all together. With purpose autonomy is directed and progress and mastery become worthwhile pursuits. So, empower your people to find their purpose and be purpose-driven.
- Connect task to what matters to an employee. People are more motivated to do tasks that connect to what they value.
- Find out what employees are good at and ensure that their work focuses on their use of those strengths.
- Help employees find their purpose, connect to it, and find ways to live it daily.
Employee motivation is important and research shows that 40% of the success of team projects can be attributed to it. It is a precursor to what all of us in human resources and talent development are after– engaged employees who contribute meaningfully and productively. Through a personalized approach, you can ease the tension between intrinsic and extrinsic motivation and find the right balance for each employee. Do they want more financial rewards? Or do they want recognition and the ability to feel challenged in their role? Learn what motivates your employees and use that to inform the tactics you use to get your people to do their best work for higher engagement and performance.