The role of money motivation in a working relationship

Is money motivation effective?

Initially someone would think that a higher salary would produce better results, but this is not necessarily correct. It has been proven, that the link between compensation, motivation and performance is much more complex. Certainly, pay alone is not sufficient. If we want employees to be happy with their job and be more productive too, money is not necessarily the answer.

Money does not buy engagement

Aspects of employee motivation

Every employee is motivated by extrinsic and intrinsic motives.  Extrinsic are the ones they receive for their leaders and managers and intrinsic ones are the ones they get from their inner self. Money and pay are extrinsic motivators. There is a natural tension between extrinsic and intrinsic motives. Financial reward, high or low, can sometimes suppress intrinsic goals, such as enjoyment, curiosity, learning, personal challenge etc.

When money decreases a person’s intrinsic motivation, then “over justification effect” is occurred. Research has found that when employees are given money or bonuses for actions, they already find intrinsically rewarding then they become less internally motivated to pursue those activities in the future. It has been proven though that the combination of high payment with challenging goals, is a better motivation for most employees.

According to another research, employees’ engagement levels were three times more strongly related to intrinsic than extrinsic motives. That is why it is important to first find our employees intrinsic motivators and offer opportunities and challenges based on those and not to expect pay and bonuses to keep someone motivated. Intrinsic motivation is a strongly predictor of job performance.

Money is not a long-term motivator

The role of money reward

Of course, nobody should work for free! We all need money to survive and provide our families. Once basic needs are covered though, our relationship with money is highly subjective and idiosyncratic. Money is valued by everyone for different reasons, such as power, freedom, love, security etc.

Money motivation and personal development balance

So, each leader must understand, what each employee individually really values, to motivate them effectively.

Once high salaries and bonuses are given, they become part of employee expectations for the future. Providing competitive salaries and bonuses to your employees is a must, but high pay by itself will not keep them at your salon longer. Research has shown that personal development is something most employees ask for. Most of them, especially the younger, are eager for growth in the form of training and for opportunities to develop new skill sets.

Read about leadership skills and how to develop them. Recognize the leadership style you use and enhance your leadership behavior by reading our articles.


How can we insure that our employees are satisfied and motivated?

We know that money can be a motivator, but it is unlikely, to meet all the necessary conditions. We also know that there is a connection between employee satisfaction and performance.

People need to feel, that their work is appreciated.

In conclusion, money is a condition and part of motivation, but for employees to be more engaged and productive, leaders should also listen to them, acknowledge their intrinsic motivators, evaluate, and praise them, help them grow, give them motives, and build a sincere relationship based on feedback, coaching and rapport.

Examine the concept of Groupthinking in workgroups through our article.


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