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Management Rule #3 That Makes No Sense: Money Is A Lousy Motivator

March 14, 2014

Why do you work?

For most of us the answer to that question is tied to money. Sure, I’ve known people who were set financially who chose to continue working because they loved what they were doing. I’ve known people who “retired” only to work twice as hard at a second career.

But, for most of us, we put in forty hours a week for a paycheck. So, it stands to reason, you would think, that increasing your paycheck would improve your motivation.

Doesn’t happen that way.

I’ve told this story before (The Biggest Raise I Ever Received), but it bears repeating here. I had a developer who worked for me named Dave (Heart, Mind, Code.) Our office provided free drinks to our staff. One day my office manager came to me,

I don’t get it

What?

I don’t see the value of giving people free soda. For example, Dave drinks a lot of soda. How is that cost effective?

Dave makes $80,000 per year and he’s on salary. Suppose he drank $100 worth of soda per month. If I don’t provide it, he’s going to walk down to the Maverick convenience store on the corner every day. And he’s going to still be on the clock.

Okay. . .

Suppose that trip to the store takes 15 minutes. That’s about 5 hours per month that he will be not working but getting paid. At his salary that’s about $200 worth of time wasted. If I spend half that on free soda, I come out ahead.

Now, I get it. But, why not just give him the $100?

Because it wouldn’t mean anything to him.

And it wouldn’t. At $80,000 per years, an extra $100 per month is about 1.5%. Who gets excited about a 1.5% raise? And more importantly, if I gave him that raise, it would quickly be forgotten. Instead, he is reminded of how much he likes his company everyday when he goes and gets his free drinks. The soda means a lot more than it’s value in money.

Even people who say they are only motivated by money are actually motivated by non-monetary incentives. Microsoft was famous for giving employees stuff; shirts, jackets, hats, mugs, I once got a kazoo, ship it awards. All sorts of stuff that doesn’t really cost them that much, but employees will keep for years.

I’ve seen programmers who had empty offices except on one lonely shelf is their Ship-It award.

…But Only If You Have Enough

There’s a counterpoint to this rule. Money is a lousy motivator, but only if you have enough. If your monthly expenses are $5000 per month and your current household income is $4750, then nothing matters except that missing $250. If you offer that employee free soda, they would really rather have the $0.50 per can. If they have access to $100 worth of soda per month, they look at the value and think, “Sure would be nice to have that $100. Then I’m only $150 way from breaking even.

But once they cross over that threshold where they can pay their bills? Then money becomes a much less valuable motivator.

Rodney M Bliss is an author, columnist and IT Consultant. He lives in Pleasant Grove, UT with his lovely wife and thirteen children.

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or email him at rbliss at msn dot com

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4 Comments
  1. I have seen this said in public only by obscure economists. And me, avoiding discussion of ‘incentives’ at work that make me uncomfortable. Some people seem to be motivated by an immediate reward, others take a longer term view that long term stelar work will be compensated.

    Interesting point is your observation that it first requires ‘enough’. My daughter is working 2 jobs to save up to finish her degree; the increased pay is motivation because even with very low living expenses she doesn’t make enough to hit that mark. During high school money wasn’t a big motivator, doing a good job was. She had ‘enough’ for that time. That is likely to change again after graduation, because as a professional (english teacher abroad) her salary will again be ‘enough’. And that may change again when marriage and children come along.

  2. I didn’t put it on the blog, but one example I often use with people is that if you hate your job and I double your salary, it will have an effect for only a few weeks. And after that you will still hate your job.

Trackbacks & Pingbacks

  1. Book Review: Influencer | Rodney M Bliss
  2. Book Review: The Seven Habits Of Highly Effective People | Rodney M Bliss

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