Friday, June 04, 2010

Does motivation by money works?

Basically, monetary reward based on performance work best for simple and straight forward task, such as for factory worker or call center personnel.

When a task gets more complicated (which requires some conceptual and creative thinking), the magic on monetary reward based on performance only works half the way. After the worker gets enough money to satisfy their needs, giving them more money isn’t going to improve their performance much. If you are paid $300,000 per year, are you going to work twice as hard (or inspired to improve efficiency better) to earn another $150,000 worth of bonus? Since your basic and security needs are satisfied, you probably will be looking into esteem and self-actualization needs (Maslow’s hierarchy of needs), and money can’t buy these needs.



3 factors lead to better performance & personal satisfaction:
  1. Autonomy – The desire to be self directed (I know what’s best to do to make my own destiny). Rather than always telling the employees what to do, why not allow some levy for them to decide how to make the company or product better (example of Google’s 20% time)
  2. Mastery – The urge to get better at stuff (it’s fun and satisfying, and feel good for self esteem). Example? People using their free time working on open-source projects, and give it for free.
  3. Purpose – if the profit motive gets unmoored from the purpose motive, bad things happens. We all want to believe that we are working towards a greater good, and we are purpose maximiser (we care about purpose)
A few years back, all I wanted to do is to make enough money so that I have less to worry. Once I made enough money to satisfy my basic needs, I wanted to work of something more fun, challenging or something more meaningful (even though it means making less money). If one day I could afford to make money not an issue, that would be the day of pure real living (living exactly the way we wanted, working on what we really wanted). Money is just the means, never meant to be the end.