Does money or a ‘caring’ employer motivate us?

The question of what motivates employees more — financial compensation or something more intrinsic — is the subject of regular debate, and new research that shows no link between rising GDP and life satisfaction/happiness only complicates the issue further.

According to a 2010 survey, the top-rated item on perspective employees wish list (87%) was an employer “that truly cares about the well-being of its employees.” A challenging and fulfilling job was rated second, job security third, and an attractive benefits package was fourth. Financial compensation was rated fifth, with 66% saying it was important.

This search is consistent with another study conducted by employee benefits company Unum, in collaboration with Harvard Business Review analytic services. The study found that an ethical, transparent corporate culture, and caring about the well-being of employees were more likely to be viewed as attractive to job seekers as was providing a high base salary.

According to the research of psychologists Tim Kasser and Richard Ryan, published in the Journal of Personality and Social Psychology, “the more people are driven by a desire to be wealthy, the poorer their psychological health on a range of measures.”

G. Douglas Jenkins, at Arizona State University, writing on the issue of financial incentives, concludes when it comes to the issue of performance, incentives don’t help, a finding psychologist Janet Spence reiterated in her research. Alfie Cohen, author of Punished By Rewards, and long-term critic of extrinsic rewards as a motivator for performance, argues “no controlled scientific study has ever found a long-term enhancement of the quality of work as a result of any reward system.” He argues employers and executives need to think about what employees need to be happy and fulfilled, rather than what rewards can be offered to get them to do what they are told.

A striking conclusion from recent research conducted by economist Richard Easterlin and his colleagues at the University of Southern California about the happiness-income paradox is that long-term — 10 years or more — happiness does not increase with a country’s average income. This contradicts conventional wisdom that claims a rise in happiness occurs with improvements in GDP. Easterlin found measures of life satisfaction and happiness rose with improvements in democratization.

Yet, corporations continue the practice of attracting and retaining the best talent by focusing on financial compensation and incentives and ignore the increasing mass of search that underscores what really motivates employees and creates conditions for improved performance.

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