Inspired Incentives

Does Money Motivate?

Posted by Devin Ferreira

Wed, May 30, 2012 @ 10:07 AM

In the world of incentives, the role of money in determining behavior has been hotly debated for a long time. Many studies claim that non-monetary incentives like trips and merchandise are far more effective than money in influencing employee behavior. Nevertheless, many companies continue to offer monetary incentives such as company bonuses and stock options. So, does money matter? Or, more importantly, does money motivate? While quite similar, these questions highlight a very important distinction between the two that can be made in terms of human behavior.

In various surveys that have been geared toward understanding the positive job experience, money consistently ranks behind things like coworker likability and the quality of one's work environment. Yet other studies insist that people, when given the choice, would opt for a monetary incentive rather than something tangible and non-monetary. So what gives?

Part of the disconnect stems from a belief that money truly matters. This belief is so ingrained in our culture that people will often continue to pursue monetary goals even when the pursuit ceases to make them happy. Though the goal-oriented nature of reaching certain financial benchmarks promises to motivate us in the short-term, research has shown that it does not offer much in terms of long-term satisfaction. This is because financial incentives are largely extrinsic motivating factors, meaning they come from outside ourselves. While non-monetary incentives, like a cruise, are also extrinsic, the difference is that they are not seen merely as a means to an end, the cruise is the end. This is why these non-monetary incentives tend to be more effective in the long-term and why many incentive programs that are based around non-monetary incentives tend to endure longer and see more positive results than their financially-based counterparts. The reward can be seen as the ultimate goal, instead of as simply an intermediary to some other, as-of-yet undefined purchase. So, while it may be true that money matters, in the world of incentives, it doesn't motivate as well as a non-financial reward.

Topics: Performance Incentives, Performance Improvement, Loyalty Programs, Sales Growth, Employee Motivation

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