Do you motivate your employees with money?

      Of course yes! You pay your employees to do the work and to do it well. You also give rewards when the work has been done perfectly. It means that money is a way to motivate people. But does that mean that you can continuously motivate people with money? Or worst, does that mean that you maybe pay too much your employees? A recent article in the HBR made me think again about this question.

      In this article, Ray Fisman _ The Org : The Underlying Logic of the Office_ deals with an experiment that did some searchers in Germany and Switzerland. He says that the study is “suggesting that economists' focus on cash might often be misplaced”.

The study was very simple: a work for which it’s easy to measure productivity and for which no specific skills are required. They chose "cataloguers in the library". Students were paid 12 euros an hour. They created three groups of students:

-          Group 1 : 12 euros/hour + 7 euros of bonus if they do 3 hours

-          Group 2 : 12 euros/hour and instead of cash, they offer a bottle of water

-          Group 3 : baseline, just paid 12euros/hour

Check the results on this graph:

      Productivity can be increased not only with money but also with gifts. And we can understand that if we think about the margin utility. The labor supply curve slope upwards to the right as it does between the point A and B for example. The margin utility is increasing because for each more hours worked, the employee increases his wage _ money used to enjoy the time he doesn’t work. This will continue until one point (M like Maximum). Beyond this point, he will start to reduce the amount of labor hours he supplies even if the wage is still increasing (point C).

     At one point, the company is losing money and productivity at the same time! How can you still motivate your employees to increase their productivity?

There are many books about it and many specialists who work  for companies  as consultants to motivate people. I will just give some categories of reward/gifts that you can give to your employees to increase their motivation:

-         -  Recognition: A person needs to be part of something. Just some time with croissants in the morning for example or some flowers or whatever on the desk for special occasions

-         -  Responsibilities and Power: Some searchers argue that you can give more power and responsibilities to someone. Even if on the long-term he will ask for more money…

-          - Training : it means that you are taking care about the future of your employee and you want to see him evolving in the company

-          - Gadjets : it can be a cell-phone, a car, an house cleaner, etc…

      But you can do with less money. I know a manager who worked very hard with his team to finish a project. Everyone worked during the weekends and until really late in the evening. The problem: the company did not have any more money to give as reward, or maybe 20 Euros per person. Ridiculous. So, he decided to organize a visit in a beautiful castle around Paris. He managed to do it for free and took all his team to the castle with an Art History’s professor who did the visit. Results: the loved it and were reallu gratefull.

      To conclude, every company should ask themselves if they pay correctly their employees. By “correctly” I mean: Are our employee motivate to work for us?  If not, ask if a wage-increase is the solution. If it’s already higher than the market, try to motivate them using other levers.

PS : Check this very famous video about motivation. More that intersting, it's also very funny and very well done :