Those who are paid better, work better. A bonus has long been considered characteristic of a progressive organization. But is such an incentive really useful? Or is the inner drive actually much better?
Reward related to performance
Many people are convinced that those who are better rewarded perform better. Taking this theory into account, incentive payments have long been considered indicative of a progressive organization. The remuneration should preferably be as closely as possible to an employee’s individual performance. A company that pays its employees a fixed wage has long been considered narrow-minded.
In particular, the granting of stock options or bonuses is generally regarded as the embodiment of performance-enhancing pay. And in the past there have been calls for performance-related pay to also be applied to government institutions and universities.
Performance pay is a product of traditional economic thinking
The idea of performance pay has its origins in traditional economic thinking: man is regarded as a selfish being who is primarily interested in his income. Those who receive more money for their work perform better. For several years now, modern economics has been trying to take into account the findings of psychology and sociology to better understand human behavior.
It cannot be denied, we want to earn money by working. And status is also important: everyone wants to be recognized and admired by others. But this externally fueled motivation only partly explains human actions. Equally important is the ,inner enthusiasm, to be inspired in a job.
Companies depend on the inner motivation of employees
The inner motivation in question can be traced back to two causes:
- the fact that performing an activity provides satisfaction. Consider, for example, solving thorny problems or pursuing a hobby;
- but activities are also undertaken because certain norms have changed over time. They are no longer seen as coercion, but are carried out voluntarily, even when no one controls their exercise. Most people dispose of their waste in designated places; they would feel guilty if they just threw it on the street.
Monetary incentives influence internal motivation
Intrinsic and extrinsic motivation depend on each other. Monetary incentives, such as performance pay, influence inner motivation under certain circumstances. An example is the (now disappeared) communist planned economy, which attempted to achieve economic development and innovation by imposing targets from above. Lenin justified this approach by saying: ,Trust is good, control is better.,
As we know, those attempts failed miserably because people were deprived of their own initiative and inner motivation. As events in the former communist countries show, it is difficult to rebuild that inner motivation.
How financial incentives can change an employment relationship
It becomes problematic when a relationship was previously based on voluntary cooperation, but suddenly becomes a business relationship as a result of payment. An example is the employee who was willing to work overtime in the context of an urgent assignment because she wanted to do good work. She will also do this in the future if her boss expresses his appreciation in the form of a bouquet of flowers.
But if overtime is simply paid for in money, it is relegated to a purely commercial matter. In the future, the employee will only be willing to work overtime if she is paid for it.