Since motivation is a key driver of a company’s success, it’s important for businesses to understand what motivates their employees. Motivated employees will work harder and push themselves to reach their company’s goals. While several factors, like opportunities to be promoted, benefits, and job satisfaction, contribute to employee motivation, money motivates most employees.
This is especially the case in recent times, where the cost of living is increasing daily and a lot of people are forced to borrow online to meet their financial obligations. Apart from financing an employee’s day-to-day needs, earning more money can improve an employee’s standard of living. It is also linked to status, which may be important to some employees.
Motivating employees with money can include pay raises for good work, bonuses, monetary incentives, and commissions.
Advantages of Using Money as Motivation
Using money as a tool to motivate employees is a common method among small and large businesses. Some of the pros of using money as a motivator include:
Employees who are happy with their jobs and believe they are fairly compensated are less likely to seek better job opportunities. Lower staff turnover means less time and resources are spent looking for and training new staff. It also means that the company is more productive as new workers typically take time to adjust.
Employees Feel Appreciated and Valued
Employees who are rewarded for their achievements with money typically feel seen, valued, and appreciated. This inspires them to keep up the excellent work and encourages them to work harder.
Universal and Easy to Reward
Regardless of where on the globe your business is, money is appreciated and valued. All employees can use it, and offering monetary rewards means that each employee can use it in a way that suits them. For example, some may use it for practical purposes like paying off debt or saving, while others may splurge on a new car or vacation.
Monetary rewards are easy to distribute from a company perspective since it is added to the payroll. It’s also easy to determine who should be rewarded and how much by using tools to assess individual employee performance.
It’s also easier than offering rewards like gifts or vacations as personalization is not needed. It can be given to all employees without considering their personal preferences, lifestyle, or gender.
Provide Employees with Financial Stability
Financial rewards, whether in the form of yearly raises, bonuses or commissions, can allow employees to be financially stable. Even middle-class families sometimes struggle to meet their financial obligations. So being rewarded with money can be extremely helpful in paying their bills and maybe even having money leftover to save.
Disadvantages of Using Money as Motivation
While money acts as a fantastic motivator, it does have some advantages. For this reason, it’s a good idea that it should not be used as the only source of motivation.
Some of the disadvantages of using money to motivate employees include:
Using incentives or bonuses to reward employees may pit them against each other and decrease teamwork and collaboration. For example, offering a reward for the employee with the highest sales or who comes up with the most innovative idea will likely discourage employees from working together, helping each other, and sharing ideas.
This can be a huge disservice to the company, as teamwork and sharing knowledge improves efficiency and productivity.
Using money to motivate employees is expensive. This is because you have to cut into the company’s profit to fund bonuses and incentives.
Also, if you use monetary rewards as the only motivator, employees will see it as an expectation for every piece of good work. It will then start to lose its appeal unless you increase the amount you offer, which can eventually become unaffordable.
While employees appreciate being financially compensated for good work, this satisfaction may be short-lived. Employees are likely happy when they receive their paycheck with extra money and continue their efforts, but it does not always inspire them to think outside the box and be innovative.
Sometimes, it only manages to keep employees compliant rather than creative.
In every business, there are high-performers, average-performers, and low-performers. This means that when employees are rewarded with money like pay raises and bonuses, it creates financial inequality among co-workers, which can cause conflict and lead to average and low-performing workers feeling resentful towards their high-achieving counterparts.