Motivation and Bonuses

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I’ve had countless negotiations with potential employees. In most cases, the positions that needed filling included using the brain as a tool without too many instructions. I have paid fixed salaries, commission only salaries, part fixed and part bonus salaries. Through all of that, I have noticed that by what model you are getting paid is not really important. Except in very rare cases where motivation is almost directly tied to payment.

There are three main factors that matter. How much are you paid or are you paid enough. How hard you have to work for it.

Are you treated fairly?

Here’s an engaging TED talk from Daniel Pink about motivation and how most businesses get it wrong.


Career analyst Dan Pink examines the puzzle of motivation, starting with the fact that social scientists know but most managers don’t: Traditional rewards aren’t always as effective as we think. Listen for illuminating stories — and maybe, a way forward.

What do people want in their job?

How much are you paid in it’s most basic form means just your objective need for money. If you don’t get enough money to keep you from worrying about it, then you have more stress. In this situation, you are constantly looking for a better job. You are not performing at your peak. What is the amount needed to stop worrying? It’s the minimum amount that lets you forget the payday is.

The second part of the equation is how hard you have to work for it. It can’t be too easy, or it wouldn’t pay well. If it’s too hard, you will burn out no matter what’s the pay. The best level for most people is something where you have to stretch and develop yourself.

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The third part is about group dynamics. People want to be treated fairly, and this means that if two people are doing the same job, then they expect to be paid the same amount. If results matter then this is the best way to go. When results are hard to quantify then people may expect to get paid by seniority. This would reflect the loyalty factor.

Now if you add all this you would get:

  • enough money, so you don’t have to worry about your income,
  • work that is challenging but won’t break you and
  • social standing in your group where you are treated fairly.

Do bonuses work?

Now, here’s my question. Why the hell do you need the bonuses? If you need bonuses to make your ends meet, then you are not getting paid enough. If bonuses make you work harder, then you would be out of your optimal performance zone and burn out. If you consistently perform at the level that warrants better pay you should get a rise, that’s treating you fairly.

Research has shown that bonuses will lower the performance of the people who use their head as the main tool. It seems that money narrows the field of vision for people who need to come up with creative solutions. Dan Ariely’s research in India showed that as the bonus gets larger performance on cognitive tasks deteriorates.

So, as long as you are managing the team of knowledge workers, you could just follow these steps. Pay them enough that they don’t need to worry about the money. Let them come up with the solutions to interesting problems, don’t push them to exhaustion. Treat them fairly.

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This way you don’t have to come up with elaborate bonus schemes and get the most creative work they can produce.

Image: Money by Andrew Magill

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