Practices, Not Platitudes

I recently took part in a conversation about compensation of employees. Some readers offered criticism on the Merit Money practice, described in my new Workout book, claiming that Merit Money is just another way to incentivize people. The feedback I received was, “Money doesn’t motivate people”, followed by, “Don’t incentivize people” and “Just pay people well”.

Let me explain why I think this advice is useless.

“Money doesn’t motivate people”

I live in Brussels. I can hear from my own friends that politicians and civil servants from all over Europe are attracted to the high wages earned at the European Commission and Parliament. Also, everyone knows that the credit crisis of 2008 was caused (in part) by top managers and bankers who were obsessed with ridiculously high bonuses. Obviously, money does motivate people, even those who already have plenty. The phrase “Money doesn’t motivate people” is usually offered by people who have read Drive by Daniel Pink, or Punished by Rewards by Alfie Kohn, and then took the insights and research of these authors and simplified them to the extreme, up to a point where the summary is no more than a meaningless platitude.

“Don’t incentivize people”

The very purpose of financial compensation is incentivization. I get paid to speak at conferences and company events. No matter how fulfilling it is for me, I usually don’t work for free. When you pay me, I’ll come. When you don’t pay me, I won’t come. It is obvious that money is an incentive for just about everyone in the whole world. Even a simple thank-you note, or a kudo card, counts as an incentive. After all, when you thank people publicly, you’re sending clear signals to everyone about which behaviors are desirable. Without incentives, I would not be able to share the fruits of hard labor with my co-workers. Clearly, the suggestion not to incentivize anyone is impractical nonsense.

“Just pay people well”

Of course, everyone wants to be paid well. The sad fact is, financial constraints make this impossible for most organizations. Even more, the suggestion flies in the face of Nassim Taleb’s book Antifragile, where he claims that companies who pay their workers above-average are also the ones who are most fragile in economically unpredictable environments. The idea of paying people well sounds great but it’s not actionable. The challenge is figuring out how much is “well” and how to stay antifragile at the same time. That’s where everyone disagrees. Particularly, when it’s about their own compensation.

When it comes to compensation, I have run out of patience with people who offer nothing more than useless platitudes. It’s OK to tell me that Salary Formula or Merit Money doesn’t work (for you). I’d be very eager to learn about your evidence and actual experience with such practices so that I can share those insights with my other readers. I would also be curious what alternative practices you can offer that are even better. But frankly, if all you can come up with is “don’t incentivize people” and “pay people well” you’re not offering anything valuable.

What the world needs is practices, not platitudes.

Image: (c) 2014 Ervins Strauhmanis, Creative Commons 2.0

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  • Alex Fürstenau

    I am not sure but I think Daniel Pink said that _an increase of money_ motivates people but the motivation doesn’t last very long. If you have received an increase you are happy for, may be, a few days and in my case I am happy if I see my first increased pay check but after this it’s normal and I am not happy anymore and I am far from being excited.

    I think it’s a good idea to pay people well but how much well paid is depends on every single person and I don’t think we will have a general rule or system for that (in the near future). I personally hope that there will be some sort of basic income in the future since I hope that this idea could address several issues I currently have with the current payment ideas.

    I like the idea of MeritMoney and I hope I will be able to implement it in the future. 🙂

    • jurgenappelo

      Hi Alex, Thanks. Indeed, your summary certainly makes more sense than “money doesn’t motivate people” 🙂

  • J. B. Rainsberger

    I assume, Jurgen, that you don’t go just anywhere as long as someone offers you money. I wouldn’t say “If you pay me, I’ll come; if you don’t pay me, I don’t come”, but rather “If you offer to pay me, I might come, but if you don’t offer to pay me, I almost certainly won’t come.” Very occasionally I find myself in a position where I can pop by even without being paid. Of course, those occasions generally don’t require getting on a plane.

    I have direct personal experience that the offer of money doesn’t on its own affect my behavior unless I decide that I need that money. The less urgently I need the money, the less powerful the offer of money is *on its own*. In this sense, Pink has a point: as long as one has “enough” money (and everyone decides what “enough” means–and that’s a workshop all on its own), that greatly diminishes the motivational effect of more money. That said, in most companies most of the time, most workers don’t have “enough” money, and in that context, I’m sure that Merit Money works quite well. I imagine that managers in those companies would benefit from knowing which of their employees are “immune” (so to speak) from the effects that money has on most other people.

    This even ignores whether I believe I (as the hypothetical employee) can find money from other sources, including but not limited to side projects and other employers. 🙂

    I will add this: even when I didn’t think I had “enough” money, I walked away from a very-well-paying job at IBM because I noticed that every increase in my salary only bought me a small amount of energy with which to tolerate the bullshit all around me. I could see that, before long, salary increases would stop buying me more than a few hours’ peace. At that point, Merit Money wouldn’t have worked a damn bit on me. I imagine that managers would benefit from knowing which of the employees find themselves in a similar position, too.

    In the end, I’m with you: tell me your stories of ineffectiveness, so that we can discuss the contexts in which “it works” and “it doesn’t work”. I enjoy those conversations.

    • jurgenappelo

      Agreed. I’ve done plenty of free talks, usually local community events when I happen to be in the city. But I wouldn’t do those free talks if somebody didn’t pay me for some other commercial event.

      Pink and Kohn had to write entire books explaining how complex the topic is. That’s why I get annoyed when people use a summary of 4 words to dismiss practical ideas they have no experience with.

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