Inspiration – Do Rewards Motivate Performance?

Ever since pay-for-performance became the vogue, companies have been trying to assess the
effectiveness of this philosophy. Indeed, the world of Compensation & Benefits has a significant
weightage in the overall performance management outcomes.

Depending on the nature of your industry, pay & benefits can be in excess of 35% of your operating
expenses. This naturally encourages companies to make sure they are getting what they pay for:
bottom-line results through superior performance (the assumption being that the correct drivers of
performance and behavior are being addressed).

This then leads us to look at the link between intrinsic and extrinsic motivators and rewards. If every
employee is totally driven by the money he gets, things might be simple. However, over the period of a
career, our desires, wants and motivations change. Yes, expenses increase as family and health (and
lifestyle) demands grow; but there also comes a time when we yearn for fulfillment as ‘whole human
beings.’

Let’s put this another way: if I am totally driven by my internal motivators, for how long will I be able to
sustain myself without external appreciation (in the form of pay and recognition)? Perhaps only artists,
ascetics and selfless social workers are driven by such lofty ideals. The rest of us, unfortunately, need
cash. Alternately, if you pay me but don’t appreciate me (shower praise, stroke my ego), then my
emotional needs will not be met. As we like to say: “Everyone needs appreciation.”

So organizations develop complex, integrated reward & recognition programs that balance present cash,
future cash (retirement benefits), fringe benefits, incentives, appreciations, and what not. Incentives are
linked to performance (individual and business) and can even take the form of stock options. The
million-dollar question that ensues: “Do any of these ensure the desired outcomes?”

Our needs as employees evolve and so do market practices. This means a constant tweaking or
upgrading of the system. The employee value proposition looks to go beyond just these basic essentials
and provide a more holistic experience. At the end of the day, all these elements are a cost to the
company – whether the employee sees (and appreciates) them or not. So they need to spend wisely.

And as an employee, what motivates you?