We’ve looked at the competition paradox , the empowerment paradox and the collaboration paradox within this Performance Paradox series. But as you may recall there are 4 paradoxes standing in the way of employees becoming true enterprise contributors, and achieving that breakthrough performance organizations want.
The fourth is the motivation paradox, balancing financial rewards without crowding out intrinsic motivation.
On the One Hand…
Managers and heads of HR run to financial rewards to incent the behaviors they want from their employees. Two-thirds of organizations are using pay-for performance to motivate employees via salary increases, bonuses, and other incentives, and most employees have a network performance-related objective that is linked to their pay.
…And on the Other Hand
Studies in psychology, economics, and education have found detrimental effects of financial rewards on the behaviors they are trying to incent. Backing this up, our research shows linking pay to network performance objectives actually diminishes will for enterprise contribution. Employees with pay that is directly linked to their contributions to others are 25% less willing to help their coworkers, as their intrinsic motivation is crowded out by reward structures.
Common strategies can possibly produce less engaged employees who less motivated to be enterprise contributors. Only 29% of employees believe they’re fairly financially rewarded for their contributions to others within the common pay-for-performance systems. Furthermore, paying for network performance decreases employees’ willingness to contribute to peers by about 25%.
Only 15% of employees say that their organization effectively supports both financial and intrinsic motivation.
Absolutely. Employees are already willing to perform as enterprise contributors; however, current reward structures are at risk of crowding out that willingness. The organization that motivates financially and intrinsically can realize a 10 percentile increase in their level of Enterprise Contribution.
What to Do
HR teams shouldn’t crowd out existing intrinsic motivation with financial rewards. Look to leverage intrinsic motivation to encourage day-to-day peer contributions that are often difficult for the organization to see, and create motivation for organization contributions with financial rewards.**
CEB can help HR managers and their teams:
- Reward Specific Collaboration Activities, Not General Collaboration
- Make Contributing Rewarding, Don’t Just Reward Contributions
**CEB Total Rewards Leadership Council’s research on pay for performance tells us that compensation matters for enterprise contribution; however, not all contributions can and should be financially rewarded.