Forget bonus culture and use behavioural science to boost employee motivation, says new CIPD report

Reward specialists and HR professionals could significantly increase employee motivation with a better understanding of the science behind the impact of pay and reward on employee behaviour. That's according to new research by the CIPD, the professional body for HR and people development.

The report, ‘Show me the money! The Behavioural Science of Reward’, discusses how money may not be the straightforward workplace motivator we expect, and highlights how alternative approaches to reward may be more effective in increasing employees’ intrinsic motivation to succeed. By evolving the reward structure, organisations can take more control over the complex array of factors that determine their employees’ motivation and effectively enhance their business success.

According to the CIPD’s report, employees’ perceptions of rewards are defined by the circumstances in which they are received. For example, a bonus received during tough economic times will be perceived as having much greater value than the same reward given in times of prosperity. On the other hand, a bonus may be perceived as having less value if the recipient considers their own performance to be stronger than other employees who receive the same amount as part of a team reward. Given the tendency of people to overestimate their own abilities when performing familiar tasks such as those at work, reward and HR professionals need to be particularly wary of promoting a performance-based pay scheme to avoid disillusionment if employees’ rewards don’t match their expectations.

Jonny Gifford, Research Adviser at the CIPD, comments: “These are interesting and challenging times for reward specialists. We need to recognise employees when they go the extra mile and add increased value, but there are a number of behavioural factors that should be considered when shaping a reward programme. Crucially, we must acknowledge that monetary rewards aren’t everything and that they can even distort people’s motivation. For example, enticing the workforce with financial incentives and a strong bonus culture can lead to unwanted, risky and even unethical behaviours. Equally, because we tend to overestimate our ability as individuals, many if not most people find performance-based pay attractive in the first instance, but ultimately disappointing and demotivating. The key is having a flexible reward package that takes into account behavioural nuances and doesn’t rely solely on a wad of cash as the only means to motivate staff. It’s a change in direction for many but should also be welcome news for organisations who, in a challenging economic context, need to be more creative with their rewards package.”

The report suggests that alternative rewards can build intrinsic motivation among employees. It notes that recognition through appropriate symbolic awards – for example, through employee award schemes or discretionary ad-hoc gifts from line managers – are consistent with a workforce whose desire to succeed is self-sustaining, rather than driven by a desire to earn more money. These rewards also have the added benefit of being cost-effective and easy for businesses to disperse at ad-hoc moments, rather than building up to a single moment of reward in any given year.

Time and timeliness are key aspects explored in the CIPD’s report. It references a study by Zedelius and colleagues* which found that when people were promised reward for a later task, they started to perform better at intermediate tasks, even when those weren’t subject to a reward. It also explores the difference in perception between instant gratification and rewards that are of equal value but deferred, such as pension contributions. This difference is starkest among the youngest workers, who place the least value on pension contributions and other benefits deferred to later life.

Charles Cotton, Performance and Reward Adviser at the CIPD, comments: “Workplace pension schemes boost employee pay packets by thousands of pounds over the course of their employment but without the instant gratification of seeing that money land in their bank accounts each month, many employees fail to value the schemes. When it comes to reward, it’s important that businesses regularly reinforce the total value of the package that they offer to individuals and pay equal attention to both short and long-term rewards. This can include communication and education, but should form part of a well-thought out financial wellbeing strategy.”

With such a range of factors in play, the report concludes that the best reward strategies take into account both individual and group success, while not being overly complicated. By rewarding people for their individual performance as well as their contribution to a specific team or the overall company’s success, a business is most likely to see improved engagement, enhanced performance and good citizenship behaviours.

*Zedelius, C, Veilung, H, Custers, R., Bijleveld, E, Chiew, K and Aarts, H. (2014) A new perspective on human reward research: How consciously and unconsciously perceived reward information influences performance (Cognitive and Affective Behavioural Neurosicence. Vol, 14, pp493-508.) To download the full report, click here

Motivation Theories - Understanding the Expectancy and Equity Theories of Motivation

Before we go in to look at the Expectancy theory and the Equity theory  in detail, it is thus vital to understand what ‘process theories' are in the first place, as the Expectancy theory and the Equity theory are both process theories. Hence so in general, the process theories are basically concerned with how the people think and behave to get what they want. To say, these theories do go to explain how the employees/people are motivated thus focussing on the process by which motivation occurs. In other words, it could also be said that these theories explain why the employees behave the way they do. However, the process theories do help the managers to basically understand, predict and influence employee performance, job satisfaction and other outcomes paving way to help motivate the employees.Having said that, let us now look at each of the two theories seperately in order to better understand the two  and their contributions to help motivate employees.

Vroom's Expectancy Theory
The Expectancy theory is a process theory developed by Victor Vroom. Unlike the other content theories which focuses on the needs of the individuals in order to motivate human/employees, this theory basically concentrates on the outcomes. What Vroom  explained in his theory is that fact that in order to motivate employees/ people the effort put in by the employees, the performance generated and motivation must be linked to one another. In other  words Vroom basically proposed three variables which in turn was vital  to motivate  employees. They are basically,
·         Expectancy
·         Instrumentality
·         Valence
Having said that, Expectancy is  the believe  that increased effort will basically lead to increased performance. In other words, the more the effort put in, the more the performance will be. For example, an employee assumes that if he works  harder the  better the performance will be. But believing that increased effort will lead to increased performance is mainly influenced by  factors such as having the right amount of resources available, having the right skills to carry out the job and the necessary support of the supervisor etc. Without these, it is unlikely that expectancy could be achieved.
Likewise, Instrumentality is the believe  that if you perform well in a task then the outcome is going to be good.  In other words, a valued outcome is received the more you perform the task well. At the same time, instrumentality is also influenced by factors such as having a clear understanding of the relationship between performance and outcome and trusting the people who will basically decide on the who gets what outcome.
Valence on the other hand is basically the importance that the individuals place on the expected outcome. In other words, meaning to say that how do the employees take the outcomes offered to them for their task performance. For example, an employee may be motivated by recognition. If so the case, then  the employee may not value a rise in pay because it is not the most important to him. At times, they may even go to reduce the effort they put in according to how they value the outcomes received.
Having said that,  the employees in an organization will only be motivated if they tend to believe that,
·         By putting in more effort will lead to better performance.
·         Better job performance will lead to better rewards such as better salaries, benefits etc.

·         And the predicted organizational rewards are valued by the employee.
By any chance if  the employees happen to believe that any one of the above are not true, then Vroom states that the employees are unlikely to be motivated. In other words, meaning to say that in order to motivate the employees all of above three have to be achieved by the organization.
Adam's Equity Theory
The Equity theory  developed by Adam in 1963  is based on the idea that employees basically expects a fair balance between their inputs and outputs. In other words, what exactly means by is that the employees are likely to be de-motivated  both in relation to their employer and the job if they happen to believe that their inputs ( effort, loyalty, hard work, commitment, ability, adaptability, tolerance, flexibility, skills etc)  are greater than their outputs( salary, benefit, recognition, reputation, responsibility, sense of achievement, sense of advancement/growth, job security, praise etc).
The employees usually  compare themselves with the other employees who are likely to put in  similar inputs as they do and the outputs they receive. Meaning to say that,  an employee will basically compare himself/ herself with another employee in order to find out whether he/she has been treated fairly. However, this actually does not mean that all employees have to be treated the same way and given exactly what is being to the other employees. This is because all employees are not motivated by the same outputs expected by the other employees. For example, a newly working mother may look for something like flexible hours more than an in crease in pay.
However, even though employees may seek for a balance between  their inputs and outputs it is not always possible to measure the inputs and out puts of the employees  and provide them with the correct  balance . But still it is possible to give a similar output for the inputs of the employee in order to have a fair balance between the two. Having said that, in order to motivate the employees to higher levels  and which eventually lead to enhance the performance, it is thus important to try and give a fair outcome  for the inputs of the employees. In order to do so, the managers must understand the employees better of what are they aiming for and try and give them the best possible out come according to what they expect.
Finally,  it should be said that both the Expectancy theory and the Equity theory do provide the managers with an insight of how to motivate the employees not by concentrating on the needs of the employees but rather the outcomes. In other means, the managers basically get to understand what exactly have to be done or the actions taken when it comes to motivating employees, by way of outcomes. To say, when it comes to the expectancy theory this theory highlights the fact that in order to motivate the employees the managers should basically tie the rewards to performance. In other means, the employees need to be rewarded according to how they perform meaning to say that the better they perform the better the rewards should be. In spite of that the manager should also ensure that the rewards given to the employees are deserved and wanted by the employees. Not only that , but the managers should also conduct training programs which will eventually improve the capabilities of the employees while making them to understand that the more the effort the better the performance will be. Like wise, the equity theory also goes on to say that if the employees are to be motivated then it is time for the managers to try and provide the employees with rewards that are very much equal to  their inputs as far as possible.
By Shameena Silva