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Bonus culture can harm employee motivation

Published: 1st April 2015

COMPANIES could boost employee motivation by shifting away from a bonus reward culture, new research shows.

The MMU-authored document shows how organisations need to understand the complex factors that determine employee’s motivation.

The report, Show me the money! The behavioural science of reward, published by the Chartered Institute of Personal Development (CIPD), highlights how reward specialists and HR professionals need to understand behavioural science and its applications to pay and reward.

Economists and management researchers at the University discuss how money may not be the straightforward workplace motivator we expect and companies should take into account both individual and group success when giving reward.

‘New insights’

Dr Ben Lupton, principal lecturer and co-author, said: “We think that this report is the first to consider the implications of research findings in the behavioural sciences for a comprehensive range of organisational pay and reward issues.

“Our hope is that it will provide new insights and perspectives for HR professionals to enhance the development and implementation of effective reward strategies in their organisations.”

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.

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. HR professionals need to be wary of performance-based pay to avoid disillusionment if employees’ rewards don’t match their expectations.

Incentives

The report suggests that alternative rewards can build intrinsic motivation through appropriate symbolic awards – even chocolates or flowers. These are cost-effective and easy for businesses to disperse at ad-hoc moments in the year instead of than building up to a single moment in a given year.

Jonny Gifford, Research Adviser at the CIPD, said: “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.”