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Ideas for Leaders #146

Rewards that Motivate More than Money

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Key Concept

Non-financial rewards such as career-development opportunities and challenges and responsibilities have a much greater impact on staff motivation than salary and benefits. Cash and bonuses and a fair and transparent policy on pay are important to employees – so, too, are flexible benefits. But organizations need to take a ‘holistic’ view of compensation and think in terms of the ‘total rewards package’. Very few people are motivated solely by money.

Idea Summary

A large-scale study by Vlerick Business School, in association with three media partners, De Standaard, La Libre Belgique and NRC Handelsblad, underlines the importance of non-financial rewards to employees.
The study, based on a poll of 4,877 people in Flanders, Wallonia and the Netherlands working in 18 different sectors, measured attitudes to salary, bonuses and benefits and also to non-financial components of compensation – ranging from time spent travelling to work to pride in the employer.

The results point to employee demand for:

  • More involvement in decisions about pay — and more transparency from employers;
  • ‘Cafeteria’ benefit plans – more flexibility and choice.

They also stress the importance of:

  • A ‘development culture’ – training opportunities and challenges and responsibilities;
  • Positive relationships with supervisors – coaching from line managers;
  • A good CSR record, a good reputation in the labour market.

Employees were generally quite satisfied with the level of their pay and their bonuses and with the benefits they received. However, they were less satisfied with what might be termed ‘procedural justice’ – the way salaries and bonuses were determined and transparency about pay - and they wanted benefits to more closely reflect their personal needs and circumstances. Fairness and flexibility were key concerns.

When it came to non-financial rewards, there were two main priorities for employees: a development culture and the opportunity to follow training; the ability to participate in decision-making.

Importantly, the study found that the non-financial components of compensation had a much greater impact on employee engagement and motivation than salary and benefits. Challenges and responsibilities and the reputation of the employer and how the organization was perceived externally played a major role.

Financial rewards had slightly more influence over decisions to leave an organization. Here again, however, intrinsic factors were important – in particular, the relationship with the supervisor and mentoring and development opportunities.

At a time of continuing economic uncertainty and budgetary constraints, the survey looks like good news for employers keen to increase morale. Nonetheless, it uncovers some old concerns about fairness in the workplace: more than 20 percent of the sample disagreed that the difference between their pay and the CEO’s was ‘acceptable’.

Business Application

  • Offer flexible benefits – give employees the opportunity to adapt packages to their own lifestyles and circumstances.
  • Make investment in training and development a priority – even during recession and times of economic uncertainty.
  • Be transparent about the way pay policy is determined – involve employees in decisions about their future.
  • Monitor employees’ reasons for leaving the company in carefully structured ‘exit’ interviews – watch for signs of clashes between staff and line managers, and of low levels of intrinsic motivation.
  • Make sure supervisors are capable of developing positive relationships with employees and of acting as mentors – coach line managers to coach.
  • Take more than a box-ticking approach to corporate social responsibility and sustainability; develop the social purpose and reputation of the organization.
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Authors

Institutions

Source

Idea conceived

  • 2013

Idea posted

  • May 2013

DOI number

10.13007/146

Subject

Real Time Analytics