Annual Bonus Ranks Last as Motivator for Employees

I’ve just read an interesting research report out of the UK, which was driven by a desire to understand why output per hour and per employee dropped well below the G7 average even though 94% of UK organizations offered financial incentives to staff. Indeed, UK companies spent an average of £1,400 per employee (up 1% year-over-year) in annual financial bonuses, yet saw a declining return as compared to rest of the major industrialized economies.

Key statistics from the survey show the three most effective motivators to high performance identified by employees were:

1. How much the employee enjoyed their role (59%)
2. Basic salary (including pension) (49%)
3. Quality of the relationship with their team and colleagues (42%)

What was the lowest ranking motivator of performance? Additional financial incentives such as performance bonuses – selected by only 13% of respondents as a top motivator.

These findings are well in line with what I and my Café colleagues have reported in the past:  People need a fair and sustaining base salary, but once that criterion has been met, intrinsic factors of engagement and motivation are far more powerful than the almighty pound (or dollar). Indeed, the report goes on to say:

“When asked for one thing that would motivate them to do more, 31% of respondents suggested better treatment by their employer, including more praise and a sense of being valued, would be the most motivational thing their organisation could do.

“Recognition, non-financial reward and support/ feedback are both highly motivating and increasingly desired by employees. Managers who are able to understand and utilise these tools effectively will be able to get the best out of their workforce and produce a happier, more productive environment.”

Can simply telling someone “thank you” be that powerful for motivation? Several studies point to this result. The Spring 2012 Workforce Mood Tracker of fully employed U.S. workers found 82% of employees said being recognized actually motivated them in their jobs while 78% of employees said they would work harder if their efforts were better recognized. Extensive research conducted by Harvard Business School Professors Teresa Amabile and Steven Kramer (and reported in the book The Progress Principle) showed:

“We found that the most important indicator on employee engagement ... was simply ‘making progress in meaningful work.’ If employees could find meaning to the work — even contributing value to the team or the organization — this would make a difference.”

This is an important distinction to understand. This is not employees asking for the gold star or constant praise. This is employees asking for confirmation that their daily effort is not in vain, that the work they produce is helpful to a broader community or important in achieving a bigger mission.

Adding to the research proofs, Gartner reported in their 2012 Strategic Roadmap for Performance Management:

"Leading organizations will… [shift] budgets from traditional, top-down-determined, annual merit increases and incentive compensation to bottom-up, event-specific and more frequent rewards. In addition, parts of traditional talent management activities effectively become crowdsourced."

Based on the research findings from multiple sources across industries and geographies, I would say UK organizations would certainly be well served to consider investing their annual performance bonus funds in more frequent, timely and motivating recognition and praise.

Would you say the same is true for your organization?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Comments

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I agree with you Derek. Historically wouldn't you agree though that Europeans have been more risk averse than employees in the U.S? Thus bonuses are not as appealing to them? I know that the gap is less noticeable now.

[Derek Irvine, Globoforce]

Yes, that's true, Jacque. I'd like to see this trend become "historical" in fact. In my consulting travels across Europe, I see more resistance to the power of frequent, timely recognition and rewards and much greater reliance on "how we've always done it."

[Paul Spade]

Where in your source data is bonus ranked last as a motivator? Did you read past the exec summary of the source?