[MUSIC] So just how important is pay as a motivator? That is what we're going to look at in this session. A manager needs to know just how important a motivator pay is compared to other potential factors such as achievement, potential to use one's skills, responsibility, autonomy. Potential career advancement, training, etc, before deciding how much effort is justified in designing a pay and reward system. There are two basic ways of discovering how important pay is in relation to other motivators. First, ask employees. Secondly, see how they actually behave, but the two message produce very different answers. If you ask people how pay rates compare to other motivators, it comes out quite low. A tower report in 2003 found the pay did not even come in the top ten for motivating existing employees. Behind such factors as challenging work, career advancement opportunities, and a collaborative work environment. >> To what extent do you think that the amount that someone is paid influences how well they perform at work? >> It can make a difference. To be honest, if they're paid too high, then maybe they'll just kind of sit back and think they don't need to do as much work. If they are paid too low, then obviously that's not much motivation to even be bothered to do the work. So I think there is kind of a happy medium. >> All right, and to what extent do you think that the amount that someone gets paid influences how well they perform at work? >> I think it's very important. I think people like to feel valued and people nowadays work very hard. So if you can show them that they're valued with either a pay structure, or with bonuses, I think that helps. >> Good. >> But asking people about pay results in socially desirable responses that may not reflect how they actually act. Respondents may convince themselves that they are more concerned with challenging work or work relation suits and something as crude as money. Incidentally, Frederick Herzberg's claim that money is not a motivator, a claim that has been very widely promoted by management journals, notably the Harvard Business Review, was based on research which simply asked people to state what motivated them. So his results were predictable. The real test of whether pay is a motivator is to see whether payment by results systems actually do motivate people on the job. The research is not entirely consistent. It never is, but there is a lot of research that demonstrates that pay incentives can have quite a dramatic impact on performance. For example, analysis found that individual pay incentives increased performance by roughly 50%. And his colleagues found that monetary incentives were four times as effective as a motivator as making the work more interesting. Pay by result systems can operate at the individual or group level. Individual pay incentives schemes often very effective and tend to be very popular with good performers, but have some possible downsides in terms of corporation and team building, a manager needs to be aware of that. An alternative is some form of group or team based bonus system, which can provoke team building, with a reservation that high performing individuals may resent carrying other members of the team. And that for each member of the team, the relationship between their individual effort and their reward is not at all clear cut. >> When you perform well as a team and it would be unfair of me to single out any individual, so the good news is you qualify as a team for your bonus. >> That's great, thank you. >> Thank you. >> [LAUGH] >> [LAUGH] >> As we will discuss in a later session, certain types of employees, usually the ones most valued by the employer; those who are well educated, go getting and have a strong self belief, are those to whom individual payment by result systems have most attraction. In the next session, we'll be looking more closely at the necessary conditions for successful pay for performance systems. [MUSIC]
