Incentives at work: who gets what and what really works

"I'm as mad as hell and I'm not going to take it any more!"

What works in the long term is feeling like you are part of a team, feeling recognised - that you are not a machine ...

That outraged sentiment - expressed by Australian actor Peter Finch in the 1976 film Network - is getting renewed oxygen as reaction builds to the extraordinary bonuses top executives pay themselves while other staff barely rate cost-of-living increases.

In America, the Occupy Wall Street movement and We are the 99 Per Cent are outgunning the Tea Party as protests over corporate greed spread around the nation.

There is even a move to launch similar protests in Australia.

So how do incentives work - both at the top of companies and lower down the ladder?

Does an extra million really motivate a chief executive who is already making many millions to work harder? And, if so, why is the CEO not giving of their best when they are being paid so much already?

In the lower ranks, does a cash bonus work better than other reward schemes? Or is the challenge of the work and the respect of peers and employer more important?

The expert view


The experts say that money won't buy loyalty nor happiness from an employee.

Anthony Grant, the director of the coaching psychology unit at the University of Sydney, said that, while a level of financial security was necessary, wads of cash would not encourage employees to work harder or faster.

"Once a household has an income of $100,000 a year, money is not a key motivator," Dr Grant said.

Instead, money was considered a "hygenic" factor.

Dr Grant explained it was just one of many "things that do not give positive satisfaction but if you don't have them it makes people dissatisfied".

Dr Grant said that keeping an employee happy had more to do with ensuring a person has proper resources, respect, and that their mental health is considered.

"If they don't have the resources to do their job well, not just adequately, this will not just demotivate people, it will really piss them off," Dr Grant said.

"What works in the long term is feeling like you are part of a team, feeling recognised - that you are not a machine, and feeling that you are making a difference in the world."

Making someone feel recognised could be as easy as "providing lunch at a meeting", said Keri Spooner who runs the postgraduate program in Human Resources management at the University of Technology, Sydney.

She warned that the biggest mistake employers made when handing out incentives was that they did not consider what behaviour it encouraged.

"They have to be very carefully aligned with what you are trying to achieve," Dr Spooner said.

She gave the example that a person, who was paid a bonus for selling more of a product, would spend less time finding out what product was best for a customer.

Dr Spooner also rejected the idea that cash incentives made people work harder.

"Money does not buy loyalty and it doesn't buy commitment. It is such a common commodity that if that is all that is keeping you in a job - all someone has to do is offer you more and you're gone," she said.

Her research into the work practices of local government managers showed commitment came from an employee's self-esteem.

"We thought it would be a commitment to their local community or to a local politician, but it was a commitment to professional values that motivated them. They wanted to do their job well, because it was tied up with their identity," she said.

The rich entrepreneur's view

Australian entrepreneur Dick Smith, who founded Dick Smith Electronics, Dick Smith Foods and Australian Geographic, said he had a range of incentives for his staff.

These included giving staff a percentage of profits and Christmas bonuses.

But he said job satisfaction was key, however much people earned.

"It's a combination," he said.

"Job satisfaction doesn't just come from money. It's feeling that you've done something useful. Human self-esteem is incredibly important. I think that, at the end of the week if you believe you've done something worthwhile, that's far more important than just money."

Mr Smith said he felt pitting staff against each other for financial or other incentives was counterproductive as good job performances in some positions were hard to quantify.

"I like the idea of having a bonus which is spread among all of the staff. I really believe it's quite unfair to pay some people a bonus and other people who are just as valuable in the company don't get one."

He said that, while he paid his executives well, he never paid them millions of dollars in salaries.

"The key to what I'm saying is that you have to spread the wealth around. What's happening now is great concentrations of wealth.

"The wealth is so high at the top and pensioners are getting $16,000 [a year] at the moment. The problem is capitalism needs trust between the bosses and the workers. That trust goes when you pay people huge amounts of money."

He said today's executive pay incentives had become so large they were ineffective and not linked to risk-taking.

"Normally you make large amounts of money when you've taken large risks. People who get paid large amounts of money have invested their house, their whole lives in it. But, these days, they take no risks and if the whole company goes down, the history is that they are given even more money to leave."

But Mr Smith said the wage gap between the lowest and highest-paid workers was becoming so entrenched it was unlikely to narrow.

"It's part of globalisation; there's nothing you can do about it. For 50 years, we've had capitalism where the chief executive got three or four times what the workers got. Now they get 300 times.

"The whole thing is utterly ridiculous. It's all about greed, but I suppose that's what capitalism is about."

The view from the street

Looking around Sydney's Martin Place, bustling with men and women in suits carrying paperwork and yakking into their mobile phones, you might assume these workers epitomise an industry ruled by big bonuses.

But many out on their breaks or walking to meetings this morning said respect in the workplace, extra career opportunities and social activities were more important incentives to work hard.

"I think it's the quality of the work and the person you work for and what you are learning that really drives you; not necessarily pay," said Ingrid Radford, 53, who works in finance.

"I think respect of the organisation and what it does for the community is very important."

Interior designer Cintia Mistro, 33, said loving her job was where her motivation came from.

"It's not the money itself," she said.

"So I don't think getting more money for it would make me work harder."

She said other incentives to work hard would be a good work environment.

"If I feel like I've been respected and recognised [for] what I do, these are the main ones for me."

Brad Fry, a 22-year-old chef, said good pay was important in any job, but respect from customers was also an incentive.

"Just more appreciation for the job you do from the people who are requesting your services. That does help a lot, I think," Mr Fry said.

"More community things, like your workplace will get together and do events and share things together, like barbecues."

Claire Cook, 22, said bonuses were important to her.

"It gives you motivation. I work in sales so bonuses come as part of the job," Ms Cook said.

She said other possible incentives would include holidays: "The opportunity to travel, without a doubt."

Others said bonuses helped them figure out what their goals were and how they could achieve them.

"It gives you the particular thing you need to achieve in order to get remunerated," said Scott Buckingham, 30, who works in financial services.

"It definitely drives behaviour."

Mr Buckingham said career advancement would be another important incentive.

"Just wanting to feel like there's a benefit to you for hard work."

Chris Glen, 35, who works in media and marketing, said a bonus provided something tangible to work towards.

"I actually think if you don't have a bonus then you get nothing to work towards to fulfil the objectives in your job," he said.

Inderpal Singh, a 57-year-old contractor in the finance sector, said bonuses were definitely a way to make him work harder, but achieving goals was also motivating.

"It depends on the challenge, you know, if you have something to do, a project or something like that.

"A challenge definitely makes you work harder."