A few years ago, a family friends of mine moved from their small company to a larger organization. This move was motivated by more than just the prospect of higher pay. At the first job, raises were not common. As Smith (2015) explains, most people do not actually know whether they are paid fairly. The employee at this first job felt that raises did not come often. While they may have been strong performers, they did not see a noticeable increase in their pay. Consequently, their level of effort decreased. Perhaps not dramatically, but the level of discretionary effort from the employee diminished. This is an example of what Kerr (1977) describes in On the Folly of Rewarding A, While Hoping for B. The employee feels that the company rewards A when they expect B. In this case, the organization may expect people to be innovative and take initiative, but they are rewarding people if they remain within their budget and do not take initiative. Consequently, individuals will begin to modify their behavior to suit the rewards that are given to them. The new organization offered above-market rates and bonuses based upon performance. As Greenhouse & Strom (2014) explain, higher pay is used to retain and motivate employees. The increase in effort from this employee is likely due to the new compensation structure. Buckingham and Coffman (2016) write of great managers and how they create heroes. The employee likely felt that the new compensation structure was one way that the organization signaled that I see you and you matter. This signal, rather than the pay itself, was what motivated the change in behavior.
References
Buckingham, M., & Coffman, C. (2016). First, break all the rules: What the world’s greatest managers do differently (2020 ed.). Gallup Press.
Greenhouse, S., & Strom, S. (2014, July 4). Paying employees to stay, not to go. The New York Times.
Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769–783.