Compensation – What Really Motivates Employees?

Source: Firas Raouf, OpenView Partners

It’s the end of the year, when sales reps are feverishly closing deals and looking forward to big commission checks, and the rest of your employees are anticipating big end-of-year bonuses. As the CEO, you’re also starting to think about the compensation plan for next year and how to structure it in a way that drives the right motivation and performance.

One of my colleagues sent me a link to a talk given by Dan Pink who wrote a book about motivation science called Drive. Dan talks about research that points to some counter-intuitative motivations that drive performance. I originally heard Dan’s talk at a TED conference:

In the case of motivating physical, simple, or repetitive work activities, the findings were intuitive. The more you offer to pay someone, the better they do.

Within an early-stage technology company, I would point to sales teams to exemplify that dynamic. The more you offer to pay sales people, the more motivated they are to make more calls, and sell more to customers.

The surprising finding in Dan’s research is that monetary rewards have the inverse effect on cognitive (aka more complex and/or creative) work. In the case of cognitive work, increasing the size of the monetary reward actually results in worse performance.

Within an early-stage technology company, I would point to the majority of the organization (including in some cases the sales team) to bear that point out. Technology companies are primarily made of knowledge workers who spend the majority of their work on solving problems and creatively building things.

According to Dan, rather than purely a monetary-based motivation, what drives cognitive creativity is the desire for:

  1. Autonomy: The desire to be self directed — i.e. help me understand the goals you’d like me to achieve, and let me get on my way to achieving them. Don’t micro-manage me.
  2. Mastery: The urge to get better at things — i.e. I am more motivated by learning and getting better as a person and as a worker. Don’t stand in the way of my growth.
  3. Purpose: Having a transcendent purpose — i.e. I want to be inspired to do my best. I want to be part of something great.

Of course, that doesn’t mean you don’t need to pay people enough for the work that they do. You absolutely need to compensate people enough in order to attract top talent and make sure that pay (and all the emotions that it garners) is not an issue. But there is certainly more to motivation than money, and as you think about your own team’s compensation, I highly encourage you to keep these things in mind. Watch the video and read the book.

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