Money doesn’t motivate: Here are 3 psychology-backed reasons that prove it

Do you believe the more your employees are paid, the more motivated they will be? This has been the accepted notion for ages. Now, however, with more studies being conducted, the research suggests that motivation is far more complex than we first thought. Compensation plays an important part in that, but even the employees that are most in favour of the link between pay and motivation agree pay isn’t everything. A higher salary won’t make the duties more pleasurable or nurture a newfound fondness for work.

1. Control leads to rebellion

Psychologist B.F. Skinner discovered the operant conditioning technique which leans on reward and punishment to condition people into behaving the way you want them to. Money being the stimulus in this case. When employees behave favourably, they are rewarded with more money, when they behave unfavourably they are penalised with deductions.

This system is different from motivation because it uses control. It doesn’t matter whether you use positive reinforcement or negative reinforcement, no one likes to be controlled. Control is the mother of rebellion – it doesn’t create true motivation or ignite a hunger for prestige.

2. Consider Maslow’s hierarchy of needs

Maslow’s hierarchy of needs refers to the five basic needs of every human. It is delineated in a tier-structure, with the two bottom tiers covering the basics to survive – food, water, shelter, and security or safety. The next ones include self-fulfilment, like belongingness, esteem, and reaching one’s full potential. Money will only motivate those who battle to fulfil the first two tiers.

An employee who already makes ends meet wants to expand their knowledge or they might be striving towards a promotion. They won’t feel motivated by the promise of more money.

3. Intrinsic motivation is self-determined

Motivation is divided into two categories; intrinsic and extrinsic. Extrinsic motivation is the motivation for things like money, fame, status, etc. The best form of extrinsic motivation (motivation outside ourselves) is when we are driven to action because it’s for someone or something that we care about deeply. For example, we may go to work even if we don’t want to because its important to send our kids to school, put food on the table for the family, and have nice holidays together.

The theory invented by Edward Deci and his colleagues concludes that when money is used as a means to control an individual, it taints their feelings towards the jobs or project, and therefore becomes a demotivator. Additionally, if the reward is set and foreseeable, such as extra money or extra compensation, intrinsic motivation decreases by 36%. Basically, this means that the motivation must come from within. Money is a temporary motivator that can later breed contempt and frustration.

How can you motivate your employees and create a high-functioning team?

One of the newer studies has analysed communication as a major contributor to motivation and productivity in a team environment. The study found that the length of interactions, the tone used, and the frequency of interactions was directly proportional to how productive a team is. This, too, is only part of the puzzle. Money and financial progress lay the foundations for a good work ethic but each employee is unique. Each person has their own set of goals. The best way to motivate employees is to get to know them and ensure the work environment is pleasant, supportive, and caring.

Researching the psychology of business taught me to look at the corporate world through a different lens and what I saw reinforces that business is about more than money. It’s about people and relationships, developing skills and empowering others. Business has always inspired me and I want to get other people excited about their potential.

Trevor Glass is a Founder and Business Psychology Researcher.