Thursday, November 8, 2012

Money is NOT the motivator

It's a common misconception that people are motivated by money, especially when talking about entrepreneurs. Make millions from your stock options!! Drive a porche!! Buy an expensive house in Palo Alto!! But for the 99%, money is an outcome of their hard work, not the reason they work hard.

For sales people, it's all about winning. I've seen sales people compete harder to be visibly #1 and win a $100 Starbucks card than invisibly earn a $10k bonus. Yes, sales people are coin operated - you have to pay them for their performance in a pretty linear way, but the motivation comes from the hunt and the kill -- winning and being #1.

For engineers, it's all about their technology being used and staying current. Nothing is more motivating to an engineer than seeing their work in the hands of hundreds, or thousands, or millions of people. Nothing is more demotivating for most engineers than working in an ivory tower. They want to work with smart people more than be known to be smart. They want to be working on the latest technology, apply it to interesting problems and create cool products. That's why they'll work all night, not because of stock options.

Even the blood-sucking lawyers (I say that with all affection) working in a partnership, charging their clients hundreds or thousands of dollars an hour, care more about how they are paid relative to their partners than how much they actually make, once they're making a lot.

However, it's not that money is unimportant. It's that the lack of it is a demotivator, not the reverse.

The base level problem is whether there's enough. If someone is not making enough money to support their chosen lifestyle you're going to have a problem. Worrying about making ends meet can be hugely distracting away from doing the job. You're not responsible if you have someone on your team whose expenses are higher than the job pays, but you will have to deal with the problem eventually, even if the problem you have to solve is fill the job when the person leaves. You need to know so you can help through advancement, if possible.

But once people are making enough, the key issue is fairness. Everyone wants to be treated fairly relative to other people doing similar work in your company or similar companies. If everyone's pay was openly posted, would it make sense? would it feel fair?

I don't advocate posting pay, because the sheer process of everyone absorbing it and explaining it is distracting, but you need to act as if. Just like you should never send an email you would not want on the front page of the New York Times, when you look at the pay of your team, you need to see that it's fair, or if it's not (which sometimes happens for odd, historical reasons) you should have a plan to continuously move it to be fair. And it is a continuous process because the team, and everyone's jobs, continuously change.

Your HR team will talk about Pay for Performance. This means steer pay people to who are performing, steer it away from people who are not. But in the end remember that pay doesn't motivate. For every one of your employees you have to figure out what motivates them first, and then make sure their pay is fair.

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