It’s not really possible to explain the importance of employee motivation and goal-setting in today’s business world. Goals are important because they guide the company and its’ employees toward improvement, while motivation is like a fuel which helps employees and business owners reach the goals they’ve set.

Motivation is essential for success, therefore, it’s an essential component of every company. It empowers employees, makes them more engaged, which ultimately leads to higher productivity, increased revenue, cost savings and more value created.

With unmotivated and unhappy employees, productivity levels and work relationships decrease, which is why all business owners are wondering what’s the best way to increase their employees’ motivation.

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Motivation Sources

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Behavioral theory differentiates two major sources of motivation when it comes to job performance.

The first one is external (extrinsic), and it’s related to physical or monetary awards like bonuses, child care, etc.

The second group is internal (intrinsic), and this is a situation in which rewards meet psychological and personality needs of employees such as feelings of validation, or pride.

Companies mostly focus on external motivators. However, this approach is wrong because external motivators tend to be less effective as time goes by. Which is why employers must address internal motivators more.

What Motivates Employees?

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Companies have developed different methods to increase employees’ motivation as well as satisfaction at work. These are usually based on company’s type, size, values, mission, and so on. However, it seems that most companies are still focused on the money. Whether it’s in the form of a raise, bonus, or stock options - managers around the world seem to think this is the best way to boost someone’s morale.

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The fact is, that offering monetary bonuses is the easiest way to reward performance. And, it works… to some extent. For less paid jobs, monetary incentives are a big deal and they make all the difference. However, no matter how well the job pays, people don’t stay too long in positions and companies which don’t make them happy. See? That’s how extrinsic motivators lose importance over internal factors.

Imagine this: your employees come to work in the morning and you present them with three different reward coupons. For a job well done, they can either get cash, a rare compliment or a free pizza. Which one would your employees choose?

Dan Ariely ran a study with this same scenario, and it turns out employees want pizza. The compliment coupon came in second, and the cash bonus ended up costing the company more, and resulted in a 6.5% DROP in productivity. So, even from the employers perspective - cash bonus was worse than no incentive. As the week went by, the amount of workers selecting pizza and compliments slowed down a bit, but these workers still performed better than those who didn’t get an incentive.

In this experiment, compliments won over pizza. However, Ariely believes that pizza would win in a different scenario. His original idea was to deliver the pizza to employees’ families, which he thought would make them heros in families’ minds.

Even though it might seem funny, this experiment really shows what motivates people. It’s amazing to see how social factors like gratitude play a substantial role when it comes to motivation at work. Fair pay is important, but that’s not the only or the best way to motivate employees.

How is This Explained?

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Adam Grant, a professor at Wharton, explained that motivational power of money at work fades quicker than a sense of appreciation. 

He explained that a pay raise feels like it’s time for one, bonuses get spent easily and that the new job title doesn't seem so important once employees get it. On the other hand, he says that the sense of appreciation sticks with us more. 

Motivating employees in the office seems easier than motivating employees who work from home, and it’s like that. So, many remote companies resort to using remote employee monitoring tools, which measure productivity and activity levels. Based on these charts, remote companies are able to create suitable reward programs for their employees.

Wrap Up

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Before you go ahead and start creating a rewards program for your company, you should review your current work conditions to make sure existential security and a healthy atmosphere exist in the environment. 

However, at the end of the day, we all want to be acknowledged by our superiors, and have some free food in the meantime. Maybe it’s time to swap Casual Fridays for Pizza Fridays?

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This article was originally written on September 21st, 2016 by Gina Ora. It was rewritten on November 24th, 2019 by Bojana Djordjevic.

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