Column: Win for life
20.08.2024What would your employees do if they won ‘Win for Life’ tomorrow? Would they continue working for your company if money no longer played a role?
We consistently think that employees will perform better if we significantly increase their salaries or give them individual bonuses as extra motivation. And if we ask this question directly to those same employees, we know that many will, without any doubt, say yes to a substantial pay rise.
Before I go into this further, I want to avoid one possible misunderstanding right away. A fair salary is absolutely important. And a little more is always welcome too. But the idea that people work harder because they suddenly win ‘Win for Life’? Those who have been following academic research for a longer time know that this is not true.
Written by Jeroen Naudts. This text was also published as a column in HRmagazine.
Surprising bonuses
A good example of this is the research conducted by Dan Ariely, behavioural economist at Duke University. Ariely’s research team carried out its study in India, where participants were asked to complete a series of memory and concentration tasks. If they successfully completed these tasks, they received a bonus. The size of that bonus depended on one of the three groups to which the participant belonged. In the first group, participants received a small bonus equivalent to an extra day’s wage. In the second group, good performance was rewarded with two weeks’ wages. The third group received a generous bonus equivalent to five months’ salary for good performance.
Which bonus worked best? The impact of the low and medium bonus in groups 1 and 2 turned out to be almost identical. But the effect of bonus 3, equivalent to five months’ salary, was completely different. Although perhaps not in the direction you would expect. The participants in this group consistently performed worse. Despite the fact that they could earn 150 times (!) the amount awarded to participants in group 1 for exactly the same work.
Overstretched muscles
A salary increase is certainly welcome, but not too much and not too quickly over time. Does that sound surprising? The explanation lies in the phenomenon known as choking. In sports, this is the phenomenon whereby increased mental pressure causes muscles to become more tense, making even the simplest movements more difficult. The generous bonus equivalent to five months’ salary in the third group created this increased mental pressure. As a result, the participants in the third test group performed worse than expected.
Randstad: the importance of growth opportunities
That was also the finding at Randstad Group. Before they took a deeper dive into their HR data, they too assumed that compensation was the most important driver for increasing retention. But when they analysed their HR data, it turned out that the opportunity for growth and career progression within the organisation was far more important. An area in which they successfully invested. So do not only follow the most obvious path of salary increases, but dare to dig deeper, because that is where the real ‘win for life’ lies.