Employers in Ireland continue to drain employee motivation and damage productivity by focusing too much attention on extrinsic factors such as purely financial incentives and not enough on the psychological needs of their employees.
This is one of the key findings from new research by System Dynamics. The research shows that employees in Ireland typically respond much better to the 'carrot' than the 'stick'. Even more interesting, however, is the finding that it's more important for managers to know which carrot to use.
The research, carried out in both the public and private sector, shows statistically significant findings that job satisfaction peaks when the employees feel 'autonomous motivation' or a sense of choice about their work.
High levels of autonomous motivation are also most closely linked with stronger organisational commitment and well-being.
So rather than incentivising people with solely financial reward, employers should instead build reward systems that focus on nurturing the psychological needs of their teams. Doing so helps to build and sustain on-the-job behaviour where people strive to exceed expectations rather than simply doing enough to get paid.
It sounds easy and many companies and managers talk about motivating employees through empowerment and emotional intelligence.
However, actually implementing such practices is difficult and takes time. As a result, most organisations resort to offering incentives (and punishments) to drive motivation – even though this approach is proven to be the least effective.
To overcome this issue, there should be three areas of focus for managers who want to get the best results from their teams.
1 Employers need to ensure that their employees feel a sense of choice in how they go about their work. In short, employees need a sense of autonomy.
2 Employees need to believe that they have the ability and competence to do the job required. So give your employees stretch targets, just don't stretch too far.
3 Employees need to experience meaningful, satisfying and supportive relationships at work.
When these needs are satisfied in the workplace, employees will be happier, healthier and more engaged, all of which supports continuous improvements in productivity.
The findings of our research here in Ireland also tally with emerging research in other parts of the world where employee compensation is well down the list in terms of what is important to employees.
For example, the 2011 Mercer's 'What's Working' survey ranked being treated with respect, a work-life balance, the type of work undertaken, the quality of the company leadership, the quality of the people you work with and an environment that helps provide good service to others ahead of overall compensation.
It has also been shown that performance-contingent rewards such as purely financial rewards can lead to reduced motivation, poorer performance, reduced creativity and unethical or fraudulent behaviour.
As one sociologist put it: "Getting people to chase money . . . produces nothing but people chasing money. Using money as a motivator leads to a progressive degradation in the quality of everything produced."
In these difficult economic times, employers need to pay less attention to using financial incentives and more to the actual motivational needs of their employees.
Companies and managers that focus on nurturing employees' needs in the areas of autonomy, competence and relatedness can reap significant benefits.
Given Ireland's status as a hub for creativity and the knowledge economy, the research findings provide an important compass for employers seeking to improve productivity as Ireland's nascent economic recovery gathers momentum.
It may be a simple truth that the carrot is better than the stick, but the true skill rests in knowing which carrot is the sweetest.