Who doesn’t want a raise?  More money would be great, but you don’t work just for the money.  Not really.  None of us do.

Whoa, whoa, wait a minute.  Speak for yourself.  Money is exactly the reason why I’m working.  Do you think if I had enough money this is how I would be spending my time?

Please don’t stop reading.  Bear with me for just a moment.  I’m not trying to lay off some pie-in-the-sky nonsense about how money doesn’t really matter.  No way.  I don’t believe that, and neither do you.

My point is to highlight how the majority of companies structure their reward systems around financial incentives without taking adequate account for what truly motivates humans to perform.

First, we need to clarify that incentives and motivation, while related, are two different things.  Incentives determine or create a tendency towards a specific action.  If I do this, I get that.  Motivation provides a reason for doing something.  It answers the “why” we all ask ourselves, either consciously or unconsciously, before we do something. 

Again, they sound similar, but there is a critical difference: incentives come from the outside, motivation comes from within.

Your boss telling you if you hit this sales target the company will give you a 20% bonus is an incentive.  The company is trying to create a tendency for you to act a certain way by using money as the carrot. 

If you’re in sales your compensation package is built around this principle.  It’s axiomatic in sales organizations that if senior leadership wants its salespeople to do something differently (like sell more digital, to use an example from my past) then all they need to do is adjust the comp plan accordingly.

My problem with this approach, and with any comp structure that relies exclusively on financial incentives, is that it assumes humans can be manipulated like mice wandering a maze in search of cheese.  Companies that do this presume that employees with the proper financial incentives will be sufficiently motivated.  But that’s not how you build a winning culture because money alone is not motivating.

People are motivated by lots of things professionally.  Money clearly is a big one, yet studies have repeatedly shown that other factors matter equally as much, if not more.  The opportunity to do challenging work, to have one’s contributions recognized and valued, to make a difference in the world, to grow, to work with others in pursuit of a common cause.  Absent these conditions, people won’t be happy, no matter their comp. 

An executive coach once told me that if you take a job just for the money, by the third or fourth paycheck you will be used to the cash.  And then you will realize that you aren’t as happy as you thought you’d be in the new job.  One doesn’t have to look very far to find highly compensated people who are profoundly unhappy with their work.  The reality is if you don’t like what you do, getting paid more won’t make you happy.  Extra pay can reduce your dissatisfaction, but that’s not the same as being happy.

Some of the hardest working, most dedicated professionals in our society work in jobs that don’t offer financial incentives for strong performance.  The tireless, heroic efforts this past year of first responders, medical researchers, and not-for-profit employees (just to name a few) are great examples of humans motivated by a deeper purpose to do extraordinary things.

All of us that work in the private sector can benefit from stepping back and reexamining how we motivate people.  Fair compensation that gives everyone skin in the game is a must.  But financial incentives alone are not sufficient.  Leaders must take the time to ensure they have processes that speak to the deeper motivation of employees.  How can the company help employees grow and learn new skills?  Are their contributions being recognized and valued? What service does the company, and the employee’s role, make to the communities in which we live?

It’s performance review time at many companies.  I hope everyone gets a raise.  But if your work is driven exclusively by financial incentives, you’ll likely never be truly motivated or find professional happiness.