Recent surveys indicate that more Americans than ever are not thriving at work. Does that mean that they need a general increase in pay? On many levels, this seems to make perfect sense. After all, psychology, economics, and business have generally supposed that money offered choices and that the more personal choice, the greater well-being. In organizations, the prevalent carrot-and-stick model assumes that people are motivated by financial incentives.
Wall Street, a blanket term for the financial markets, epitomizes this carrot-and-stick ethos, sometimes called pay-for-performance. I should know. For 25 years I was a senior executive at leading financial companies. Big Wall Street banks keep attracting the brightest and most ambitious graduates from elite universities. According to a recent survey described by Lewis, half the graduating class of Harvard wants to work there. It certainly is not a calling or an aspirational choice. Of the Harvard seniors who went into finance, only 5.71% say that they expect to remain in this sector. So what’s their motivation? Simply put, they crave money and status.
According to Binder, entry-level financial analysts typically make $70,000 to $90,000 a year, with the prospect of making much more. But the inflated compensation usually comes at a high price: grueling schedules, insecurity, tedious work, fear, exhaustion, and terrible health habits, not to mention the strain on social life. Unsurprisingly, Lewis reports that many of these analysts wind up hating their jobs and looking for exit strategies.
Race for Status
Surely, employees expect a decent compensation for their work. However, studies described by Schwartz show that job satisfaction does not depend on absolute pay. It turns out that in the race for status, it is all about relative position. Social comparison is a curse in that people feel good or bad with regard to income only when compared to others. Diener and Seligman cite research that shows that individuals are more satisfied when their income is higher than the income of others in their organization or their industry.
Additionally, Schwartz describes studies on hedonic adaptation that point out that people more or less rapidly get used to their new circumstance, good or bad. Inevitably, the psychological effects of a big bonus or a salary raise abate with time. This challenges one of the most entrenched myths of happiness: “I’ll be happy when I get a big raise.” In fact, a study reported by Konow and Early found that people usually overestimate the amount of satisfaction they will get from material things and underestimate the satisfaction they derive from human connections. As a result, many people choose jobs that will make them unhappy.
Finally, Schwartz and Sharpe note that to make things better in our modern societies we usually reach for a set of rules and administrative oversight mechanisms to tell people what to do and monitor their performance. We create a set of incentives that encourage good performance by rewarding people for it. But the authors argue that skill without will can lead to the most blatant cheating in the service of one’s own interests and that financial incentives can never replace wisdom. The latest example is the current Wells Fargo Scandal. You may know that for years people at this big bank opened unauthorized customer bank accounts for the sole purpose of meeting sales targets. The aggressive sales culture prevailing at the company ended up corrupting over 4,000 employees into unethical practices.
Money is a Means, not an End
The sages of humanity have warned us since recorded history started that money should be nothing more than a means to an end. Yet, so often, we confuse means with ends and sacrifice our needs to grow and to develop social relationships (ends) for money (means). Indeed, Ryan and Deci argue that what motivates people is pursuing intrinsic goals and engaging in activities that satisfy the three innate psychological needs for autonomy (agency), competence (effectiveness) and relatedness (connection).
Intrinsically motivated behaviors are performed out of personal interest and are inherently satisfying. By definition, they are self-determined behaviors, such as reading books for fun, practicing sports for pleasure, or working hard at a task with other colleagues because it is personally rewarding on different levels.
Organizations, Look at your Assumptions Again
Thus, organizations would be well inspired to revisit their assumptions about what motivates employees. In particular, the belief that material self-interest is the best incentive for all people is wrong and misses so much of what actually makes us want to work. Income alone is not a good predictor of well-being because materialism can have negative outcomes, in particular for health and social relationships. Indeed, positive relationships at work can be a source of energy, enrichment, meaning and learning that help individuals and their organizations thrive.
In the end, money matters. But wisdom and people matter most.
This article authored by Robert Rosales was originally posted on PositivePsychologyNews.com