The biggest employee demotivator of all time is money. You heard that right. It is second only to public flogging.
But wait, this can’t be true. Business, employees, work, everything boils down to money. Money is the alpha and the omega. The reason for living and dying, the end all and be all—which is exactly why money demotivates people. Money is expected. It is part of the contract. Employees work, you give them money.
If all you have to offer your employees to motivate them is money and bonuses, your relationship becomes one of you just dispensing money like food pellets. Employees start to see themselves as rats having to perform certain actions or produce things to get those food pellets.
You don’t want to be a rat feeder! You want to be a person and you want to have a professional relationship with your employees so they respect you, and are loyal and motivated when they’re working for you. Money, believe it or not, can’t buy you that. Money buys you employees who work for the highest wage, and money is all that counts—above loyalty and above pride in workmanship.
Bonuses: Expected vs. Unexpected
Here’s the crux of the issue: Every employee has a reason, or several reasons, why they are being underpaid or paid just barely enough for what they do. They’re focused on money because they don’t have it, or don't feel like they're getting paid what they're worth.
But money is just like anything else: The more of it you have, the less value you put on it. (One beer in the fridge is a lot more valuable and will be savored and appreciated a lot more than a fridge full of beer.) After a certain point, the more money we make, the less we appreciate money. By default, when you give people more money (a bonus), you cause a slight drop in appreciation.
The lesson here: Unexpected bonuses in smaller amounts get more appreciation than a one time ball crushing, knock it out of the park, bonus. Expected bonuses, that are bigger, manage to demotivate. As the year-end approaches, unless they’re zombies or eternal pessimists, your employees expect a financial bonus if you give them out every year. When you give them the bonus, they are grateful and appreciative for sure—but usually for only as long as it takes them to calculate how many bills they can pay with it.
You did your duty and now it’s time for them to say thanks and move on. That gratefulness lasts for a very, very short period of time. That said, you can't really win if you usually give out bonuses. If you don’t give them a bonus or you give them less than they expect, you scrooge boss you, then you have also demotivated them.
In the rare case (and it is rare) that you give them more money than they expected, they’ll be excited for a little longer period of time. Maybe they’ll work harder for four or five days, or come in early and work late and do an extra great job on the next project, but then boom. You’ve just elevated their value in their eyes by paying them more. Soon their minds will rationalize why they are worth more all the time. Then they may even look back in time and ask why didn’t you give them more money and bigger bonuses earlier. Can you hear the grumbling yet? You’ve just demotivated them again. And you’ve raised their expectations for the next raise!
Truly Appreciate Your Employees, Reap Rewards
Money is a terrible motivational tool. It goes out faster than it comes in and once employees get it, they spend it or save it, or pay off their credit card debt or use it to treat themselves in some way. But they have no physical memory of the money you gave them and that fuzzy, fading memory of you actually handing them a check gets fainter with each passing moment.
I am not saying you can’t give bonuses, or don’t give bonuses (they are expected, after all). I’m just saying don’t ever see them as a motivational tool. Bonuses are just business as usual.
If you want to develop a loyal, motivated following, do the unexpected. Get to know something about your employees and then give them something relevant. Allow them to do what they love. Give them public recognition for success.
Give them the occasional unexpected physical gift (like a week at a resort, or a brand new watch). You will definitely be remembered, and every time they look at the pictures or at their wrist, they will think of you and your company and be truly motivated. Anything you can do to tie employee motivation to the respect and a physical show of appreciation will do more to motivate them than any bonus check.
Read more articles about bonuses.
Mike Michalowicz is CEO of Provendus Group, a growth consulting firm that help companies who have plateaued to start growing quickly again. Michalowicz is the author of The Pumpkin Plan and The Toilet Paper Entrepreneur, as well as a popular blog for entrepreneurs.