Money vs recognition: ¿which one is the best motivator?
In December of last year, Ikea Spain announced that its coworkers would get 13.2 million for achieving certain objectives, as long as they had 6 months of working in the company. With this news, the old question in the incentives topic resurfaced, about which one is the best motivator: ¿money rewards or recognition without money?
Last year, Ikea gave out 12.5 million in extra payments and at least in its data, the performance seems to be good, since the company made 1.348 million euros in Spain at the fiscal exercise closing, 8% more than the year before.
With this said it’s important to clarify that Ikea’s benefits aren’t loose or given by a Christmas whim. They’re framed in two different programs tied to financial goals:
-One Ikea Bonus: tied to the objectives of each unit, in this program the bonuses are received according to salary. The requirements: to have six uninterrupted months working for Ikea and to be active at the end of the fiscal exercise. Ikea will give out 10.2 million to the 5.822 employees that qualify for this benefit.
– Tack!: which means thank you in Swedish is the program tied to the global objectives where the benefits are a contribution to the pension plans of those employees that have worked at least 5 years in the company, a total of 4.959 people. This program will give out 3 million euros in Spain.
On the other hand, vouching for the moneyless recognition, there’s Dan Ariely, professor of Psychology and Behavior Economics in Duke University and author of the book: “Payoff: The hidden logic that shapes our motivations.”, in which he says that bonuses don’t motivate the employees to work harder.
Ariely sees as something odd the happiness in which business give out financial bonuses, all the while finding it hard to give recognition when it’s free and more satisfactory for the coworker.
He exposes that everyone benefits from recognition: the one who gives it and the one who receives it, meanwhile with the monetary bonus you may see an immediate raise in productivity, but in the long term you can feel dissociation between company and employee.
Dan Pink, best-seller author about motivation, also says that money can’t buy performance. And supported by a study of the London School of Economic, where 51 payment structures where analyzed, it was found that the financial incentives can reduce intrinsic motivation and decrease the ethical reasons to comply with social labor standards such as justice. As a consequence, giving monetary incentives could have a negative impact on the entire performance.
And so, ¿is it better to give recognition to our coworkers for their good work or to award them with money?
Despite what scholars like Pink and Ariely say, for Ikea, the second option seems to work. The Swedish giant of decoration has 3 years with these incentive programs, in which a total 36.7 million euros had been given to the coworkers, no matter their rank or occupation in the company.
Our conclusion: whether they’re monetary rewards or not, the important thing is to tie the incentives to strategic programs with clear objectives and conditions.
Although it would be interesting to study the long term engagement of Ikea’s employees to check if their motivation diminishes as Pink and Ariely assure, we are certain of the importance of incentives to align the coworker’s purpose to the company’s and therefore getting both to grow together.
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