Money is Not an Effective Reward

Some cliches become cliches because they are true (for example, “actions speak louder than words”). Others become cliches because they sound good, but don’t hold up to logic. The idea that money is the best motivator is one of these.

Money is an effective motivator in the following situations:

  • You aren’t paying your people enough.

  • Money is used infrequently and unpredictably.

  • Monetary rewards are only used for basic, mechanical tasks (like production in a factory).

Most managers do not have employees who are in the situations listed above. Which means money is not a great reward.

In fact, Dan Ariely in his book Payoff proves that money can actually hurt long-term performance.

One of the biggest advantages that great managers have is the fact that even good managers fall for this fallacy. It makes sense, they’ve seen it work in the short term, and it would make their life easier, but it isn’t.

Be a great manager and use rewards that are more effective. Don’t try and convince others that money is not effective - you’ll spend a lot of time and still not make any headway. Just smile in the knowledge that you have knowledge that they don’t.