The Importance of Pay in Employee Motivation: Discrepancies Between What People Say and What They Do
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THE IMPORTANCE OF PAY IN EMPLOYEE MOTIVATION: DISCREPANCIES BETWEEN WHAT PEOPLE SAY AND WHAT THEY DO Sara L. Rynes, Barry Gerhart, and Kathleen A. Minette A majority of human resources professionals appear to believe that employees are likely to over- report the importance of pay in employee surveys. However, research suggests the opposite is ac- tually true. We review evidence showing the discrepancies between what people say and do with respect to pay. We then discuss why pay is likely to be such an important general motivator, as well as a variety of reasons why managers might underestimate its importance. We note that pay is not equally important in all situations or to all individuals, and identify circumstances under which pay is likely to be more (or less) important to employees. We close with recommendations for implementing research findings with respect to pay and suggestions for evaluating pay sys- tems. © 2004 Wiley Periodicals, Inc. It is easy to overestimate the frequency more likely to underreport than to overreport with which adults actually go to the opera the importance of pay as a motivational fac- and underestimate the frequency with tor in most situations. Put another way, re- which they watch TV cartoons on Satur- search suggests that pay is much more im- day mornings, based on their self-reports. portant in people’s actual choices and (Nunnally & Bernstein, 1994, p. 383) behaviors than it is in their self-reports of what motivates them, much like the cartoon Rynes, Colbert, and Brown (2002) pre- viewers mentioned in the quote above. Yet, sented the following statement to 959 mem- only 35% of the respondents in the Rynes et bers of the Society for Human Resource al. study answered in a way consistent with Management (SHRM): “Surveys that di- research findings (i.e., chose “false”). rectly ask employees how important pay is to Our objective in this article is to show them are likely to overestimate pay’s true im- that employee surveys regarding the impor- portance in actual decisions” (p. 158). If our tance of various factors in motivation gener- interpretation (and that of Rynes et al.) of ally produce results that are inconsistent the research literature is accurate, then the with studies of actual employee behavior. In correct true-false answer to the above state- particular, we focus on well-documented ment is “false.” In other words, people are findings that employees tend to say that pay Correspondence to: Sara L. Rynes, Tippie College of Business, 108 PBB, University of Iowa, Iowa City, IA 52242-1000, tel. 319-335-0838, [email protected] Human Resource Management, Winter 2004, Vol. 43, No. 4, Pp. 381–394 © 2004 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/hrm.20031 382 • HUMAN RESOURCE MANAGEMENT, Winter 2004 is less important to them than it actually is. (e.g., Jurgensen [1978], which had over This is an important point because if em- 50,000 respondents, and Towers Perrin ployees’ reports are taken at face value, HR [2003], which had over 35,000]. professionals are likely to seriously underes- As the first column of Table I shows, timate the motivational potential of pay. when asked directly about the importance of In general, Moreover, a quick survey of the journals or pay, people tend to give it answers that place there appears to magazines that are most often read by prac- somewhere around fifth (range = second to be a consistent titioners (in particular, HR Magazine for HR eighth) in lists of potential motivators. In (but incorrect) message to professionals and Harvard Business Review contrast, meta-analytic studies of actual be- practitioners for general managers) suggests that they, too, haviors in response to motivational initiatives that pay is not tend to take employee surveys at face value (second column) nearly always show pay to a very effective without carefully examining the behavioral be the most effective motivator. Indeed, after motivator—a evidence related to pay and motivation. conducting the first such meta-analysis with message that, if In the section that follows, we first pres- respect to motivational interventions, Locke, believed, could cause ent evidence demonstrating the gap between Feren, McCaleb, Shaw, and Denny (1980) practitioners to what people say and what they do with re- concluded: “Money is the crucial incentive seriously spect to pay. We then show that practitioner . no other incentive or motivational tech- underestimate journals present claims about pay importance nique comes even close to money with re- the that are inconsistent with research about the spect to its instrumental value” (p. 379). motivational potential of a actual motivational effects of pay. In general, Subsequent research has continued to sup- well-designed there appears to be a consistent (but incor- port their conclusion. compensation rect) message to practitioners that pay is not Why do such discrepancies occur, and system. a very effective motivator—a message that, if how can psychological theories help us ex- believed, could cause practitioners to seri- plain them? The common tendency for peo- ously underestimate the motivational poten- ple to say one thing but do another is known tial of a well-designed compensation system. as socially desirable responding: “the tendency to choose items that reflect societally ap- Gaps between What People Say and Do proved behaviors” (Nunnally & Bernstein, with Respect to Pay 1994, p. 382). Social desirability stems from either a lack of self-insight or a lack of frank- Table I presents findings from a number of ness (Nunnally & Bernstein, 1994). In the major studies that have attempted to deter- case of pay, people are likely to understate im- mine the importance of pay to employees, portance either because they misjudge how relative to other potential motivators. In the they might react to, say, an offer of a higher- first column are the results of studies that paying job, or due to social norms that view have simply asked people to rate or rank money as a less noble source of motivation pay’s importance, relative to other potential than factors such as challenging work or work motivators. In the right-hand column are that makes a contribution to society. the results of studies in real, ongoing or- Generally speaking, the more a particu- ganizations that examine differences in lar question touches on strongly held social work output following implementation of values, the less valid direct self-reports are various motivational interventions: modifi- likely to be. In such cases, both managers cations of pay systems, work redesign, in- and researchers must find additional ways of creases in employee participation, and en- ferreting out more valid information. Recog- hanced performance feedback. In order to nizing this, some researchers have ap- increase the reliability of the conclusions proached the topic of pay importance by ex- drawn, we included only studies that are ei- amining how employees’ behaviors (such as ther narrative reviews of the literature, turnover or performance) change in re- meta-analytic reviews (which incorporate sponse to changes in pay and other HR prac- the data from many individual studies into a tices (e.g., the second column in Table I). single large-scale empirical analysis),1 or These behavioral responses are far more single studies with very large sample sizes compelling pieces of evidence than people’s The Importance of Pay in Employee Motivation • 383 TABLE I Discrepancies between Self-Reports of Pay Importance and Behavioral Responses to Changes in Pay Major Studies of Behavioral Responses to Pay and Other Major Studies of Self-Reported Pay Importance Motivational Interventions 1. Herzberg, Mausner, Peterson, and Capwell, 1957. Litera- 1. Locke, Feren, McCaleb, Shaw, and Denny, 1980. Meta- ture review of 16 studies showed that pay ranked sixth in analysis (see Note 1 at end of article) of productivity-en- importance. Ranking above pay were job security, interest- hancing interventions in actual work settings found that in- ing work, opportunity for advancement, appreciation, and troduction of individual pay incentives increased company and management. productivity by an average of 30%. In contrast, job enrich- 2. Lawler, 1971. Reviewed 49 studies showing that pay ment produced productivity increases ranging from 9–17%, ranked approximately third across studies. Did not list while employee participation programs increased productiv- rankings for other motivators. ity by less than 1%, on average. 3. Jurgensen, 1978. Collected rankings of importance from 2. Guzzo, Jette, and Katzell, 1985. Meta-analysis of monetary more than 50,000 applicants to the Minneapolis Gas Com- incentives and other motivational programs on productivity pany over a 30-year period. Pay ranked fifth in importance or physical output. Financial incentives had by far the to men, and seventh in importance to women. For men, largest effect on productivity of all interventions. For exam- security, advancement, type of work, and company ranked ple, pay was four times more effective than interventions higher than pay. For women, type of work, company, secu- designed to make work more interesting. rity, supervisor, advancement, and coworkers ranked higher. 3. Judiesch, 1994. Meta-analysis found that individual pay in- 4. Towers Perrin, 2003. Surveyed more than 35,000 U.S. em- centives increased productivity by an average of 43.7%. Re- ployees. Found importance of pay varies by objective. Com- sults were even larger (48.8%) when the sample was re- petitive base pay ranked second and pay raises based on in- stricted to studies in real organizations (as opposed to dividual performance ranked eighth for attracting laboratory experiments). Other interventions were not stud- employees. Competitive base pay ranked sixth in retaining ied, but we know of no meta-analysis that has presented employees.