How do you keep your employees motivated? How do you show them that their work is valued? Many small business owners use bonuses or raises, and while everyone loves a little extra cash, motivating your team with money may not be as effective as you think. When used poorly, monetary rewards can feel like coercion, an effect you see in the classic carrot-and-stick approach to motivation.
"Unless you're extremely careful with how you use rewards, you get people who are just working for the money," said Edward Deci, a human motivation psychologist at University of Rochester.
Some experts, like Deci, discourage using money to motivate employees at all, especially when employees anticipate that reward before they finish the task. "We need to compensate people fairly, but when we try to use money to motivate them to do tasks, it can very likely backfire on us," he said.
Others believe that money can be used to motivate employees without compromising self-motivation.
"Money is highly motivational for people," said Ian Larkin, a professor of business administration at Harvard Business School. "But saying money is the only thing we should use is also silly. Companies probably think too much about using money as a motivator and too little about other motivators."
Here are a few tips to help you put both holiday bonuses and compensation packages in perspective: