The goal of effective pay practices in organizations should be to reinforce positive behaviours in support of the achievement of organization purpose and objectives. Current ‘compensation’ practices often do the opposite.

Herzberg argued decades ago, echoed by Daniel Pink today, that people are motivated by intrinsic factors and become dissatisfied with extrinsic (hygiene) factors. Extrinsic factors include
– Working conditions
– Policies and administrative practices
– Salary and Benefits
– Supervision
– Status
– Job security
– Fellow workers
– Personal life

The problem is that managers and organizations try to ‘motivate’ behaviour through the use of Hygiene Factors. Some people are in fact

[falsely?] motivated by hygiene factors. This may be because either they are stuck at trying to satisfy lower level (Maslow) needs or because these factors may represent recognition, which is a motivator. It’s not the prospect of a pay increase that motivates, it’s the need for recognition symbolized by the pay increase that drives the behaviour. Money is a symbol for recognition satisfying higher level needs such as self-esteem. The trouble with using money as a surrogate for recognition is that it is not very efficient; there are more effective, and cheaper, ways to give people valued recognition.

For Frederick Herzberg true motivators are intrinsic, internal to the person:
– Recognition
– Achievement
– Advancement
– Growth
– Responsibility
– Job challenge
And chief of these is the work itself; people are internally satisfied by the opportunity to do something, to use their best talents in accomplishing something worthwhile even if only modest; these may vary from person to person and intellect to intellect, but essentially people have a need to ‘work’ for its own sake.

The intrinsic motivators that drive employee engagement go waaay beyond ‘compensation’.