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Inspiration vs Compensation: The trouble with money

Written by: Norm Williams, Senior Vice President Clients & Brand
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If you ask anyone, they'll say cash is more appealing. But based on years of research and practical application, we know inspiration is more powerful than money when it comes to changing behaviour.

There is a common misconception that people will work harder to earn cash than anything else. If you ask, they will say cash is more appealing. But based on academic research and practical application, we know inspiration is more powerful than money when it comes to changing behaviour.

Does having inspired sales teams or employees really matter?

A study published in the Harvard Business Review revealed that inspired people:

  • Were more creative
  • Believed more in their own abilities
  • Had higher self esteem
  • Spent less time pausing, more time working
  • Were higher in mastery of work, absorption of ideas and competence
  • Set bigger goals, display increased progress toward goals and are more likely to attain their goals

So, what's the trouble with money?

There's nothing wrong with it. It's great and it's essential, but you need a lot of it in order to deliver incremental performance. (We are not talking about base compensation and commissions here – we’re talking about over-the-top incentives, sales bonuses, and promotions above and beyond the base plan.)

Financial rewards put people into a calculative mindset. They ask, “How much money is it? Is it a good deal for me to exert more effort, learn a new skill, work harder, etc.?” If it’s a lot of money, the answer is yes. But if it's not, the answer is no and they'll continue with the status quo and exhibit no behaviour change as a result of the “incentive”.

Outside of compensation, what are the best inducements to get maximum response and drive performance? What inspires them to perform?

inspiration-continuum.png

This model was developed by Dr Ran Kivetz, a professor at the Columbia Graduate School of Business to summarise what we continue to find in academic studies and program results: Inspirational awards, vs cash and cash equivalents (debit cards, gift cards, etc.) are more effective at changing behaviour and driving results. The shift towards experiences and travel has been exponential over the past decade. According to a 2018 study by Expedia and the USA's Center for Generational Kinetics:

  • 74% of people prioritise experiences over products or things
  • The desire to travel is so powerful that 71% of Gen Z said they would get a part time job to afford a trip and 49% of Gen Z and Millennials would sell their clothes or furniture to save money for a trip

With people willing to go to those lengths for experiences and travel, the opportunity to engage them via inspirational kinds of reward and recognition is something all organisations should be looking to tap into as means to grow their businesses.

The bottom line: More cash does not deliver commensurate incremental effort and performance. Experiences inspire action – and the type of performance that drives results.

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Norm Williams

Senior Vice President Clients & Brand

Norm has been working with Fortune 500 clients for over 30 years to engage their sales organizations, channel partners, consumers and employees. For the past 30 years, Norm has worked in the field at BI WORLDWIDE as a Business Development Director, Regional Vice President and Area Vice President. In his current role, Norm oversees all of BIW’s sales, client services and marketing teams to deliver measurable financial results for the most recognized companies in the automotive, heavy equipment, telecommunications, pharmaceutical, food, consumer package goods and shipping industries.