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Outdated Beliefs that are Harming Business No.1

Updated: Oct 13


Majority of the organizations around the world are suffering with low performance because they are still operating from a belief system that has been scientifically shown to be wrong- except for the highly successful cutting-edge businesses that have been quick to unlearn these beliefs and adapt new paradigm practices that’s been benefiting them.

So let’s look at the most common and outdated belief:


No.1 Money Increases Motivation.


Money seems to increase performance for short period of time and only for simple route tasks. But when the tasks require creativity, design, problem skills or relationship skills, offering more money seem to have an opposite affect.


Tim Judge and colleges reviewed 120 years of research to synthesize the findings from 92 quantitative studies. The combined dataset included over 15,000 individuals and 115 correlation coefficients. The results indicated that the association between salary and job satisfaction is very weak and people’s satisfaction with their salary is mostly independent of their actual salary.


A scan of the scientific literature shows there is little evidence to show that money motivates us, and a great deal of evidence to suggest that it actually demotivates us. For example, paying creative people bonuses for good performance not only demotivates them, but almost guarantees they will fail. A study that demonstrates this and pushes us to rethink the Variable Pay Plans comes from Ariely and colleagues. They recruited villagers in India to play games testing memory, creativity and motor skills, offering three different groups 4, 40 or 400 rupees per game for scoring highly. The maximum reward was equivalent to the amount spent by the average person living in rural India in five months. They found that those offered the highest incentives performed worst, earning an average of 20% of the maximum possible.


Of course this doesn’t mean that people shouldn’t get paid. Not making enough money to comfortably survive has negative effects on individuals and consequently their motivation and performance. There seems to be a point until which emotional well-being levels increase with salary levels but that they plateau afterwards — for US that point seems to be $75,000. So the CEO of Gravity Payments, Dan Price, did not arbitrarily adjust all his employees’ salaries (including his own) to this number.


So what does it all mean? It means in order to create a high performance culture we need to release thinking money as the main motivating force of engagement and think about how to make the workplace one in which people will get their needs satisfied and in which they will perform well.

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san francisco | banu@leaderspsychologist.com | +1-786-416-0330

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