Chances are you’d probably say your employees would choose a pay raise, right? I mean, after all, who wouldn’t want more money? Taking a few liberties with the classic song Money by Barrett Strong, your employees are probably saying “Your leadership gives me such a thrill, but your leadership don’t pay my bills, I need money!”

Getting a pay raise would be an immediately tangible reward that everyone could literally take to the bank. Besides, it’s not like you need any dramatic improvement as a boss, right? Sure, you may not be the greatest leader in the world, but there’s a whole lot of bosses plenty worse than you. Your people would definitely choose a pay raise, you say.

Well, you’d be wrong. One study showed that 65% of Americans would choose a better boss over a pay raise. How do you like them apples?

In many of our training courses we do a “best boss” exercise. We ask participants to share the characteristics of the person who was their best boss, and as you can see from the list below, many of these traits are ones you can develop and master with just a bit of effort and focus.

My best boss…

• Was trustworthy—Often mentioned as the foundation of what makes a best boss, being trustworthy is paramount to being an effective leader. Research has shown that employees who have high levels of trust in their boss are more productive, engaged, innovative, creative, and contribute more to the organization’s bottom-line. Click here to learn more about how to build trust as a leader.
• Believed in me—Best bosses believe in the capabilities and potential of their people. Through their words and actions they communicate a sincere faith in their employees that builds the confidence of their team members to go above and beyond expectations.
• Showed respect—No one likes to be talked down to or treated as “less than.” Best bosses recognize the inherent worth each person possesses and they seek to build people up, not tear them down.
• Listened to me—Being a good listener is one of the most powerful, yet underrated leadership skills. Good listeners don’t interrupt, ask clarifying questions, summarize what they’ve heard, probe for deeper understanding, and also pay attention to what’s not being said in the conversation. Check out The 5 Fundamentals of Effective Listening for more tips.
• Helped me grow—People want leaders who are invested in helping them grow in their jobs and careers. Best bosses understand that leadership is not about them; it’s about the people they serve. As such, they are committed to helping their team members grow in their careers, even if that means the employee ultimately leaves the team or organization for better opportunities.
• Had my back—Participants in our classes often say their best boss was always in their corner, or had their back. There are times in organizational life where the boss needs to step up and defend the needs or interests of his/her team. Supporting your employees doesn’t mean blindly defending them regardless of the circumstances, but it does mean you always have their best interests at heart and are committed to putting that belief into practice.
• Gave feedback in a way I could hear it—I’ve learned in my career that people really do want, and deserve, honest feedback about their performance. The trick is to deliver feedback in a way the person on the receiving end can hear it without becoming defensive, internalize it, and take positive action moving forward. Here is a way to give feedback that builds trust in a relationship.
• Cared about me as a person—It’s a cliché but it’s true: people don’t care how much you know until they know how much you care. You can be the most competent boss around, but if your people don’t feel you truly care about them as humans, then they will withhold their trust and commitment from you.
• Adjusted their leadership style to my needs—The best bosses know that one size doesn’t fit all when it comes to leadership. Each team member can be at different development levels in their goals and tasks, so the leader needs to adjust his/her leadership style to meet the needs of the employee. Managers need to learn to become situational leaders.
• Gave me autonomy—No one likes to be micro-managed. Helicoptering over your employees and telling them what to do, how to do it, and when to do it, creates a sense of learned helplessness. It erodes the morale and motivation of employees and leads to them developing a “quit but stay” mentality. Best bosses make sure their team members have been given the proper training and have the best resources and tools needed to do their jobs. Then the manager steps out of the way and lets their team do their thing, while providing any needed support and direction along the way.

Unfortunately, too many leaders are unwilling to admit they could use a bit of improvement, and too many organizations tolerate poor managerial performance (free whitepaper: 7 Ways Poor Managers Are Costing Your Company Money). But as you can see from this list, becoming a best boss isn’t rocket science. It’s within the grasp of any leader who is willing to put in a bit of work to improve his/her craft.

About the Author

Randy Conley is the Vice President of Client Services and Trust Practice Leader at The Ken Blanchard Companies. His LeaderChat posts appear the fourth or last Thursday of every month. For more insights on trust and leadership, visit Randy at his Leading with Trust blog or follow him on Twitter @RandyConley.

Consider these five statements. True or False?

1. Money cannot buy you happiness.
2. Money may not buy happiness, but it will buy things that make you happy.
3. The more money you have, the happier you are.
4. Seeking wealth, status, or image undermines interpersonal relationships and connectedness to others.
5. Pursuing money or other materialistic values results in feeling pressured and controlled.

Did you answer True to #1? Most of us have held a programmed value since childhood that money doesn’t buy us happiness. If it did, we reason, we wouldn’t see rich people with substance abuse issues, struggling with their weight, or defending themselves in court against character or behavior accusations.

Ironically, I find that people also answer True to statements #2 and #3. Despite believing that money cannot buy happiness, they believe that money can buy things that make us happy and that the more we have, the better off we are. But that isn’t logical. If money doesn’t buy you happiness, how can having more money buy you happiness?

Research supports the notion that money and happiness are related, but not in the way you might think. If it were true that money buys the things that make us happy and that the more we have the happier we are, then we would expect happiness scales to increase when per capita wealth increases. But that isn’t the case in the United States or any other country in the world. Pursuing and achieving material wealth may increase short-term mood, but it does not increase one’s sustainable happiness.* Both statements #2 and #3 are False.

Not only does money not buy happiness or the things that make you happy, but the more that materialistic values are at the center of your life, the more the quality of your life is diminished. This lower quality of life is reflected in a variety of measures including low energy, anxiety, substance abuse, negative emotion, depression, and likelihood to engage in high-risk behaviors. 

The Problem with More

Interestingly, when individuals are asked what level of wealth they need to be happy, both the poor and the rich respond with relative amounts of “more.” No matter how much you have, you always want more—more money, belongings, toys, status, power, or image. But here’s the thing: No amount of riches will buy security, safety, trust, friendship, loyalty, a longer life, or peace of mind. Moreover, thinking you can buy these things destroys any real chance of experiencing them.

Therein lies the problem. We’ve been programmed to believe that our well-being depends on the quantity of what we have. There is a current TV commercial where a little girl tries to explain why more is always better—which is the message the advertiser is trying to convey because that’s what they are offering you—more. The irony is that the little girl simply cannot explain why more is better. It really is funny. But it disproves the very point the advertiser is hoping to make. More is not always better—it is simply a belief that most of us have yet to challenge. 

Quality Over Quantity

What if we were to turn the table and focus on quality over quantity? Consider your answer to statement #4. Did you answer it True? One of our most basic and crucial human needs is for relatedness with others. This longing for connectedness is obvious in the explosion of social media and online dating services. The lack of relatedness is detrimental to everything including the quality of our physical and mental health. Research indicates that relatedness is thwarted by the pursuit of materialism.* Yet we rarely link materialistic values and goals to the undermining of interpersonal relationships that influence the quality of our life.

Statement #5 is also True. If you follow any of the popular culture regarding the effects of extrinsic motivation, or what we call suboptimal Motivational Outlooks, you understand the negative impact that feeling pressure or control has on creativity, discretionary effort, and sustained high productivity and performance. And yet, organizations are hesitant to generate alternatives to pay-for-performance schemes and incentivizing behavior, despite the proof that those systems based on materialistic values generate the pressure and control that undermine the quality of our work experience—and our results. 

Our Values Shape Us

And here is a great sadness. When you operate from materialistic values, it not only undermines your well-being, it also negatively affects the health and well-being of others. When our focus is on material pursuits, we become less compassionate and empathetic. Our values shape the way we work, play, live, and make decisions. And those decisions impact the world around us.*

Each of us has an amazing opportunity with the understanding gained through recent research and the evolution of human spirit. We can shift our focus from the value of materialism to the more empowering values of acceptance, compassion, emotional intimacy, caring for the welfare of others, and contributing to the world around us. Not only will this shift in focus improve the quality of our own lives, it will also create a ripple effect that ultimately will improve the quality of life for others. For the reality is that the most important things in life cannot be bought. Indeed, they are priceless.

* For supporting research and more information on this topic, I highly recommend the following resources:

• The High Price of Materialism by Tim Kasser
• The Handbook of Self-Determination Theory Research by Deci and Ryan
• The Price of Inequality by Joseph E. Stiglitz
• Website:  www.selfdeterminationtheory.org

About the author:

Susan Fowler is one of the principal authors—together  with David Facer and Drea Zigarmi—of The Ken Blanchard Companies’ new Optimal Motivation process and workshop.  Their posts appear on the first and third Monday of each month.

Funny thing is, senior executives make the same mistake when trying to identify what motivates their direct reports.  In separate research, Facer points to studies at George Mason University where executives emphasize external factors such as compensation, job security, and promotions while employees point to inherent factors such as interesting work, being appreciated for making meaningful contributions, and a feeling of being involved in decisions.

The assumed focus on purely external motivators keeps executives and employees looking in the wrong places when trying to identify cures to the lingering lack of engagement in today’s workplaces.  While disengagement continues to hover near 70% according to recent Gallup studies (a number relatively unchanged over the past 10 years) managers and employees continue to assume that there is little that can be done to improve motivation at work.  It seems that it is completely dependent on the economy.  In other words, when times are tough and money is scarce there is very little you can do to motivate people.

This is a false assumption explains Facer and the reality is that many people remain highly motivated—even during lean times, and even in organizations struggling to make ends meet.  It is all dependent on your motivational outlook and your perceptions of the environment you are working in.

What motivates you?

Here’s an interesting exercise to try for yourself that will allow you to replicate some of the findings cited in the research.

• Identify some of the key tasks you are working on as you finish up the year.  Be sure to write down tasks that you are looking forward to getting done as well as the ones that you’ve been procrastinating on. Don’t make the list too long.  About 5-7 items will help you see the pattern.
• What’s your motivation for finishing each task by the end of the year?  While there are actually six motivational outlooks, let’s look at two broad categories—Sub-optimal motivators (tasks you have to do because of negative consequences or promised rewards) and Optimal motivators (tasks you want to do because they are meaningful and part of a bigger picture you see for yourself and your organization).
• How many of your tasks fall into each category?  What’s your engagement level with each task as a result?

If you are like most people, you’ll find that your engagement level (and subsequent performance and well-being levels) are highest on the tasks where you see the work aligned with personal and organizational goals.  You’ll find that the tasks being done merely to avoid punishment or gain rewards are at a lesser level.

As leaders, it’s important to connect our individual work—and the work of others—to something bigger and more meaningful than just avoiding punishment and gaining rewards.  Don’t let misconceptions about what motivates you—and others—keep you and your team from performing at their best.

To learn more about Facer’s approach to motivation, be sure to read, Motivation Misunderstanding and Rethinking Motivation: It’s time for a change.  Also check out Facer’s complimentary November 28 webinar, Motivation as a skill: Strategies for managers and employees.  The event is free, courtesy of Cisco WebEx and The Ken Blanchard Companies.

The bad news is that you may have brought the problem on yourself by the way you structured compensation, rewards and bonuses.  

Once you set people on a path of extrinsic rewards, you will need to prepare to keep increasing the pay, bonus, or promotions every year, or be prepared to disappoint people when you are not able to do so.  (A situation many companies find themselves in today.) 

Here are a couple of ways to minimize the downside when using these traditional forms of extrinsic motivation.

Keep things in perspective. You want to reward and encourage people who attain the goal—but you don’t want it to become the goal. You don’t want to hear people saying, “I’m just here for the money.”

Make sure the goal is self attainable.  If you are going to use extrinsic motivators, make sure that attainment is completely self controlled by the employee.  You don’t want a manager or supervisor dangling the reward in front of an employee like a carrot on a stick.  This is a coercive strategy that just encourages boss-watching and brown-nosing with people spending half their time making sure the boss notices what they are doing.

Deepen the experience. The tough economic times of the last two years have shown how shallow the employer—employee relationship has become in many organizations.  As Warren Buffet reminds us, “It’s only when the tide goes out that you learn who’s been swimming naked.”

Look beyond money (but still provide it) and then shift the discussion to linking individual work goals into larger organizational goals.  The task is to move people away from short-term transactional thinking and into something larger and more sustainable.  

Learn more

For specific strategies on how to make this happen in your organization, be sure to check out the following articles by Scott and Ken Blanchard at Fast Company

The Role Money Plays in Engaging Employees

Maintain A Startup Attitude for a Passionate Office

Managers: Set People Free to Promote Growth and Get Results

PS: On January 25, The Ken Blanchard Companies will be hosting a Leadership Livecast on the problem of Quitting and Staying.  Have you successfully addressed quitting and staying in your organization? Can you share it in five minutes or less?  Videotape yourself and send it to us.  You could be a featured speaker!  Click here for details.

Alfie Kohn first wrote about this in his book, Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A’s, Praise, and Other Bribes.  Daniel Pink picked up the banner most recently in his 2009 book, Drive: The Surprising Truth About What Motivates Us. 

In both cases, the author’s point to social science research conducted over the past 50 years which shows that money and other extrinsic rewards can actually reduce motivation and ultimately performance if not used properly. 

(For a great introduction into some of this social science research, check out Why We Do What We Do: Understanding Self-Motivation which summarizes the work of Edward Deci and Richard Ryan, two long-time researchers in this field.)

Three warning signs

Are you falling into the “if-then” trap as a manager?  Here are three warning signs:

1. Instead of trying to understand what really motivates your direct reports, you increasingly rely on a carrot approach where you dangle incentives in front of employees to get them to engage in desired behaviors.

2. Instead of taking the time to fine tune job roles and responsibilities, you take an approach of, “We pay you a fair day’s wage and we expect a fair day’s work in return.”

3. Instead of helping people connect their work to a higher purpose, you instead insist that they stay focused on their own task and leave the big picture thinking to senior management.

With this type of thinking, it’s easy to fall into a transactional mindset as a manager.  Now work becomes mostly about getting the next raise, bonus, or other prize.  Don’t let incentives and compensation become the de facto manager in your organization.  Go beyond “if-then” thinking to discover what truly motivates your people. It’s time well-spent that will pay long-term benefits!

_____________________________________________________

PS: Interested in learning more about creating a motivating work environment?  Check out these upcoming executive briefing presentations!

Creating an Engaging Work Environment: The Leader’s Role

The New Paradigm of Motivation: How to Make It Work

One area where companies often run into trouble with this is sharing information about employee compensation. Most companies keep actual salaries confidential but that doesn’t mean that the process of determining salaries has to be confidential also, explains Blanchard.  “If you have a good reason for paying at the level you do, let people know. Keeping it a secret doesn’t help things. It just causes unnecessary discontent.”

A Case in Point

To illustrate his point, Blanchard shares a story about the experience of a CEO who serves on the company’s board of directors.  This CEO went through something just like this when an internal employee survey showed dissatisfaction about the fairness of pay in his company. This was really frustrating to the CEO, who believed that the company’s pay scales were well above industry averages.

“It was purely an openness issue,” explains Blanchard. “The company had been operating fairly for a long time but leadership had not taken the time to fully disclose the way they were making decisions. When they eventually did disclose the process, perceptions went up.”

For this company, the first step was to conduct a highly visible and transparent study with an outside firm to analyze the company’s whole compensation system.

“What it showed was that the company’s base pay levels were almost exactly at the 50th percentile for organizations of a similar size and with the same demographics. It also showed that the company had a generous bonus plan in place available to all employees. The bonus plan, together with the base pay, resulted in employees being compensated at the 75th percentile–well above average.

“Armed with this information, the leadership team went on an organization-wide campaign to talk about the procedure they used to determine pay scales and the rigor they used in applying it. As a result, they were able to change people’s perceptions of the level of compensation in the organization and its relative fairness. Because people had a greater understanding about the way pay scales were determined, they had a better capacity to understand and accept the results, even though they still wished—like all of us—that they were making a little more.”

How open is your company when it comes to sharing information about how decisions are reached? 

Are you more of an “open book” or a “closed book” culture?  Remember that your approach will have a definite impact on employee’s perceptions of fairness.

As Blanchard concludes, “When people aren’t able to point to a process that is known, published, and understandable, they start to make up their own stories. If there isn’t clarity about the way decisions are made, the stories people make up are typically a lot worse than reality.”

You can read Scott Blanchard’s entire column in Fast Company, The Just-Right Approach To Social Media And Transparency, And What It Says About Your Company and also check out Blanchard’s other thoughts on compensation at The Role Money Plays in Engaging Employees.  To read more about money’s role in creating an overall engaging work environment, download the new Blanchard white paper, Employee Work Passion: Connecting the Dots

When people can’t put their finger on other aspects of the work environment that are troubling them, they will often look to pay increases as a short term fix to make up for it. This impact never lasts very long and pretty soon you’re back to your same levels of dissatisfaction.

If you want to create a compensation plan that works for most people, be sure to address these needs identified by authors David Sirota, Louis Mischkind, and Michael Meltzer in their book The Enthusiastic Employee. People want—and expect:

• A decent wage that allows them to live the lifestyle they feel they deserve
• A fair return for the work they provide
• A signal from the organization that it values them

Just a little bit above the prevailing rate does the job 

The good news according to the authors is that people are generally reasonable when it comes to pay and do not expect compensation wildly beyond what others receive for comparable work. You only need to pay a little bit above the prevailing wage to create high levels of satisfaction with pay. A small premium above perceived prevailing rates will do wonders for attracting better candidates, keeping the good people you already have, and encouraging people to live up to their above average pay scales.

At all costs, what you want to avoid is the perception that your organization pays slightly below the prevailing rates. When that occurs, you are sending the wrong message to your employees. Now it looks like you are trying to obtain their services at a discount, and are putting your needs over theirs. Don’t be a cheapskate when it comes to compensation. People always have the ability to dial down their work performance to the level they feel is commensurate with the pay they are receiving. You don’t want below average performance. Don’t insult people with below average pay.

What if you are paying above average rates, but nobody thinks so?

First, remember that reality is in the mind of the perceiver. If you are paying slightly above prevailing rates and employees don’t perceive it that way, take a moment to see what you can do to help employees accurately understand the total value of their compensation package. Sometimes employees will compare base pay rates without taking into account the value of other compensation elements such as medical, dental, 401(k)s, etc. Help employees understand how your total compensation package measures up against other companies in your industry and in your area. Make sure that employees understand the total value of the package you are offering. Show people the numbers, and respectfully challenge the misconception that you are paying below industry averages.

Get compensation right and then move on

Finally, once you’ve made sure that you’re slightly above industry averages with your total compensation and that you’ve done a good job communicating it to employees, do everything you can to put the issue to bed and get on with other things. Money should not be the primary reason people come to work. It needs to be a foundation, but it shouldn’t be an incentive in most cases. Pay people fairly and then move on to some of the other items that make a motivating work environment. Remember that compensation is just one of the factors that people look into when evaluating a work environment. Don’t make it the sole focus.