Performance bonuses for individuals, particularly CEO’s, has been the norm across many industries for decades.
According to a report from the Canadian Centre for Policy Alternatives, the top 100 highest-paid CEOs in Canada now make, on average, $9.2 million – that’s more than 190 times the average Canadian income of $47,358.
A major part of these salaries are non-salary payments such as cash bonuses, share and options awards, pension contributions, and other compensation.
For example, Gerald W. Schwartz the CEO of Onex Corporation, a private equity investment firm, makes an annual salary of $1.3 million… but his additional non-salary payments equal $86.5 million dollars. That brings his total compensation to over $87 million dollars a year.
So does that mean that Schwartz is doing a terrific job? Not necessarily.
Bye bye bonuses?
There is increasing evidence that indicates that executives and professionals are less motivated by financial rewards as they are with other intrinsic rewards.
Ray Williams, who heads a Ray Williams Associates, a company providing executive coaching and training services, says research into employee engagement levels and productivity show a rapid decline in recent years.
“So they do follow up studies to say ‘Why? Why don’t you like your job? Why aren’t you really engaged in a level that makes sense?’ And a lot of them say, there’s just no reward in it for me. And when you kind of dig further and say ‘you mean you’re not paid enough?’ they say ‘No, the job’s not interesting, my boss doesn’t care about me, I get no recognition.’ All of that stuff points to internal, or what they call intrinsic motivation, as opposed to something from the outside.”
Now, we’re not suggesting that this is an absolute thing! Employees are still motivated by a salary, but just throwing money does not motivate an employee to perform better in their job.
In order to prove this point, researchers turned to America’s favourite pass time:
“They studied baseball teams to see what happens. You know the contracts some of these baseball players are getting are just astronomical. And what [they] found was the teams that had the biggest gap of inequality between the highest paid players and the lowest paid players, those teams lost more games than where the gap was smaller.”
One group that Ray Williams pointed out as putting a lot of emphasis on non-financial incentives are millennials. The millennial generation, born between 1980 and 2000 are now entering the workforce and it’s predicted that by 2020, millennials will form 50% of the global workforce.
So, if you are a manager of a millennial workforce, what motivates them?
“Different things than the Baby Boomer generation. ‘Will this job and where I’m going, will it provide work life balance for me? Will I be able to have a lifestyle that I really like, in comparison with the work I’m doing and how I’m paid?’ So they’re driven a lot more by that plus the recognition, being able to have good social relationships at work and a company that has some social responsibility.”
Instead of throwing money at your employees, what should an employer look at as a way to motivate their employees?
“Do they have an understanding that their work is meaningful? That it contributes in a way that’s significant to the organization, and is that recognized? ‘Hey, you know what, what you’re doing here is really important and is really making a difference in terms of what we’re trying to accomplish.’ Second is a sense of community and collaboration, and we’re working together as a team, and we’ll support each other as a team. And then leadership and management style. Where leaders are not just driven by strictly results and looking at bottom lines – but also they’re motivated by things like compassion and concern. Do they really care about them?”
Williams says it’s time for senior executives and consultants to drop 20th century business practices, with their focus on financial incentives to motivate employees and improve performance. Instead, he says they need to step into the 21st century and realize there’s more to being an employee of a company than a paycheque.