When setting employee compensation, companies usually turn to the benchmarking data in their respective industries and set a salary based on fair market value. Talent professionals sometimes think that potential new hires will simply follow the money, and therefore a dollar amount is everything. But what if this model for compensation is misaligned with what employees really value? Spoiler alert: it’s no longer just about the money.
Today’s pay-for-performance model is based on the belief that people who perform should get paid more, which then motivates them to perform better to earn even more. But, research shows that the relationship between pay and performance isn’t so simple. As leaders, we know that employees have diverse needs, that many different motivators can affect performance, and that optionality is key.
When thinking about a rewards package and building a pay-for-performance model, we must consider both extrinsic and intrinsic employee motivation to ensure an engaged and productive workforce.