When Money Motivates

Workers are more motivated when managers can choose bonus amounts.
When Money Motivates

ALLOWING MANAGERS TO use their discretion when allocating bonuses helps motivate staff, say Rebecca Hewett and Hannes Leroy of the Rotterdam School of Management at Erasmus University in the Netherlands.

Hewett and Leroy studied actual bonuses given to office workers by an organization funded by the U.K. government. They asked 155 of the 733 employees to report their motivation levels shortly after receiving their bonuses. The researchers found that employees who received high bonuses perceived to be based on their manager’s discretionary judgment thought the bonus was fairer. This, in turn, increased their intrinsic motivation.

Leroy points out that several companies in the Fortune 500 have shifted toward allowing managers to use their discretion when allocating bonuses because they want to create work environments that “encourage passion, purpose and engagement.” These factors engender intrinsic motivation, she adds, in which “you’re doing a job because it aligns with who you are and your core interests and values” rather than doing it for extrinsic reasons.

The research also suggests that manager discretion is only perceived to be fairer and more motivating when employees benefit from it. Those who receive less money view this discretion as less fair.

“Bonus systems are, by nature, not put in place to treat everyone equally—someone always loses out,” says Hewett. “If your goal is absolute equality, then bonuses are perhaps not the best tool, but if your goal is to motivate the better performers, then allowing managers space to use their discretion is a good thing.”

“Well, it’s only fair: How perceptions of manager discretion in bonus allocation affect intrinsic motivation” was published online March 28, 2019, in the Journal of Management Studies.