Money Doesn’t Buy Employee Motivation

The research conducted by Krüger and Rootman on seven elements of employee motivation concluded that, while financial rewards indeed motivate employees, they have the lowest influence on employee motivation compared to the six other elements studied. Thus, leaders should not focus on rewards alone to keep employees satisfied, motivated, and committed.1

Krüger and Rootman wrote that “rewards can take on various forms, such as wages/salaries, pension schemes, health insurance, bonuses, commissions and share options.”  In essence, the “rewards” that Krüger and Rootman’s research focused on equated to “money” or financial rewards. The researchers indicated that as soon as the money reaches a level that is deemed satisfactory by the employee, it loses its power to motivate and no longer impacts employee satisfaction and commitment. Once this occurs, money motivates only when provided for exceptional performance and when the employee is aware that it was performance-based. For employees earning an acceptable level of compensation, money motivates and contributes to great performance when it is used as tool for employee recognition, whether it is called recognition or a bonus.2

Yet, it is important for organizations to develop an adequate compensation system based on their industry’s standards and geographical location.  Take a close look at the compensation strategies of the organizations in your industry that are successfully recruiting and retaining the talent you need.  If you are part of a small business or non-profit organization that cannot compete based on salary, take heart.  Money is not the only tool in your kit to recruit and retain great talent.

A more holistic view of rewards is the “total rewards” approach depicted in Figure 1 below. This approach focuses on both financial (compensation) and non-financial rewarTotal Rewardsds.

Financial rewards encompass the broad categories of base pay, contingency pay, and benefits. Whereas non-financial rewards focus on performance and career management, quality work environment, and work/home integration,3 all of which address the psychological needs of employees.

The literature on compensation slices and dices these categories in numerous ways. However, the key take-away is that organizations must take a holistic approach in rewards management to successfully motivate and retain employees.

While salary is a vital element for employee motivation and for desirable workplace outcomes, organizations that successfully integrate both financial and non-financial rewards are more competitive in attracting and retaining talent.4

This is in alignment with Krüger and Rootman’s research, which focused on seven financial and non-financial elements of employee motivation, satisfaction, and commitment. These seven elements are listed below in order from the highest to the lowest degree of influence on employee motivation:

  1. Interesting and Meaningful Work,
  2. Recognition and Feedback,
  3. Empowerment,
  4. Working Conditions,
  5. Strong Leaders,
  6. Workplace Fairness, and
  7. Rewards.5

If you are part of a small business or non-profit, you can be strategic about the way you bring talent through your doors.  There are many talented individuals who are getting ready to complete their studies in your industry and who are hungry for experience in the field.  This is a golden opportunity for you to offer them internships or entry-level positions. You can provide them a positive learning experience in exchange for their tangible contributions to your organization.  Remember to assign them meaningful projects and not merely use them for the tasks other employees do not want to do.

Sure, they may take the experience they gain with your organization and move on to make more money. However, you stand to gain from their eagerness to learn, to make a difference, and to prove what they can do.  More importantly, if you create a great environment where they can learn and thrive, they will naturally become ambassadors for your organization who will send more talent your way.

While money is an important part of your rewards plan, it is not the only factor that conveys employee value. To motivate and retain talented employees, focus a significant amount of your resources and energy on creating a great workplace.


1 Krüger, J. & Rootman, C. (2010). How do small business managers influence employee satisfaction and commitment?  Acta Commercii, 10(1), pp. 59 – 72.  Retrieved from:  Date accessed:  October 30, 2016.   Creative Commons License.

2  Krüger and Rootman, 2010.

3 Nienaber, R., Bussin, M. H.R., and Henn, C.  (2011).  The relationship between personality types and reward preferences.  Acta Commercii, 11(2), p.p., 56-79. doi: 10.4102/ac.v11i2.153  Retrieved from:  Date accessed:  March 19, 2017.  Creative Commons License.

4 Nienaber et al., 2011.

5 Krüger and Rootman, 2010.