Thursday, November 20, 2008 at 11:15 am
Who needs a bonus? In fact, who needs pay?
Goldman Sachs' top executives recently made the news for refusing to take bonuses this year. Hear that? It's the sound of me clapping really slowly. Bravo, fellows. Bravo. Your stock is down 60% this year, and your firm is expected to announce its first quarterly loss as a public company in December. But you're going to bite your lips and — deep breath — take home only your annual salaries of $600,000. Heroes. True heroes.
UBS and Barclays are following suit, and New York Attorney General Andrew Cuomo is trying to make sure those greedy louts over at AIG do, too.
In times like these, chucking bonuses for execs seems like a no-brainer, if only for public relations. But it turns out that bonuses don't really work, at least not in the way we expect. Dan Ariely, a professor of behavioral economics at Duke and author of “Predictably Irrational: The Hidden Forces That Shape Our Decisions,” conducted an experiment recently in which he offered financial incentives to test subjects to perform well on cognitive tasks. After all, the promise of a fat bonus motivates us to do well, right? Nope: those with the highest monetary incentive performed the same as the other groups.
Anyway, for us regular schmos, receiving a bonus this year ranks just a little lower on our list of concerns than, oh, say, remaining employed. So you'll be happy to hear that another study finds we value praise more than we do actual pay. Globoforce, which calls itself a recognition strategist, says psychic income is "the need for social acceptance, increased self-esteem and enhanced self-realization." Rewarding workers with psychic income is, says Globoforce, "more powerful than cash compensation."
As proof, it offers the following:
- 2008 White Water Strategies survey, which revealed that acknowledging staff achievements (praising employees) had the same impact on job satisfaction as a one percent increase in pay.
- 2008 study by the Japanese National Institute for Physiological Sciences found that paying people a compliment appears to activate the same reward center in the brain as paying them cash.
- 2004 University of Chicago study that found non-cash incentives were 24 percent more powerful at boosting performance than cash incentives.
What do you think? Does praise work better than cash?
14 Comments and Trackbacks to “Who needs a bonus? In fact, who needs pay?”
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Lisa Takeuchi Cullen is a New York-based staff writer at TIME. She writes about workplace, business and society trends for the magazine and TIME.com. Read more
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Thursday, November 20, 2008 at 11:33 am
Can I pay my bills with praise?
Thursday, November 20, 2008 at 11:50 am
To a point. Going along with Benster's idea, I don't want any employers suddenly thinking that we could do without a pay raise and just act really, really grateful for us instead.
Thursday, November 20, 2008 at 2:27 pm
I work in a low paying field and I definitely feel better about my job and that low pay when I do get praise and when I went for six months without any acknowledgement of my work, good or bad, I was really unhappy and unmotivated. So praise is good- to a point. But if I can't pay my bills and keep a roof over my head, being the best at my job doesn't mean a whole lot.
Thursday, November 20, 2008 at 4:34 pm
It's like a combo meal at McDonald's - the burger is OK, but better with fries. So the lavish praise it OK, but way better with a bonus.
Thursday, November 20, 2008 at 4:35 pm
correction: lavish praise IS OK
Friday, November 21, 2008 at 9:58 am
I often give my dog a biscuit when I praise him. He likes them both. I do too.
Friday, November 21, 2008 at 11:12 am
Now I'm hungry.
Friday, November 21, 2008 at 2:32 pm
I like the praise and the bonus. I'm SO impressed by the execs offering not to take their yearly bonus. My, it would be more impressive if the execs stood up and said "Don't pay us for a couple of years". I'm sure they would all survive just fine.
Friday, November 21, 2008 at 7:39 pm
[...] Who needs a bonus? In fact, who needs pay? Goldman Sachs’ top executives recently made the news for refusing to take bonuses this year. Hear that? [...] [...]
Sunday, November 23, 2008 at 8:59 pm
Praise only-no
Praise and pay-yes
Pay only-yes
Monday, November 24, 2008 at 7:03 am
Looks like everyone is kind of missing the point. If you use praise as a motivator, you get an increase in performance. If you use pay as a motivator, you don't. So my take would be praise to motivate, pay a bonus or a raise to reward (and pay the bills) but then keep praising. Kind of a no brainer actually.
Monday, November 24, 2008 at 12:50 pm
I would be more impressed if the GS execs returned their bonuses (boni?) from previous years, too. Afterall, they were paid based upon an overassessment of their profitability.
Tuesday, November 25, 2008 at 4:50 pm
"Psychic income".?!?!?! In the spirit of the holidays... BAAAAAAHUMBUG! LOL!
(The article is somewhat confusing, as it bounces back-n-forth between speaking of bonuses and raises, which are 2 different animals) So on with my comment...
Who's a good little worker? I am! I am! I'm a good little worker! So could I use some genuine praise now and again? Absolutely! However... I, like many, need and rely on receiving those holiday bonuses. So, employer, THANK YOU for thanking me in a tangible and most useful way. Keep 'em coming please.
Wednesday, November 26, 2008 at 12:54 pm
Goldman Sachs execs not only need to give up their bonuses, they need to give up their pay for a bit and their bonuses for a very long time (until they can demonstrate an understanding that what they did was wrong, very wrong). They were so wildly over compensated that their business went bust. And their bonuses and pay was made up of our money. And they lost it all. Give it back and give it back now!