Compensation is the most direct expression of value in the workplace.
Beyond providing for basic needs, compensation is the most visible sign of how much an organization values an individual’s time, skills, and contributions.
It communicates forcefully what work and behavior an organization truly rewards and prioritizes.
But in the eyes of leaders and team members, compensation is anything but simple and straightforward.
The perceptions that surround it are confounded by the fact that people evaluate compensation relative to their peers. Work satisfaction is directly impacted by how one’s pay compares to others, affecting both self-worth and social status.
Within this social comparison, the ideas of fairness and equity in compensation can significantly influence motivation, commitment, and engagement.
It’s fascinating that the etymology of the word salary traces back to the word “salt,” which was once a precious commodity used for payment, fundamentally linking compensation to worth and respect across cultures and time periods.
People intuitively understand that compensation reflects how their contributions are acknowledged and valued by the organization. As such, it influences perceptions of so many ideas of social value, including relevance, status, influence, power, and connection.
So, people naturally want more of it, especially as compared to their peers. But leaders and team members vary widely regarding its everyday importance.
When money means too much to people, they often become “coin-operated,” where their motivation to do anything is directly linked to the monetary reward for doing so. They quickly become mercenaries who are out only for themselves.
When money means too little, it robs people of their initiative, often leading to complacency and a disrespect for merit and productivity.
Leaders who overemphasize or underemphasize compensation to motivate team members often inadvertently promote an unhealthy relationship with money that undermines performance and job satisfaction.
The best leaders recognize that there are many motivational drivers, including purpose, autonomy, recognition, mastery, belonging, and influence. They seek to strike a healthy balance of the many facets of motivation without depending too much or too little on compensation.
As important as compensation is to most people, using it as the primary motivator for high performance diminishes the intrinsic reasons people naturally want to excel.
Once compensation becomes the be-all and end-all in an organization, the culture becomes a food fight for attention, shortcuts, jealousy, and unhealthy competition.
Good leaders remind people why they should want money in the first place. A healthy relationship with money means it is valued to create experiences, help other people, buy back time, and gain access to support.
While it reflects social worth, a fixation on its symbolic rather than practical value creates an imbalance that is unhealthy for everyone.
Money gives people the ability to make independent choices and exert control over life circumstances. It doesn’t promise them that they will stand out and be seen as more valuable than others.
That’s why compensation must be put in its proper place.
People aren’t wealthy or the most productive until they enjoy the intrinsic rewards money can’t buy.
A Daily Dispatch from the Front Lines of Leadership.
