What doesn’t make people happy at work (but many people think it does)

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There are two things that organizations traditionally use to make their people happy, but which simply do not work, and which may even be harmful:

  1. Salary, raises, bonuses
  2. Corporate status symbols and rewards

As long as companies look to these two things to make people happy at work, we will get nowhere. And make no mistake: Businesses use enormous amounts of money, time and effort trying to fairly apportion money and rewards.

There’s one more thing that just doesn’t make people happy at work, but which employees and trade unions oftgen cling to it: Job security.

Let’s look at why money, rewards and job security don’t make people happy.

Why the salary does not make people happy

In 2004 IKEA in Denmark did something completely unexpected. They decided without negotiations or union pressure of any kind to give their entire check-out staff a 25% raise. A typical salary of 16.000 DKK (aprox. 2.500 USD) suddenly became 20.000 DKK (approx. 3.100 USD).

Was this expensive? Sure. While cashiers aren’t highly paid, IKEA has more of them, than of any other group of employees. We’re talking a sizable raise in total monthly payroll expenses.

So why did they do it? Because it made the check-out staff happy – and IKEA knows that happy employees create results. Fantastic results.

Let’s immediately turn around and contradict that story: A high salary does not make people happy at work. Neither does a raise, a bonus, a prize or any other kind of financial reward.

What happens when a person gets a raise, is a brief spike in happiness at work, but it quickly settles back to it’s previou level.

(graph)

When IKEA initiated the 25% raise for its check-out staff, they expected results in return. They didn’t do this out of the kindness of their hearts, it was very much a business decision. And they got results:

  • Lower employee turnover – meaning time and money saved on recruiting new staff
  • More experienced staff – when people stay longer, they grow more experienced and better at their jobs
  • Higher customer satisfaction – because of the experienced and happy staff
  • Higher quality / fewer errors – because of the experienced and happy staff

IKEA found that the raise paid for itself within six months!

So if I’m claiming that a raise doesn’t make people happy at work, then why did it work for IKEA? For two reasons:

  1. This group of employees were the least well paid in IKEA. This means that a 25% raise made a palpable difference for their quality of life.
  2. Recognition. IKEA clearly stated that the reason they got the raise was, that they are the most important group of employees. Though sales staff is available inside IKEA’s stores, the reasoning went, most customers help themselves, meaning that the only IKEA staff member they will ever talk to, is sitting at the cash register. This made the check-out staff feel valued and trusted – and that made them happy.
  3. Fairness. Psychological business studies show, that people don’t judge their salary based on the absolute figure but by comparing it to their colleagues, peers and the market average. Which reminds me of the New Yorker Magazine cartoon where an employee is turned down for a raise and then asks “Well, if you can’t give me a raise, could you at least give Peterson a pay cut?”. The checkout staff were suddenly paid as well as other IKEA employees, and far above the market average.

You need more proof? Irma, the grocery chain mentioned in a previous chapter, is the fifth best workplace and the best retailer to work for in Europe and their salaries are market average – no more. If salary is so important, how is that possible?

The truth is this:

The salary is what makes it possible for people to show up at work every day. It has no effect on how happy or how productive they are.

Lofty titles, a larger desk, company cars, the key to the executive rest room and other status symbols don’t make people happy at work either

Alfie Kohn, the author of the provocative and excellent book “Punished by rewards???, has this to say:

The idea that dangling money and other goodies in front of people will “motivate” them to work harder is the conventional wisdom in our society, and particularly among compensation specialists.

…rewards are not merely ineffective but actually counterproductive. Subjects offered an incentive for doing a task (or, in some of the studies, for doing it well) actually did lower quality work than subjects offered no reward at all. As University of Texas psychologist Janet Spence put it after discovering this surprising effect in an early study of her own, rewards “have effects that interfere with performance in ways that we are only beginning to understand.”

Kohn’s book may be one of the meticulously researched business books ever, collecting the results of hundreds of psychological studies. But then it has to be, because Kohn’s message is so much at odds with the way businesses traditionally motivate employees, which is mostly by throwing money and rewards at them.

Kohn’s research found that rewarding people reduces productivity and quality. This seems counter-intuitive at first, but Kohn’s explanation is simple: Every time you reward people for doing something, you motivate them externally, an act which inevitably reduces people’s inner motivation. And only inner motivation, ie. people truly wanting to do a good job, is any guarantee of quality and performance in the long term.

It’s funny to think, that businesses and leaders struggle to motivate people, and the way we often use bonuses and rewards actively works against this intention.

So if rewards don’t work, what should a business do instead? Kohn’s advice would be to do everything possible to take employees’ minds off the rewards, and that incentives, bonuses, pay-for-performance plans, and other reward systems violate the last principle by their very nature.

The fair distribution of rewards and status symbols can take up significant amounts of time and effort in an organization, but they actually have a negative long-term effect on employees’ happiness and on organizational performance. Not zero effect – negative effect!

The upshot:
The vast majority of businesses use raises and other rewards to drive behavior and to make people happy at work.

It doesn’t work! In many cases, it’s counter-productive.

Job security

I work in the government sector in Denmark as a tjenestemand, a type of position which makes you virtually immune to being fired. No matter how incompetent or obnoxious I get, I can’t be fired without a huge hassle for my government department. Though the public sector is moving away from hiring people on these terms, many people still have them. No matter what they do, they won’t lose their jobs. It’s the ultimate job security.

It’s terrible.

People end up stuck in a rut. Their world gets smaller and smaller, their focus gets more and more narrow. They also resist any and all change, no matter how small or how innocent. I hate to say this, but in many cases I really feel that firing that person would actually help him, because it would force him or her to move on.

In studies that ask people what makes them happy at work, job security often figures high on the list. Rarely at the top, but always in the top 10.

It’s obvious that spending each work day in fear of being fired will make you desperately unhappy. But the kind of job security where you’re almost certain to hang on to your job no matter what happens, is also bad for people’s happiness at work.

Rosenbluth International faced this very dilemma. As described earlier, they’d decided to put their people first. Here’s the interesting question: If you have put your people first, how can you ever fire any of them?

CEO Hal Rosenbluth had an elegant answer: Putting your people first entails a responsibility to fire people who don’t fit in. Not at the first sign of trouble, obviously, you start by trying to help the employee. Training, coaching, guidance. Maybe a new position inside the company.

But when these things don’t work, a commitment to your employees’ happiness means precisely that you have to fire employees that simply don’t fit in. And that’s why unrestricted job security will actively make an organization a less happy place to work. Because when people stay on at jobs where they really don’t fit in you get:

  • Lower performance
  • Higher workloads
  • More conflict

Allowing an employee to stay in a job that doesn’t make that employee happy is not only bad for the employee, but for everyone around that person, because of the lower performance and because unhappiness at work is contagious.

(Graph of happiness at work as a function of job security)

So to sum this up: Too little job security makes us unhappy at work. It leads to fear, avoidance of conflicts and stress.

But too much job security is also bad, because it leads to passivity, cynicism and resistance to change.

20 thoughts on “What doesn’t make people happy at work (but many people think it does)”

  1. I agree that you can’t make people happy just by paying them. But at the same time it’s quiet possible to make people unhappy by not paying them fairly. or worse making promises about rewards and then not delivering. So I guess it all depends on the kind of work, and the social structure of the company and more likely, if a company is taking time to really look after it’s staff then giving them a fair wage is something that is likely just to happen, rather then been used as a tool to coerce more out of people by “buying” peoples motivation with pure hard cash.

  2. I think the “rules” change a bit (not sure exactly how, but I’m pretty sure they DO change) depending on the type of work and amount of training/education/skill/creativity required to perform a particular job. Product design engineers respond a little differently than fast food workers. Not necessarily oppositely though… just DIFFERENTLY. But I agree with the basic premise that $ alone is a poor motivator…

    I’ve often wondered if individual rewards should be totally replaced by team evaluations/rewards (everyone on a team gets the same compensation and evaluations). This would be difficult in some cases, but it might work very nicely in situations where people have to work closely together on a common product/project (even if they have different tasks).

  3. Absolutely Chris, different employee groups have different needs – heck, it even varies from person to person.

    Companies that favor team rewards over individual bonuses find that it improves communiation, learning and cooperation between employees and department.

    Conversely, individual bonuses tend to pit co-worker against co-worker, making people less likely to help or learn from each other.

  4. One of the things we’re noticing in our organization is that morale is reaching an all time low afte a company acquisition. Security is tightening and IT has done so much as planned to lock our wallpaper to the company logo and prevent it from being changed. As a management team, we’re taking the initiative to go out and talk to the employees every day, even if its just to say hello. We’re not buying people lunch as a reward for a set goal, but we will buy lunch on occasion just to say thanks for doing a good job. We’re starting to send out emails recognizing positive results instead of just negative situations. This is very new, but we’re already seeing an impact.

  5. Two things actually contributed to the idea… one was reading this site! Another was a business or support center publication that discussed morale in an article. If I can find it on the mess I call my desk, I’ll leave a message with details of where to find it. The results are coming in slow, but we are seeing a positive response. Every day when I leave, I go through each department I work with (even if I don’t supervise them) and check to make sure everything is okay and nobody needs anything. I’ve gotten positive comments direct to me and to my manager for this habit.

  6. Kudos, Ben, it sounds like you’re on to a good thing. You’re employing the most important resources needed to create happiness at work: attention and time.

    As in, you make sure you’re aware of what’s going on (perhaps before it becomes a serious problem) and you take time for people.

  7. This is a great read, got a few comments…

    1. You mention that there are two misconceptions about things that make ppl happy but really don’t (raises & perks) but then throw in the bit about job security, too. The JS section was interesting, but I found its presence here a bit confusing–it seemed to appear out of thin air :)

    2. In reading about how salary is often used to make ppl happy, but often doesn’t, I came across a gem somewhere (can’t remember where) that said something like “people don’t necessarily care about the amount they make; they care about the amount they make in relation to people who are doing the same job as them.” So equitable pay is important… people will be happier being paid $50k if all their co-workers are paid $50k than if they were paid $75k but their co-workers are being paid $100k. There’s some good stuff about relative incomes here, and there’s a PDF floating around that I’ll try to dig up that lays this out beautifully.

    3. Alfie Kohn’s work is great, and you use it effectively here, but it seems that this point could use a wider breadth of examples. It’s too easy to dismiss Kohn as a wacko / radical if you’ve never heard of him. Since this point is contentious–I actually had a boss say to the whole company once that “if you’re here and not after more money or a better title, I’d question why you’re here” (that was week one of my job that I was extremely excited about, and I knew then that I had severly misjudged the company)–I think it’s important to both show more evidence as to why rewards are counterintuitively counter-productive, and to offer alternatives suggestions to make people happy (or that you will in a later chapter). Also, there’s some good stuff on why rewards don’t work on Joel on Software (he quotes Kohn and Lister and DeMarco, who wrote the excellent Peopleware). Also, Joel’s compensation structure is here… might be something interesting for you.

    That’s all!

    Kareem

  8. BTW, regarding my #2 above, it seems to me that a lot of what you’re talking about to help companies make people happy at work involves systems thinking or a holistic approach, so I realize that it’s difficult to write “do A, B, and C and you’ll have happier people and sleep on a huge pile of money at night!” I think it would be helpful to the readers to throw in “Hows” where there’s context, and then maybe detail them in the “How” chapter.

    Just a thought! :)

    Kareem

  9. Thanks for your excellent advice, Kareem.
    1: You’re perfectly right, I fixed that.
    2: Thanks, I added a paragraph on that
    3: I fleshed out Kohn’s arguments some more. I’ll go back to his book and find a suitable quote to add also.

    As for adding some how, now: That’s actually a brilliant idea. When I’ve written the how section, I’ll go back and put some of that in.

    THANKS!!!!

  10. Too much of anything is too bad! Guarantees of any kind always bring up the moral hazard problem. In case of guaranteed job i.e. 100% job security will make people complacent, unmotivated and less respectful about their goals and performance. There should be carrots and sticks in any job and only when people realize that they cannot take their jobs for granted, only then they will perform their best, benefitting the company and increasing their own job satisfaction. I would rather prefer a 90-95% job security but not 100%.

  11. I don’t agree entirely with what has been said because it makes too many ‘obvious’ assumptions which can easily be countered with others.

    1) Bonuses and salaries do motivate some people, it depends on their intrinsic motivation. Some people live for work, some work to live; some work for money, some work for principle. We’re different, it works.

    There is no right or wrong answer to whether money or values is the core motivator; it really depends on the individual.

    2) Likewise with corporate stuff. Personally, I think it’s a load of old tat. But when you work for a place for a long time, it can become quite loveable old tat too! In a funny sort of way, it can be used for recognition.

    3) Job security does matter. Most people would agree. I can’t buy into the argument that it leads to a potential for conflict, because most people would agree job security is something only guaranteed when you show up, do the work and don’t annoy people.

  12. After working for many years if exploitation continues and diplomatic people make life worse how job satisfaction will be there. CEO of company is partial and support only his favourite staff how job satisfaction can be there. People may not want to go to that workplace but if there is no choice they will have to go till they get a good job but with a question in mind if same situation arise in other company than?

  13. Continuing job for more than 5 years may make a person stagnant. Young people can choose their career correctly with right judgement after putting in few years and just moving if they are not satisfied. Life is beautiful and working with people who make their life hell is not fair where forcibly Uniforms are given to wear and whole life you have to be in that uniform and as expectations saying all time SIR /MADAM an outdated word at all the time.

  14. At work, we should build the good environment like in the disco club that everyone can join and have fun. All people want to laugh and smile everytime, so let them do what they want. Do not disturb them. Free happy, Free Life!!!!!!!!!!!!!!!!!!

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