The case Study “Money Does not Buy Happiness. Well,on Second Thought" looks into the discussion about the absolute happiness and the relation between money and happiness of individuals and countries. The point that the article brings to the surface is that, while in 1974, the empirical studies outlined that money can make individuals happier, however, this paradox is not applicable to the country level, recent research Stevenson and Walker argues that rich countries as much as rich people tend to be happier. The increase in financial welfare also directly related to the increase in satisfaction with life. The conclusions are driven in the case study outline the importance of the focus of governmental policies not solely on GDP measures, but on the criteria, which affect the and directly impact collective and individual happiness. Moreover,the authors provide an example of Bhutan, where the GDP measure was substituted by Gross Domestic Happiness index.
Role of Money
Individuals are motivated for various reasons. The complex of this element consists of both, intrinsic and extrinsic motivators. While money is an essential driver of productivity and quality at work and even social environment, it constitutes only a part of a happiness framework of an individual or society. There are many examples of high-level professionals, Chief Executive Officers, and leaders, which leave the organizations due to the lack of personal fit with the organizational structure and culture. Piekema (2014) gives an example of Bob Diamond, the CEO of Barclays Bank and the lack of relation between the executive motivation and the "degree of richness". Indeed, accessive money reward can undermine intrinsic motivation, such as the need to feel autonomous, competent and related to others. To conclude, money is the major mechanism, which defines the contemporary mechanism of interaction within human society. The purpose of businesses is to generate the wealth of the shareholders, while the purpose of individuals to work for the businesses is to build on their financial stability. This means that the role of money is critical, but it cannot by itself build on individual satisfaction, as human nature is much more complex.
Financial Incentives
It is not a secret that money in the vast majority of places and communities is the only way to purchase the needs and "desires" for individuals. Moreover, in many situations, financial stability identifies the opportunities to build on other ways of motivation and improve living conditions and health. Emphasis on financial incentive is important, but it should be introduced to individuals side by side with other motivators, which aim to dilute the "illusion" that financially rewarded can help to reach absolute happiness. Given the complexity of personalities and the differences in the degree in which internal and external motivation affect individual satisfaction at work, it is possible to argue that each situation should be analyzed separately. The examples of the large international corporations, Performance Management Schemes, and Key Performance Indicator approach to Human Resource Management (HRM) demonstrates that financial reward is very important for building the high-performance culture and strong motivation. With that, the financial incentive is good for individual and companies. But this incentive can give a short-term return and should come along with more intangible motivators, which can build long-term motivation strategy of individuals (Barbalet, 2001).
Trends
The debate around the appropriateness of incentive-based pay occupies minds of academic and business professionals for several decades. While flat pay can provide a feeling of stability and bond with the organization, it fails to build on productivity and individual effectiveness in the organization. Incentive-based pay tries to close this gap and motivates individuals for better performance. Modern approaches to KPIs and performance appraisal can make this unequal pay transparent and well-understood by the employees. Moreover, such schemes allow building personalized approach to each employee and create control mechanisms as well as motivation tools, which are most effective in this particular situation. Communication process and change management constitute the essential part of shifting from fixed to incentive-based pay and are, often, the biggest challenge for HR departments around the globe.
When thinking about the possible appropriate answer to such questions as “How to communicate to workforce that it isn’t created equally?” or “How to treat the workforce in which everyone has a different deal?”, there is no fit-for-all answer. The reality is that the responsibility of HR management is not to show that the workforce is not created equal, but to demonstrate how each individual, based on hi or her personal qualities, talents and skills can contribute towards reaching the common goals. With that in mind, the challenge of HR departments is to explain and demonstrate to the employees that they are not compared to their peers to prove wrong, but that their performance is driven by clear and measurable goals and the system is built to develop each and every employee personally and professionally in a way that motivates them and helps them to reach higher performance. In order to succeed in building cooperation rather than competition in the companies with incentive-based pay, it is critical to recognize the difference between the use of incentive-based motivation as a reward and not as punishment and create KPIs, which are interdependent between individuals and departments.
Key Learning
Employment relationships in a contemporary business environment are becoming more complex as companies should build retention strategies, based on a variety of motivational elements, beyond financial compensation. One of the major learnings is the potential for incentive-bassed pay, which demonstrates how effective mix of financial and non-financial incentives can improve collective productivity and increase retention rates in organizations. While the companies face with challenges related to resistance to this change and legal implications from a public and non-for-profit sector, such approach proves to be an effective response to the changing market conditions. The second learning is that financial motivation is the essential and effective tool to build strong HR structure. Financial reward, however, can only provide short-term motivation as individuals seek to fulfill their intrinsic motivation and personal and professional development goals. and this not always can be done with financial reward (Barbalet, 2001).
References
Piekema C. (2014). Does Money Really Motivate People? BBC [Online]. Retrieved 17 June 2016, http://www.bbc.com/future/story/20120509-is-it-all-about-the-money
Barbalet J.M. (2001). Emotion, Social Theory, and Social Structure: A Macrosociological Approach. Cambridge: Cambridge University Press.
