We explore the common assumptions in total rewards that could be holding us back from innovating ready for a future of reward. This will be a series of blogs.

Assumptions are an inevitable part of being human. Some psychologists believe that our brains are designed to look for patterns and the assumptions we make instinctively are based on our own experience, which can, at times, restrict our view.

When designing reward strategies and systems we make assumptions as well. However, when we take the underlying assumptions for granted and do not challenge them, they can hold us back from adapting total rewards to the rapidly-changing world of work. Assumptions, if unchallenged, prevent innovative and efficient reward systems being launched that truly meet both the needs of the organisation and the desires of the new workforce.

Stop and question

Most reward leaders are familiar with the assumptions commonly made in reward. Many of these are historical, traditional, and lack evidence. As such, they have led to very stable reward systems that have remained unchanged, despite the rapid evolution of the working world.

It’s important for the reward leader with an eye on the future to recognise assumptions and challenge them. Before you implement any new reward system, stop and question. Current assumptions aren’t necessarily incorrect or inaccurate, but awareness is the key.

Why go to work?

Organisations often see total rewards as a means of driving desired behaviour in their employees and equate compensation and benefits with increased performance. This is based on the assumptions that people are, ultimately, motivated at work by extrinsic factors including money, benefits, and primarily incentive awards like any bonus.

How many of your employees have you asked, ‘why do you work here? or ‘what motivates you to your best?’? The answers (if honest) would be insightful and demonstrate the breadth and diversity across the workforce when it comes to motivation. This range is only increasing as the world of work changes so dramatically – is a gig worker going to be motivated in the same way as the employee? Or how about the contractor working on the factory floor compared to a white-collar worker? Or what about the young worker of generation Z compared to a senior expert close to retirement?

Consider the theories – then adapt

There are various, long-standing theories of what motivates human behaviour, many of which leaders may be familiar. In fact, reward experts may be making assumptions subconsciously based on these theories when designing reward strategies. Theories including Herzberg’s, Maslow’s, Hawthorne Expectancy and others are useful to consider but also to challenge. These theories can be drawn on when designing reward strategies, but it’s wise to avoid being too homogenous when considering what motivates staff most.

Each organisation is unique, as is the workforce, so reward solutions need to be bespoke to be truly effective. Humans are not homogenous, and rewards must be as diverse to meet the expectations and desires of the workforce to achieve the desired effect: productivity and profitability for the organisation and good service and products for clients.

Look beyond extrinsic rewards

Traditionally – and in many organisations today – the extrinsic rewards can have an outsize focus from those designing reward systems. This poses a risk because it can be detrimental. For example, research (Pink, 2011) has shown the introduction of extrinsic rewards can stifle creativity and innovation, which would limit progress and performance in almost every workplace.

Pink’s research also found that extrinsic rewards can encourage workers to focus on short term goals and unhealthy competitiveness. They can also reduce performance and give rise to poor behaviours, like cheating.
Intrinsic rewards, on the other hand, can have a very positive impact on staff motivation and performance, according to various studies and expert thought.

There is evidence that workers are more motivated by aspects such as peer motivation and being encouraged, as well as the work-life balance, than they are by money or how they feel about the company itself.
And yet there are still assumptions at play here, especially when data is captured from certain workers in specific countries. We mustn’t overlook the cultural and social differences that can have an out-size impact on motivating factors, especially when designing reward programmes for a global workforce.
Caution and questions

Motivation is one of the key areas that organisations must grapple when designing a reward strategy. It is the fundament of any reward strategy, especially in light of incentives, perquisites and recognition programs. Assumptions around what motivates staff are an aspect that the forward-looking reward leader needs to interrogate, challenge and consider. Getting it wrong and blindly following common, previous assumptions around motivations can hamper the people strategy and finally the productivity and effectiveness of the business. Wrong assumptions will disincentivise potential staff in a competitive marketplace.

Assumptions on what motivates workers is just one of the various aspects that must be considered as we move towards future solutions in reward. Are the long-standing motivational theories we used in the past still valid in the future? Surely societal changes, new ways of working, a new composition of the workforce, not to mention new paradigms, must change the assumptions we make with regard to motivation and incentives? Of course!

Attend to intrinsic motivation

Intrinsic motivation, which refers to the act of doing something because it is personally rewarding, is already of significant importance. It is likely to become even more vital in the future. Total Rewards elements that foster intrinsic motivation, such as recognition for creativity and innovation, opportunities to take on challenging and meaningful work, and a strong sense of purpose and alignment with company values, will likely become more prevalent in the future.

Here are a few ideas for reasons why:

• Changing nature of work – as technology automates more routine tasks, human work is moving towards more complex problem solving, critical thinking, creativity, and social interactions. These types of tasks often require a high degree of intrinsic motivation to perform well.
• Lifelong learning – the rates of change in work, jobs and in the job markets are increasing. This means people need to be continually learning and adapting. Intrinsic motivation is key for lifelong learning and keeping pace with a changing world. Intrinsic motivation should drive individuals to acquire new skills and knowledge out of curiosity and enjoyment, rather than just to meet external standards or requirements.
• Employee wellbeing – companies are increasingly recognising the importance of employee satisfaction, engagement, and mental health. Fostering intrinsic motivation can be a way to enhance these aspects, leading to improved productivity, reduced turnover, and better overall workplace culture.
• The rise of the gig economy – as more people work on a project or contract basis, intrinsic motivation can be crucial. Those who are intrinsically motivated are often more able to set their own goals, manage their time, and persist in the face of challenges. All these are key skills for success in a gig-based context.
• Increasing autonomy – considering the rise of remote work and flexible working hours, employees are often required to manage themselves, their time, and their autonomy and independence. Intrinsic motivation is key to self-management and productivity in such environments.

In the next parts of this series we will look at the desire for and expectation of transparency and fairness in the reward system and the assumptions around homogeneity that can be damaging to the success of the pay and compensation approach.

TR2050 Members can look forward to discussing this issue at the upcoming virtual Think Tank meeting in August 2023.