Conventional wisdom; the more a person is paid, the better he works – productivity is proportional to salary. But in 2013, Harvard Business School decided to find out exactly how the level of earnings affects productivity. The results of the study were surprising.
Researchers have posted a vacancy on the freelance exchange. Applicants were asked to process captchas within four hours – to enter as much data as possible, making a minimum of errors. Those who responded to the vacancy were divided into groups.
- $ 3 per hour – such a salary was assigned to beginners without work experience
- $ 4 per hour is the rate for those who have already completed similar tasks before
The trick was that the three-dollar workers were soon announced that the project’s budget had been increased, and their wages were being raised to four dollars an hour. Scientists couldn’t even imagine how this would affect productivity.
3 + 1> 4
Both groups performed work of the same complexity. But, contrary to popular belief, higher wages do not guarantee higher productivity. People who initially performed the task for $4 an hour, despite their experience, did it less intensively and efficiently than those who worked for $3 an hour with a subsequent increase.
Analyzing the data obtained, professor of business administration Deepak Malhotra noted that the first group took the four-dollar rate for granted – the usual payment for such work for a person with experience. The employees had no reason to view it as a reward. It would seem, what’s the difference; $4 immediately or $4 after the increase? But it is there. In the mind of an employee, $3 + $1 is more than just $4.
A payoff that exceeds expectations can lead to reciprocity in the form of greater productivity.
It is important how the monetary reward is presented. It must be a gift with no strings attached. “We will raise your salary, but you will need to do twice as much” – you must agree that such a “reward” is unlikely to cause dedication among employees.
If you increase your salary simply because you can do it, you will gain productivity. Such a gesture of goodwill will certainly evoke reciprocity. If you treat people kindly, then they will respond in kind to you. But why buy something expensive when you can get the same thing cheaper? There will always be people willing to work for a pittance. Saving resources is smart for business. But for recruiting, this strategy is a losing one, and here’s why.
You get what you pay for
Humans are not robots. It is important for them not only material but also moral satisfaction from their activities. They value the employer’s generosity. After all, an increase is not just extra money in the family budget. This is primarily an indicator of the employee’s value to the company.
People want to get the highest possible salary for their work, and companies strive to get results with the lowest labor costs. Everything is logical. But when employees see that the company uses the cheapest labor, the principle known from Soviet times is triggered in their minds.
They pretend to pay us a salary, and we pretend to work.
Employees tend to be concerned about the long-term financial health of their organizations. It would be fair if the latter reciprocated. But, as polls show, few employees can subscribe to the thesis, “My company helps me achieve my financial goals, and I give it my best ideas.”
73% of workers are generally satisfied with their work, but highly educated and financially well-off people often gave positive assessments. Among the various aspects of work, communication with colleagues is the most joyful – 90% of those surveyed are satisfied with the team’s microclimate. On the other hand, the majority (65% of respondents) are not satisfied with the salary size. Compared to 2014, the proportion of those wishing to change jobs has increased, and workers explain their intentions primarily by dissatisfaction with low wages.
According to Richard Thaler’s nudge theory, Homo economicus evolves into Homo sapiens. Put, in the future, economics will be more responsive to human behavior. But so far, the opposite is true: business counts money without thinking about psychology and motivation.
Adapted and translated by The Cop Cart Staff
Sources: Life hacker