How to Motivate When Pay Increases Are Small

Pay increases this year will again be small or nonexistent – below 3%.  Even top performers will get planned increases less than 3%. So, what can you do to motivate people?  The answer is, “plenty”.
A gazillion studies have shown that if pay is at a competitive level, non-financial incentive are MORE effective than financial incentives in engendering motivation and employee engagement.
Want examples of non-financial incentives?  Praise from an employee’s manager or supervisor, involvement with senior leaders on business issues, and the opportunity to be included in key projects are three of the most effective. 
Other key points:

  • Annual pay increases motivate no one.
  • If you give an unmotivated workforce more money, all you get is a wealthier unmotivated workforce.
  • Some say, “You can’t take praise to the bank.”  But neither can cash buy you work satisfaction – the kind that truly generates motivation. 
  • Praise is not a substitute for pay.  But pay is also not a substitute for praise.  Both are important.
  • People can understand that times are tough, and yes, they’re thankful to have a job.  But they don’t understand why managers can’t recognize and praise them for the work they are doing, especially when the workforce is leaner and people are asked to do more.
  • Too many managers and supervisors are deficient in the skill of providing praise.  Or their egos, need for power, or personality disorders cause them to not want to give praise.

Here’s what to do: 

  1. Get your managers out of their offices and talking to people.
  2. Give them training and role plays on how to do it.
  3. Start giving specific praise to a couple people or a group at the beginning of every meeting.  Work on making it a habit.
  4. Don’t confuse praise with flattery which is artificial and motivates no one to improved performance.

Bob Legge is a consultant and speaker.  He helps companies improve profits and increase individual and organization performance.  His clients have included Wrigley Chewing Gum, Wilson Sporting Goods, United Airlines, Mutual of Omaha, Paychex, Rochester Gas and Electric, Valeo, Adelphia Communications, Rich Products, American Hospitals Association, among others.  Bob can be reached at  Bob’s company website is

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