“Is high pay the only answer to attracting talent? Many companies try to solve motivation with monetary compensation, but talent wants more. What is the most effective way to motivate?
Motivation
Motivation is not a simple matter of giving money.
I recently quit my job and started a company. Perhaps because of my experience working in Silicon Valley, I have the knowledge and skills in this area, and I was able to secure two venture investments shortly after starting the business. The total amount was over $100 million.
Seed funding was easy, and technology development was not a major challenge. However, hiring people was not easy. Currently, our company is constantly hiring new blood, except for a few key employees that I brought with me when I changed jobs. Recently, I found some really good, capable young people. I offered them decent salaries. I also offered them stock options and stock dividends, but they ultimately turned me down.
I’ve always studied technology, so I’ve only managed teams and have no experience in designing the overall structure of the company. But the principle I have in mind is simple. In economics, they say that money is the universal key to everything, right? So I thought that when we hire people, all we have to do is offer them higher wages, but I don’t understand why they refuse.
The Importance of Motivation as Taught by History
People respond to the method of “motivation. Every motivation has different results. Sometimes very small things can change the overall outcome. Institutional economics claims that “good institutions turn bad people into good people, but bad institutions turn good people into bad people.
The following famous historical story illustrates this point.
In the late 18th century, England was in the midst of two major revolutions. The Industrial Revolution caused a mass migration of the rural population to the cities, which were overflowing with people and experiencing skyrocketing unemployment. People flocked to cities like London, Manchester, and Birmingham, but could not make ends meet. To make ends meet, people resorted to stealing.
The British government enacted strict laws to make the harsh punishments effective. Anyone who stole an item worth one shilling (equivalent to about $100 in today’s purchasing power) was imprisoned or exiled, and those who committed robbery, prostitution, murder, or arson were executed on the spot.
The second was that a large amount of land was needed to force prisoners to work. There was no room on the small British mainland to accommodate these people. When the United States, which had previously served as the final destination for deporting prisoners, declared its independence, many prisoners found themselves without a place to go.
In 1770, Captain Cook discovered Australia and reported the discovery of a new continent to the British king. This was the most developed state in Australia at that time. In the name of the British Empire, they declared sovereignty over the east coast of Australia.
The area was somewhat isolated, making it perfect for the release of prisoners. George III made Australia a destination for criminals.
On January 26, 1788, a fleet of 11 aircraft carriers transported 548 male convicts and 189 female convicts to Australia, and by 1840, a total of 160,000 convicts had been transported to Australia.
In the early days, the British government paid captains based on the number of convicts they transported. However, the captains who received the money did not care about the survival of the prisoners or the number of prisoners once they left the British coast.
Due to the excessive number of prisoners and the long distances to be traveled, large quantities of water and food were needed during the transfer. In addition, due to the poor medical conditions, there was a shortage of medicine and many people died during the transfer process. Some captains did not even provide enough water and food to save money, and prisoners often died without immediate medical attention. As a result, the death rate of detainees increased dramatically even before they arrived in Australia.
At one point, more than one-third of the prisoners died during the transfer process. By the time the remaining prisoners reached their destination, they were extremely tired, hungry, and ill. A first-class sailor said cruelly when he saw these criminals.
“Let us send these monsters to hell. It doesn’t matter, because we got all the money for transporting them.
The British public was not very interested in these criminals either. But the problem was that the criminals were not put to death. Media such as newspapers and magazines began to express their opinion that the conditions of transportation should be improved, and religious groups also argued that the captains should follow the spirit of humanitarianism. The Legislative Council passed a law that improved the distribution of food and water during the transfer process and provided adequate light, air, and necessary medical care.
Yet the mortality rate did not improve. No method worked until an economist made a new suggestion. What was the suggestion?
This economist suggested that instead of paying for all the prisoners when the ship left, the price should be paid according to the number of prisoners who disembarked in Australia when the ship arrived.
A new law was enacted in 1793, and the survival rate of prisoners suddenly rose to 99%. A wise commentator commented on this event as follows:
“Economics has triumphed over mercy and love!”
This incident shows that people react differently depending on their motivation. If the prisoners pay the captain after boarding the ship, it encourages the captain to mistreat the prisoners. Some captains even withheld food from the prisoners without providing them with the necessary supplies, and then sold them after arriving in Australia to make huge profits.
However, when the law was changed to require payment only if the prisoners reached their destination alive, the captains’ attitude changed. Previously, they had profited from the deaths of the prisoners, but now they had become people who were “deeply sorry for the deaths.
Even if they did not mourn their deaths, they would at least shed tears of deep remorse that they could not make money because of their deaths. If the prisoners were alive, that would be money.
The motivation method seems simple at first. It’s just a change from “prepayment” to “postpayment. However, it is not so simple for the motivation method to work in a complex market.
Motivation creates a virtuous cycle in society
Motivation is all around us, including organizations, companies, and the economy. If you go to a supermarket, you can see the products that fill the shelves. People take this for granted. We depend on others for food, clothing, and shelter every day. Why do so many people serve our interests? Adam Smith explains in The Wealth of Nations.
“The reason why we look forward to a banquet is not because of the love or esteem of the butcher, the brewer, or the baker. It is because of the profit they seek.”
This is one of the most extraordinary phenomena in economics. Given the right conditions, motivation brings together the interests of the individual and the interests of society. The products in the supermarket warehouse come from all over the world. Through the mechanism of motivation. The business profits generated here serve to bring together and coordinate the private interests of tens of millions of people and the overall interests of society.
You can see what kind of distribution process fresh vegetables go through by looking at them at the market every morning. Farmers wake up at 5 a.m. to deliver their produce to the wholesale market. Truck drivers pick up different vegetables at 6 a.m. and deliver them to the supermarket. At 7 a.m., supermarket employees display all the products to greet the early shoppers. The early bird gets the worm is a motivator that encourages people to get up early to earn more. Based on this mechanism, people strive for their own benefits and naturally fulfill the benefits of others.
Economists argue that people act in predictable ways for various motivations other than direct material motivations. Prestige, power, honor, desire, and love can all be important motivations. Even good deeds can be a response to some kind of motivation. Economists say that it is not at all strange for a charity to enhance and promote the honor of those who donate. Of course, there are people who give anonymously, without giving their names. But even on a university campus, it is hard to find a building named “Mr. Anonymous’ Building” with your eyes closed.
In institutional economics, this is called “path dependence. It refers to the phenomenon where certain past decisions are not easily changed due to inertia. Once you fall into “path dependence,” it is difficult to get out of this inherent “swamp. Of course, choosing the right path can also be a catalyst for moving forward.
The same is true of a company’s culture. If you create a positive and progressive culture, you can discover and recruit a wide variety of new employees. They can also freely adapt to that culture. You can maintain a virtuous cycle of self-development and growth by following existing paths. There is no damage to the traditional corporate culture or a halt to growth. When you start a company, it is important to establish an innovative business model and solid technology. If a startup is to survive for a long time, it must have a well-developed system. In particular, the role of the “motivation” system should not be overlooked. In the early stage, a corporate culture and motivation system should be created to promote the growth of employees. A healthy competitive system must be established, and an innovative system must be developed. Internally, these systems must function well to create a virtuous cycle and penetrate the “highway” of development.
Talent cannot be bought with money alone
Let’s get back to the story. If you want to use the “motivation” mechanism to discover talent, relying on high wages alone is not enough.
According to Maslow’s “Hierarchy of Needs,” human needs increase in order from basic physiological needs, followed by safety needs, belongingness needs, esteem needs, and self-actualization needs. The first four levels are basic needs, and the highest level is classified as the need for growth. Highly innovative talents tend to have a high level of self-esteem. Their needs are not limited to physiology, safety, and belonging. They have a much greater need for respect and self-actualization. The Silicon Valley friends I know were motivated by their inner sense of accomplishment, even if there was a huge financial reward. And they felt a great sense of pride in the results they achieved on their own. People who work in Silicon Valley value the growth of their intellectual abilities, face challenges boldly, and solve problems with innovative ideas. When you think about it, you can see why they have trouble recruiting talent. When we surveyed Silicon Valley professionals, more than half of them said they spend time outside of work researching technology-related projects for “fun.
Accenture, the world’s largest management consulting firm, published similar survey results. Most Silicon Valley IT professionals admit that making money is very important to them. However, most are willing to create value for the company if they are motivated by the work itself, even if it pays less, and if it helps them grow in their career.
If you talk to the “millennial” generation today, you will find that they are more focused on company culture and work-life balance than they are on large companies or economic prosperity. In other words, there has been a shift in the pursuit of professional values. These are the digital natives who grew up in a relatively free and prosperous era. Even if they are not super rich, they have no worries about the basic necessities of life. Many of them have friends who own homes, but even if they don’t, they don’t feel the need to. So for this generation, money is important, but it is not the only criterion for evaluating quality of life.
Therefore, in addition to generous financial rewards, it is very important to offer them challenging work, a free and innovative corporate culture and atmosphere. A company with a sense of mission is truly a company with a soul. A company with innovation and cohesion can go further and higher.
Perhaps your company already has such a culture. If so, please demonstrate it when recruiting talent. Today’s “MZ Generation” is not satisfied with simply working for a company that is respected by people and that pays well. They want to live, work and grow in an environment where they can freely express their innovative ideas. A work environment that is free, equal, self-actualizing, and full of innovation may be much more attractive to them.
