However, financial incentives must be used properly if they are to motivate people, Gupta said. If the reward appears too small, it may have a negative effect. In a 1995 study of 192 college students hired to work and subsequently given varying percentage raises, Gupta and her colleagues found that most people didn't consider a pay increase significant until it reached 6-7 percent of the base pay. Employees' motivation and performance lagged if the raise fell much below that mark. It's not simply dollars.
People often think the amount of money they earn reflects their worth.
They also use money to elevate their status in society. To show the link between money and motivation, Gupta and Atul Mitra of Lyon College in Arkansas surveyed research correlating financial incentives and work published in major journals over the past 40 years. They examined 39 studies and analyzed how well each proved its point. Their findings debunked four myths about the value of money in work situations and called into question another, the two report in the autumn issue of the American Compensation Association Journal. Money does not motivate.