Base Pay vs. Recognition: What's More Important?

What’s more important: base pay or being appreciated for your work? A recent survey released by Boston Consulting Group polled more than 200,000 employees around the world to create a definitive list of the top 10 factors for on-the-job happiness. They found that employees value the following (in order of importance):

  1. Appreciation for their work
  2. Good relationships with colleagues
  3. Good work-life balance
  4. Good relationships with superiors
  5. Company’s financial stability
  6. Learning and career development
  7. Job security
  8. Attractive fixed salary
  9. Interesting job content
  10. Company values

Related: 5 Ways to Keep Employees Inspired and in Love With Their Jobs

Interestingly, recognition, work-life balance and personal relationships took the top spots while salary ranks eighth, contradicting other surveys on the topic. In a round-up by Smallbiz Ahead, they cite three other surveys from Tinypulse, SAP and SHRM that show compensation as the number-one concern. The diverse results can cause confusion.

We all know that base pay is always a huge concern for everyone, but if salary is a major concern in your organization, no amount of recognition will make your employees forget it. And if your employees aren’t getting enough recognition for what they do, no amount of money can buy their loyalty. These polls tell us that salary and recognition are both top concerns simultaneously, and what’s needed is a nice balance between the two.

Striking a balance

Anyone worth their salt in Human Resources is familiar with Frederick Herzberg’s hygiene theory, which states that base pay is a hygiene factor, meaning it must meet a certain expectation, but after that expectation is met, its power as a motivator is diminished.

Related: How to Motivate Employees in Less Than 5 Minutes

Why? Because for all its importance, people would rather not struggle with salary. It’s awkward; it’s messy; and nobody I know looks forward to a conversation about it with their boss. People would rather get paid what they’re worth from the get-go, so they don’t have to worry about it and they can do their job without the extra stress or burden.

The motivational 'sweet spot'

And here’s the kicker: There is no guarantee that increasing base pay will increase the output of your workers. High salaries don’t correlate too well with high performance. Why? Intrinsic motivation, or our internal psychological desire to achieve things, has been proven to have more substantial and predictable motivation effects than extrinsic motivators like cash and material goods.

However, the raw impact of extrinsic rewards like cash make them excellent short-term motivators. Cash can only go so far, but there is strong evidence to suggest that if you pay a competitive salary and also give people recognition for their work on top of that, amazing things can happen. But it’s not automatic -- it’s a constant negotiation to find that motivational “sweet spot” between decent salaries and a positive work environment. That’s when you become number one.

Related: 4 Tips to Create a Productive and Healthy Culture