Pay and Performance: What’s the Connection?


money-peoplePayroll expense is the largest line item in the budget of most congregations. When the budget is tight we often turn to payroll expense to balance the budget because we simply don’t have many viable options.

However, we have to ask ourselves if this annual payroll dance around budget time harms our employees. How does the recurring budget dialogue about pay increases (or lack thereof) impact our employment relationships? Does the debate hurt employee motivation or the ability to hold employees accountable for good performance?

Money matters in the relationship that we have with our employees, but perhaps not in the ways you assume.

Does Money Motivate?

Research shows that money does not motivate in employment situations, except when the tasks of the job are purely mechanical.  Contrary to longstanding organizational belief, linking pay increases to performance has negligible impact on motivation, and in some instances actually reduces motivation. (TED Talk: Dan Pink on The Puzzle of Motivation

The absence of adequate salary may keep a person from accepting a job and it may cause enough dissatisfaction for an employee to leave a job, particularly when the employee feels that he is being unfairly treated. However, if an employee finds their level of pay basically satisfactory, money does not lead to higher levels of motivation.

Rather, motivation is produced by managing the more intrinsic side of the employment situation: greater autonomy, the mastery of an important skill, the ability to work in service to a larger good, etc.

Does Money Help to Create Performance Accountability?

Accountability is the obligation that an employee has to account for his or her performance, or lack thereof.  Does pay help to strengthen accountability in our relationships with employees? It does to the extent that pay maintains utility in the employment relationship.  

Employment relationships are basically utilitarian in nature; the exchange between employer and employee must prove useful to both parties. The employee offers something that the congregation values; a set of skills, and the time and energy to apply those skills to tasks and processes that the congregation deems to be important. In return, the congregation offers the employee something that she values: pay, benefits, opportunities for growth and advancement, the opportunity to work for a greater good. This is utility.

As long as both partners in the employment relationship find utility in the relationship, accountability around performance remains strong. An employee is responsive to an accountable conversation in a relationship with utility. If the employer doesn’t provide what the employee needs, or vice versa, the relationship loses its utility. When this happens, accountability is diminished.

When an employee values money in the employment relationship, then decisions about pay impact accountability. If money is not particularly important in the employee’s relationship with the congregation, pay does not foster accountability.

What Matters Most about Money?

So, money doesn’t really enhance motivation, and it may or may not impact performance accountability. In what ways does money really matter in shaping our employment relationships?

Fairness Matters: Pay matters as an indicator of fairness in the employment relationship. Creating pay structures so that co-workers perceive fairness in the workplace is important. When employees feel unfairly treated in matters of pay they will take action to restore fairness. The actions they take may not be helpful to the congregation.

According to behavioral psychologist, J. Stacy Adams, employees seek to maintain equity between the inputs that they bring to a job (time, effort, skill, loyalty, commitment) and the outcomes that they receive from it (recognition, responsibility, sense of achievement, praise, pay).

Employees continually evaluate their perceived inputs and outcomes against the inputs and outcomes of other employees. When an employee feels that the outcomes they receive from the job don’t match their inputs, or when they perceive that others have a better balance of inputs/outcomes, the employee will seek to restore equity.

To restore equity, the employee may seek to renegotiate the terms of employment. If this fails, they may reduce their energy or loyalty. They may also seek to negatively influence the inputs and outcomes of their fellow employees.

Justice Matters: As religious organizations we frequently advocate for those who are marginalized or taken advantage of by society. To maintain integrity, we must be certain that our employment practices are “just” as well.

We are not being just when we fail to pay a livable wage. It is not just to pay employees below what the market says they are worth. We promote injustice when, in an effort to avoid rising health care costs, we break full time positions into part time positions that don’t carry benefits. In these situations, our walk does not match our talk and our behavior demoralizes our employees.

Appreciation Matters: Most employees equate pay increases with appreciation. “If you are providing me with a pay increase, you must value the work that I do. When you fail to give me a pay increase you are devaluing me.”

We must handle our annual conversation about payroll increases in such a way that our employees feel appreciated. When we can’t rely on money to communicate our appreciation, we need to be authentic and creative with other appreciative techniques.

Employees are not likely to feel appreciated if they learn about their pending pay raise in a group setting, or from someone other than their supervisor. They don’t feel valued when everyone receives the same increase regardless of effort. They don’t feel appreciated when the payroll increase is the first thing slashed during the budget dialogues.

The relationship between pay and performance is complicated. This year, as you make decisions about staff payroll increases, don’t forget the conditions that actually impact ongoing performance: accountability, fairness, justice and appreciation.

Leave a Reply

*