Motivation is a big industry. From incentive and recognition trade shows to compensation consultants, there are a host of industry experts ready to carefully craft the perfect program that keeps employees working happily and productively. Most of these experts adhere to the economic principle of agency theory, which says that individuals work for their own self-interest.
To best leverage this principle, these experts offer just the right trinket, or they design an elegant incentive compensation solution tailored to your needs. All of these offers assume that simply having financial incentives triggers people to work harder, which makes performance-based compensation almost a given.
According to research from Ian Larkin, assistant professor at Harvard Business School, social comparison — our natural tendency to measure ourselves against our peers — may be the most powerful workplace motivator. So performance-based compensation might not matter as much as how that pay compares with peers in the organization.