Motivated employees equal satisfied customers

May 23, 2014 - 06:28

Employees who have fun at their jobs perform better than those who are driven by bonuses and commissions. This leads to more satisfied customers, a new study shows.

“Recruiting employees who experience genuine inner joy when performing business tasks is very important,” Professor Dysvik says. (Photo: Monkey Business/Microstock)

Financial incentives such as bonuses and commissions have long been considered essential in the motivation of employees. However, intrinsic motivation is a stronger success factor, according to a growing number of studies.

Compensation is important, but it should primarily be given as fixed salary, says Professor Anders Dysvik at The Norwegian Business School BI.

“For more complex tasks, variable, performance-based compensation can be counterproductive,” Dysvik explains; a fixed salary is a signal of trust, and the employee no longer has to think about compensation during the execution of the tasks.

“Performance-based pay does not seem to work for complex tasks, because it is difficult for employees to see the connection between effort and result,” Dysvik says.

Intrinsic motivation is superior

Professors Bard Kuvaas and Anders Dysvik at BI's Department of Management and Organization analyzed data from more than 11,000 respondents from 100 organizations. They considered factors such as management responsibilities, education, fixed salary and variable pay, finding that intrinsic motivation is a significant factor in both achievement and loyalty. Employees with intrinsic motivation simply outperform others.

They also feel a much stronger commitment to the company, tend to take on several optional roles, and rarely have plans to quit.

“Recruiting employees who experience genuine inner joy when performing business tasks is very important,” Professor Dysvik says.

Employee commitment affects customer satisfaction

For companies in the service sector, customer satisfaction is essential. Satisfied customers are more loyal than others, and replacing lost customers is expensive. Satisfied customers can lead directly to sales when people discuss the company.

Research shows that employee job satisfaction leads to a good service climate, which in turn leads to better performance and higher customer loyalty.

Anders Dysvik (Photo: BI)

“The most important customer could be the company's own employees. If you manage to keep them committed, this will be noticed by the customers,” Dysvik says.

Susceptible to fatigue

Employees who rely more on external motivation, however, do not make extra effort unless they get paid for it. In addition, they are more susceptible to fatigue, consider changing employers more often, and have a weaker emotional commitment to the company.

“Recruitment should be more targeted. If you can find an employee who is genuinely concerned with the work and can get on well with other people, you have made a killing,” Dysvik says.

Routine tasks are different

Do performance-based rewards have any effect at all on work effort?

Yes, in certain cases they do – but only for uninteresting jobs: simple, routine and not very motivating tasks that are easy to measure, like planting trees or replacing car windows. This was shown by a 1998 American meta-analysis based on 39 different studies.

In contrast, according to organizational psychology, certain kinds of jobs can provide intrinsic motivation. Employees who report high intrinsic motivation typically have a high degree of self-determination at work, are trusted with tasks that are important, are receptive to constructive feedback, and can use a variety of skills.

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Read the Norwegian version of this article at forskning.no

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Translated by
Lars Nygaard