Pay or praise? Which matters more to how happy you feel at work?

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While many of us might assume that cold, hard cash is the best way to motivate people at work, the reality is that money isn’t the only way to keep people engaged in what they do. In fact, it’s not even the most important factor in increasing employee wellbeing. Instead, praise is actually more effective than bonuses in encouraging people to do their best work.

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In a survey of 1,047 executives, managers and employees, McKinsey & Company found that “non-financial motivators are more effective than extra cash in building long-term employee engagement in most sectors, job functions, and business contexts”. The survey showed praise was the top motivator, followed by attention from leaders. So why is praise such an effective motivator? And why do we value it more than money?

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The power of praise

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Receiving praise from others drives well being and promotes comradery within teams. And positive feelings towards managers or colleagues, as a result of receiving praise, make people want to produce better results for them, thereby deepening engagement. And praise isn’t a currency. It can’t run out, or be spent or lost, so it’s hard to regret giving or receiving it.

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Sometimes a simple pat on the back can make your day, maybe even your whole week! There’s something about instant feedback from your work and experiencing it in real life that feeds the human need for companionship. The reason it feels so good is because it feels authentic; when it comes from a boss or peer, maybe even out of the blue, you feel like your work has to be something special for someone to go out of their way to praise it. 

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It’s also important to remember that we’re wired to function in a receive-give and give-receive environment and so praise is likely to release dopamine - the so-called happy hormone - which will automatically give someone a boost. And praise is positive for both sides; it feels good to be praised and also to watch someone's reaction when receiving praise. So it’s a win win.

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Money isn't everything

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By comparison, bonuses and pay rises can create a mindset of perceived happiness tied to earnings but can often lead to a rollercoaster of emotions. People experience a short term high but then are pulled back into their everyday reality, perhaps even sinking lower. And financial incentives are often distributed according to fixed timelines and set criteria, removing the serendipity associated with unexpected praise, and the steady drip feed of dopamine that comes from more regular moments of recognition.

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Bonus cultures can also result in competition and isolation amongst employees, with some losing out so others can succeed or make more progress. Incentives that come with caveats, or as the result of a zero-sum game can actually lessen positive feelings, driving engagement down over the long term. 

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Of course, the importance of financial rewards can’t be disregarded, but they shouldn’t be seen as the be all and end all. Performance reviews are significant when determining the trajectory of an employee, and bonuses or pay rises can be a proxy for growth, but praise is a vital, always-on complement to that cycle, making people feel welcomed, appreciated, and engaged all year round. 

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So remember a compliment costs nothing, but can mean everything to how happy someone is at work.

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How to ace the art of the work compliment

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Here are our five top tips for giving praise in the workplace:

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Be professional - remember you’re praising someone for something they’ve done professionally, so keep your praise professional!

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Be specific - don’t just say ‘ace job’, actually tell the recipient why exactly you think they’ve done an ace job.

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Be timely - don’t sit on praise for ages; it’s more authentic, and more appreciated, if it’s delivered as soon as possible after someone has smashed their task out of the park.

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Be mindful of your audience - not everyone likes to be the centre of attention, so be aware of how your recipient likes to be praised and offer your compliment accordingly.

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Be appropriate - make sure your language, or the way you recognise achievement, is appropriate to your workplace and relationship. A super formal email might seem inauthentic in a casual workplace, while a matey slap on the back might also undermine the message you’re trying to convey.

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