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I think another thing to consider is the company's point of view, especially when it comes to collaboration. For example, if salaried workers spend a significant portion of their working hours in status meetings that sends a different financial signal to the executive team than if the same people are paid by the hour. This topic dovetails nicely with the greater discussion going on right now around contingent workforce.

Laura:

Good point, and you're right ... some interesting implications here for contingent workers. Thanks for the thoughts!!

Question - is there any discussion in the data about the relative income level of the two audiences? The reason I ask is I recently saw a study that indicated that after about $60K in income, more money doesn't affect "happiness." Just curious if the hourly/salary issue is one of absolute or relative income and positional concern.

Paul:

Good question. My review of the paper suggests that they did gather information on income level in at least one of the studies referenced, but it isn't discussed as a factor. Because the "hourly" population is noted to include occupations like software developer and IT specialist, I don't know how clearly delineated the two groups actually might have been on that variable. You might want to click through (the paper is available free to download) to see if you find anything that I've missed.

Suspect it's all about a perception of individual efficacy and personal line of sight feedback. Bet that hourly workers who can opt for or out of overtime at will can be as "happy" about their controllable compensation comfort level as straight-commissioned sales reps. Both classes experience parallel intrinsic satisfiers. It's not the cash, it's the control over the outcome. The money is simply the medium for keeping score.

Michael Milken didn't go over the top in the mid 1980s because he needed money, believe you me. I held his W-2 and never saw so many zeros in my life on the original where they had forgotten to add his generous nine-figure bonus. Cash was just the counter, not the motivation. Didn't make him happy in the end, either way.

Like so many things, beyond a certain threshold point, it's not the amount you earn that pleases your life but the way you can control your earnings that makes life pleasant.

Jim-

I completely agree about the importance of a sense of control and understanding of earnings - that personal line of sight. Key to any kind of pay satisfaction - or program effectiveness. Thanks for weighing in!

I second Jim's comments - it's about the feeling of self-efficacy, a prerequisite for self-worth, one of the most important factors for happiness from a psychological point of view.

"If we want employees to care about the incentive plans we put in place and change their behavior accordingly, we need to make the connection between their efforts and the ultimate payout as clear as possible." I totally agree with this, this will help motivate the employees to do the job well and also would help the employer because the employees work for the employer.

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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