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A free monthly newsletter about improving your
people, processes, sales and marketing, financial
performance…and other interesting stuff

June 2012

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Does More Money Equal More Motivation?

A question I frequently get asked is “should we be incentivising our staff by way of financial bonuses and rewards?”

This is a challenge for companies of all sizes - trying to keep good staff performing at optimal levels and also from being poached by larger companies with bigger wage budgets. I have heard story after story in my travels and especially in my work with mining related businesses, of people being sweetened with big pay packets to lure them away from their current employment. How do we as employers strike the balance of not allowing wages to blow out and at the same time keep our people happy and performing at the highest levels?

Intrinsic verses extrinsic motivation

Intrinsic motivation is best described as that motivation that comes from within a person whereas extrinsic motivation is that which comes from external sources.  Intrinsic motivation is all about doing that which we find enjoyable and are passionate about, that which relates to what we value highly and where we gain a personal sense of satisfaction. Extrinsic motivation is about external factors that create stimulus to achieve or perform certain tasks such as when a child is obedient due to potential consequences.

In the workplace, the starting point is the hiring process. Identifying keenness and passion for ones work should be primary, skill levels secondary. Much easier to train someone in the technical aspects of their job than teaching them to love their work. The latter akin to trying to make a slow horse speed up – just plain hard work. Many employers bypass this stage. Due to labour shortages (and not really understanding the ‘whole person’), we tend to hire anyone that is somewhere near the mark technically, rather than considering the person themselves.

One of the key observations to consider when both hiring and working with people is that all of us are motivated by what is most important to us. If we value money highly then money it is.  If satisfaction from a job well done, then that is reward enough. If it is time with the family, then that is what drives us. Our workers are no different.  Different factors drive different individuals according to what is most important for them.  Tap into these internal drivers, adapt the workplace around these and you will have employees more inclined to be intrinsically motivated in their work with both themselves and the company reaping the rewards. Their work then relates to their higher values. Incentivise everyone with financial rewards and you potentially will miss the mark much of the time.  As Edward L Deci observed:

“If a person who is intrinsically motivated to perform an activity begins to receive external reinforcement for the activity, what will happen to his intrinsic motivation? Previous studies and the present study indicate that money decreases intrinsic motivation, while verbal reinforcements tend to enhance intrinsic motivation.”
Edward L Deci  - Journal of Personality and Social Psychology 1972, Vol. 22, No. 1, 113-120

And if you do head down the path of financial rewards, look at incentives based on team performance as opposed to rewarding individual effort.

Good luck!

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 Financial Performance
A quick improvement checklist:
  • Establish budgets and goals in terms of Sales/Revenue, Cost of Sales, Gross Profits, Overheads and Nett Profits
  • Communicate these to the people responsible
  • Share this information with your team
  • Hold people accountable for results (or lack thereof)
  • Break sales targets/revenues into daily, weekly, monthly or quarterly goals – whatever is applicable for your business
  • Create strategy on the key improvement goals to enable appropriate actions and momentum (ensuring energy is being applied in the right direction and on fewer things than the many)
  • Frequently pause to analyse results, reset direction with strategy and action plans. (Human beings are the only ones who run faster when they are lost!!!)
  • Reward your teams for meeting financial budgets, cost reductions, efficiency improvements and the like.
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Efficient Process - Chaos and Order

I have worked with a client for the last 18 months whose initial request was to bring order to their internal chaos. “We have doubled in size for the last number of years but want to consolidate and get our ship in order before growing again”

If you are already in a state of chaos then doubling growth (or whatever your goal is) will simply magnify that chaos, with potential profit margins dissipating from the increase.

The astute manager knows that both of these areas work harmoniously. The ‘too busy for that kind of stuff’ business owner, focused only on growth but neglecting internal processes and people can hardly be commended. Perhaps applauded for their lofty goals and increased sales but failing in terms of bottom line results, employee satisfaction and the resulting attrition, aging systems, duplicate processes, old technology, lengthy process times for work completion, profit erosion… (I could go on).

“Maximum growth happens on the border of chaos and order”
– Dr John DeMartini

Chaos and order are good friends. When Chaos is taking the lead, Order comes in behind to support, organise and delegate functions, allowing growth to continue. When Order is running the show, systems and flow is happening nicely. Chaos then says “it’s time we had some growth – I will take the lead”.

Too much chaos - Risk scale increases across the board
Too much order - a mundane and safe business existence with slow growth (if any)

Chaos and Order – the perfect partners!

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The Cellar Notes


Even though it is the time of year when a good bold red seems to become the preferred option for many, try a bottle of Jacobs Creek Riesling (under $10) and have it with an Asian dish. Particularly good with Vietnamese food where there is a combination of chilli, lime and coriander.
On The Lighter Side

On one of my hotel stays I had a knock on the door. Opening it I found housekeeping ready to clean my room. Her opening comment was “do you need servicing today?” Taken aback I wasn’t quite sure how to respond but it did make me wonder what species she thought I was!

In This Issue:
Ray Hodge is the Director of Ignite Business Consulting. He speaks and consults to businesses & organisations, a notable event being the Department of the Australian Prime Minister and Cabinet.

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….This enabled us to identify bottle necks and design new efficient systems to overcome these bottlenecks…The business now is growing rapidly with a motivated team that reminds me of why I wanted to run my own business in the beginning.”

Ben Roberts – Roberts and Cowling Accountants

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Call Ray +61 7 3390 7406
Copyright 2011 Ray Hodge. All rights reserved.


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