Analyzing Employee Motivation: Happiness vs. Pay in Productivity

This essay examines the impact of employee happiness versus pay on productivity within the context of organizational behavior and design. It analyzes various motivational theories, including Maslow's Hierarchy of Needs, Herzberg's Two-Factor Theory, Alderfer's ERG Theory, and McClelland's Need Theory, to determine whether happiness or higher pay is a more significant driver of employee motivation and, consequently, productivity. The essay argues that while salary can contribute to job satisfaction to some extent, happiness, stemming from factors like recognition, growth opportunities, and fulfilling work, plays a more crucial role in motivating employees to be productive. It concludes that organizations should prioritize creating a work environment that fosters employee happiness to maximize productivity.

ORGANIZATIONAL BEHAVIOUR
AND DESIGN – 729763

Since the spread of globalisation and liberalisation, the business world has been evolving at
an unbelievable rate. Globalisation has made it easier for business organisations to establish
overseas relation and make effective use of foreign resources to achieve business
competencies, which has increased the level of competition amongst rival firms. Business
organisations are trying their best to implement strategies that would enable them to
outperform their competitors and are continuously bringing changes in their operations and
processes. In such difficult times, where operations, processes and most of the resources can
be replicated in no time by using reverse engineering techniques, human resource is one such
resource that cannot be easily replication as a result of which, it is being considered as the
most important resources. As a result, business organisations are heavily relying upon their
human resources in order to achieve market competencies (Bratton & Gold, 2017).
To maximise productivity and to optimise the performance of the employees, business
organisations have identified the need to keep the employees motivated and happy, for which,
they have established dedicated human resource departments that ensure well-being of the
workforce. Human resource management departments are formed to improve the work
conditions for the employees so that they can be made more productive by improving the
work conditions for them and by establishing better relations between employees and
employers.
There have been a number of studies in the field of employee motivation, which have yielded
different attributes that can lead to employee motivation and can make them happy. Some
scholars believe that a better pay system motivates the employees to become more productive
while some scholars believe that happy employees are productive employees. As human
resource managers believe that employee motivation and happiness is a key factor that can
play a huge role in the overall performance of an organisation, it is important to check if it is
happiness that motivates the employees to be more productive or is it a better pay scale that
motivates them to be more productive (Yousaf, Yang, & Sanders, 2015). According to me, it
is happiness that matters more to the employees and motivates them to be more productive as
compared to a better pay scale because relying on pay as a source of motivation narrows
down the scope for human resource managers to keep their employees motivated. On the
other hand, there are a number of other factors that can counter the positive impact of a better
pay and can demotivate the employees, which would ultimately lead to reduced productivity
even if the employees are being paid above the market average (Olafsen, Halvari, Forest, &

Deci, 2015). Therefore, let us gain a deeper insight into some important motivation theories
related to human resource management, in order to come to a conclusion and decide whether
it is a pay system or happiness that has a major role to play in the overall productivity
demonstrated by the employees.
First of all, to check whether happiness and salaries are related to each other, let us consult
the Cabinet Office’s Wellbeing and Policy Report in which a graph was plotted to find a
relation between salary and happiness of more than 260 occupations (michaelpage.co, n.d.).
From the above graph, it can be clearly seen that there is no direct relationship between
happiness and salary. If salary could induce happiness amongst the employees then the
employees with the highest salaries would have been the only happy people while the
employees employees with lower salaries would never be happy. The graph also helps in
establishing a fact that there are some other factors that cause happiness and motivation
amongst employees and not just salary alone.
One of the most commonly used theory in the subject of human psychology and human
resource management is the Hierarchy of Needs Theory developed by Maslow. In his theory,
Maslow suggested that there are five sets of needs and people feel motivated to work for the

next step of needs when their lower level needs are fulfilled (Rasskazova, Ivanova, &
Sheldon, 2016). The five sets of needs identified by Maslow are discussed below:
- Psychological needs  these are the needs of human beings related with food, water,
warmth, rest, etc.
- Safety needs  safety of job, shelter, general safety, etc. are the needs that fall in this
category
- Belongingness  to have relations, friends, family, etc. are some of the needs that fall
in this category.
- Esteem needs  the need to have a feeling of accomplishment or develop a prestige
and self-esteem (Fallatah & Syed, 2018)
- Self-actualization  these needs are related to morality, creativity, problem solving,
prejudice, etc.
Maslow’s Need Hierarchy is widely used by human resource managers till date because of its
simplicity and practicality. The theory suggested by Maslow can be very reliable when
looking forward to motivate employees. According to this theory, a person is motivated to
work harder for achieving the next set of need once a lower set of need gets satisfied. For
example, once a person feels that his psychological needs are satisfied, he or she would feel
motivated to work harder for achieving security needs, such as job security, etc. (Lazaroiu,
2015) By recognizing the stage at which an employee stands, it can become easier for the
managers to motivate them by fulfilling their present sets of needs. Relating this to our topic,
it can be clearly seen that considering a better pay to be a source of motivation to work harder
or to be more productive cannot be generalised for the entire workforce. It is possible that one
person is at the second level in the Maslow’s Need Hierarchy while another is at the top level
in the need hierarchy. Providing salary hikes to both of them would not make them more
productive as the first person has to fulfil his security needs while the second person is at a
level where he or she would be least concerned about his or her salary. Even according to a
research conducted by the National Academy of Sciences, the connection between happiness
and money remains only up to a certain extent. The research concluded that high income can
buy satisfaction in life but not happiness and without happiness, it is impossible for the
employees to become more productive (McBeth, 2017). Therefore, it would be happiness or
fulfil of their needs that would motivate them to become more productive and work harder.

Another pioneer theory, in the field of human resource management, human psychology and
employee motivation, is the Herzberg’s motivation theory. The theory proposed by Fredrick
Herzberg is also famous by the name of Two-Factor Theory in which he suggested two
factors, i.e. motivation factor and hygiene factor, that played an important role in employee
motivation (Hur, 2017). The two factor theory by Herzberg states that for the employees to
feel motivated, it is important that they are satisfied with their jobs, which can only be
possible if there is hygiene in the workplace. Hygiene factors, in this theory, were recognized
as those factors that were related with physical working conditions, status of employees,
fringe benefits, job security, salary structure, etc. The second set of factors were the actual
factors that could help in motivating the employees. The factors that actually motivated the
employees were related to recognition, sense of achievement, growth opportunities,
meaningfulness of the work or the job. From the two factor theory, it is clear that salary or
pay (covered under hygiene factors) could play a role in the level of job satisfaction or
dissatisfaction amongst the employees but cannot motivate them in actual (Alshmemri,
Shahwan-Akl, & Maude, 2017). On the other hand, for the employees to feel motivated and
become more productive, it is important that the managers offer them recognition, growth
opportunities, sense of achievement, meaningful work, etc. Therefore, this is another theory
that reinforces our thesis statement that it is happiness that motivated employees to become
more productive as compared to salaries.
The third theory that can be used to reinforce our thesis statement is the ERG theory proposed
by Alderfer. In his theory, Alderfer has identified three steps or classes of needs that can be
directly related with employee motivation levels. These three levels of needs are existence,
relatedness and growth. Under existence, Alderfer classified needs related to basic material
necessities (Kuppuswamy, Saminathan, Udhayakumar, Vigneash, & Gopalakrishnan, 2017).
In other worlds, existence needs are related with the physiological and physical safety needs
of an individual. The next set of needs (relatedness) are the ones that are related with
establishment of relationships, family, friends, love, belongingness, etc. The last set of the
needs are related with the need to grow. Needs covered in this category are the need for self-
development, personal growth, etc. (Kim, Kim, Shin, & Kim, 2015)Alderfer was also in
support of the need theory developed by Maslow and was of the view that unsatisfied needs
lead to motivation amongst employees. Once the lower level needs of the employees are
satisfied, the higher level needs become a source of motivation for employees.

The last theory that we will use for reinforcing our argument is the McClelland Need Theory,
which was built on Maslow’s need hierarchy. McClelland, in his theory, tried to identify the
key motivators that could help human resource managers in keeping their workforce
motivated. A major difference between Alderfer’s, Maslow’s and McClelland’s theory is that
McClelland believed that individuals are more inclined towards the satisfaction of their
present needs rather than developing new sets of needs (McClelland, 2015). The three
motivators identified by McClelland are Achievement, Affiliation and Power. In the first
category i.e. achievement, employees feel motivated when they feel a need to accomplish
something or to demonstrate their competitiveness in the workplace. Achievement motivation
generally occurs when an individual feels the need to achieve success or attain skills and
competencies. individual with achievement needs are often found to be working harder than
the others and are always seeking challenges. In the second category i.e. affiliation, the
employees feel motivated when they have needs related to love, belongingness and
relatedness. People looking for affiliation motivation have a strong desire for friendships or to
be part of a social group. Such employees like to work in teams and are less effective as
leaders. Authority motivation occurs when an individual feels the desire to have an authority
over what others are doing. People falling under this category are motivated by the idea of
being powerful and have a high prestige in their organisations.
From all of the theories studies above, along with the data collected from research projects, it
is evident that salary or pay scales do not have a role to play when it comes to motivation or
happiness. To some extent, salary can buy happiness for certain employees but the extent to
which it can buy happiness is very limited. The theories discussed above clearly show that
there are a number of other factors that motivate the employees to work harder and are based
upon their needs. The needs of an employee govern his motivation level and like one size
cannot fit all, a single motivational factor cannot be used to motivate the entire workforce to
work harder. The scope of salary in motivating the employees to work harder is narrow and
way more limited whereas happiness is clearly what makes the employees satisfied with their
jobs and motivated them to work harder, in order to become more productive. Based on
motivational theories and empirical evidence, it can be clearly stated that ‘happy employees
are productive employees’ is a statement that can is way more reliable than the one which
states that higher pay motivated the employees to become more productive. Therefore, it is
important for business organisations to implement human resource management practices that

can help them in keeping their employees happier rather than relying upon salary as a
motivational factor, which will make the employees more productive.
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