One of my favorite lessons at the USAF Academy came from Economics 101. It was the economics concept of Marginal Utility Value. In the years since college, marginal utility value provided me with insight into motivating employees, whether in a major corporation or in a small business.
Example of Marginal Utility ValueTo understand how it works, my instructor gave an example like the following: you have $10 in your wallet when you realize because you haven't drunk anything in several hours. You are really thirsty so you stop at Joe's Burgers and Drinks to get a 44 oz. soda for $2.50.
After you guzzle down half of that Coke, you're no longer as thirsty so now you notice that you are hungry too. You spend $5.00 on a deluxe quarter pound cheeseburger with tomato, lettuce and two slices of cheese. That fills you up nicely. You're no longer ravenously hungry.
As you have quenched your thirst and satisfied the demands of your stomach, you don't want to spend your remaining $2.50 on another 44 oz. soda. You're also reasonably full so you decide a mini-piece of cake would round out your meal because you have a sweet tooth, not because you are hungry.
How Marginal Utility Value Applies to Employee MotivationWhat does our little trip to Joe's Burgers and Drinks have to do with motivating your small business' employees? A lot. People want and need different things. As a small business consultant, I did several employee surveys to see what was most important to them. For the vast majority, job satisfaction, sense of belonging/being part of a team, recognition for good work or hard work, opportunity for growth and training, and flexible hours rank higher than money.
What I saw was the marginal utility value principle at work: for most employees, once the salary or wage rate satisfied their income need, money stopped being a strong motivator. Please keep in mind, though, human motivations are complex. Truly, for some of your employees, money is super important. These people will be inclined to leave for another $.25 per hour.
Motivators besides Pay RaisesSome of the things I have seen as effectively motivating small business employees are the following:
- Day off with pay for achieving a goal, like achieving quality numbers or productivity numbers
- Ability to flexibly schedule work hours so as to attend their children's school or after school activities
- Winning a T-shirt for having the best sales person for the month
- Getting recognized by co-workers as the one who did the most last month to help others - the company would award a certificate or plaque plus a gift certificate, like $50 or $100, to a great restaurant
- January and July bonuses provided the company made a profit, paid based on job level
- Taking the sales team out for a dinner cruise for exceeding quota for the month
- As a small business consultant, I have also given clients a profit sharing system based on multiple factors: performance review, time with the company, job level, and discretionary points for exceptional contributions
Top Gun versus Winning as a TeamKeep in mind too that some people are highly competitive and prefer to beat everyone else to be the best in the office, e.g. the top sales person. Others are motivated by being part of a winning team so they want a prize the whole company or office shares in. Personally, I always found hoopla to promote a contest with one big prize to be demotivating. I preferred contests where you set a bar. Everyone crossing that bar gets the prize.
The whole idea of looking at how marginal utility value can affect motivating employees is to demonstrate the point that once some need or desire is satisfied, it loses its power to inspire extra effort. Get to know your small business' employees. Ask them what would be motivating. Experiment with different things. Everyone can be inspired. Your task is to figure out how.
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- Employment & Career
- Marginal Utility