The pursuit of happiness

GARY MEAD takes a light-hearted look at what motivates top executives around the world and finds that in the end it’s all about happiness

There’s a lot of pseudo-science out there about motivation, and the higher you climb the corporate ladder, the more waffle there is. Having waded through this quicksand, it’s tempting to think that in the end it all boils down to sticks and carrots.

But what sticks? And which carrots? And are the sticks different in the US than Finland, or are the carrots more orangey-coloured in Shanghai versus Timbuktu? Humans across the world are pretty much the same – and national ‘characteristics’ bear less weight than traits that can be found everywhere. Far be it from me to mention the vulgar ‘M’ word but, according to one of the most comprehensive studies around, more money doesn’t necessarily lead to greater job satisfaction, wherever you are. The bottom line of this research, published in 2010, concludes that “increases in pay may be more satisfying to those at the low end of the pay scale.” So I’m hoping for a raise, PDQ.

But at the upper end of the pay scale, beyond survival-scrabbling, all this business of compensation, incentives, performance-related pay, bonuses and whatnot is inextricably muddled up with fuzzy topics like ‘satisfaction’ and – the greatest indefinable of all – ‘happiness’. Academics endlessly debate ‘does money buy happiness?’ and ‘does more money buy more happiness?’

Does the model work?

But let’s not give up the chase too easily. In an attempt to slice and dice the carrots more stylishly (no sticks here), a PwC survey delved into the thorny topic of executive pay and incentives, interviewing more than 1,000 executives from 43 countries. PwC drew some fascinating conclusions, not the least of which is that “the theme of the last decade has been global convergence – of pay levels and structures – for an internationally mobile group of senior executives.” The more globalised the world becomes, the more blurred the lines between national stereotypes.

There has been one big change, post-2008, says PwC: “Put at its simplest, executive pay has risen dramatically over a period when, in hindsight, the Western economic model has not been at its most successful. Surely something must be wrong? If executive pay were genuinely motivating executives towards higher levels of performance, with benefits for all, there would surely be less controversy about the subject. But is it? Does the current model really work for the individuals it is meant to be motivating?” Companies everywhere, thinking about negative PR, have responded to the public backlash against perceived excessive pay at the top by introducing long-term incentive plans of one sort or another. But interestingly enough these schemes have diminishing returns, according to PwC. On the basis of its survey it says that “risk aversion increases with the amount at stake… people will tend to choose more certain but less generous amounts over less certain but more generous outcomes.” In only one region of the world did participants “gamble over the certain amount” – South America. The most risk-averse region was Africa, “with 61 per cent choosing the certain sum.” Other telling titbits were that “women are more risk-averse than men” and that “executives over the age of 60 were the most likely to take a gamble, while those aged 40-60 were least likely to risk the smaller, certain amount for the chance of a bigger win.” Executives in the UK and Australia, for example, are much less likely to prefer a long-term incentive ‘gamble’ than in more rapidly growing countries, such as Brazil and China. Moreover, “executives across the globe” don’t like waiting for their long-term incentive packages to come to fruition. Says PwC: “When there is uncertainty about whether a payment will be received, executives across the globe apply discount rates to deferred payments that are massively in excess of economic discount rates… this is the economics of ‘eat, drink and be merry, for tomorrow we die’.”

Money isn’t everything, sure – but it sure helps. Beyond that concrete absolute, we can all think of CEOs and C-suite executives who say they (and no doubt many genuinely do) get a real kick out of their job. PwC tested that, too, by asking how much of a pay cut the survey’s respondents would be prepared to take to get their ‘dream’ job. Top of the pile was the US, where 25 per cent of them said they would do their ideal job for half their current pay. PwC said: “Investment in making people’s jobs more interesting and fulfilling means you can pay them significantly less.”

Some of us, however, manage to do their dream jobs already: happiness is doing what you want, and feeling good about it, whether it means peanuts or peaches at the end of the month.

Gary Mead is a business journalist and former commodities editor of the Financial Times