Most business people think that financial reward is the main driver of performance and a fulfilling workplace is a consequence of, not a contributor to, HIGH performance. Design the right incentives. Set stretch goals. Focus people on key objectives. Measure, measure, and measure some more. Hold people accountable. Watch the money roll in.

That was easy.

Hold on a minute. Surveys show that eighty-five percent of companies have some type of variable pay program in place yet few of them attain and sustain high levels of performance. If pay is such a powerful motivator then why aren't more companies doing better?

One reason is pay for performance is not an all-purpose solution. A large body of research shows that it works best in individual production environments where output quantity is important and can be measured. But pay for performance schemes aren't as effective in the aggregate or when the goal is producing knowledge-based outputs that have largely intangible value. Performance bonuses alone won't produce the next breakthrough drug, killer app or Starbucks retail concept. Other motivators and conditions must be provided as well.

Another problem with pay for performance is it assumes the main motivator of people to excel is financial reward. While this may be true for some workers, for many it is not. A recent nationwide survey by Katzenbach Partners LLC indicated that employees--by a more than three to one margin--would rather feel proud of their work than receive a higher salary.

So what can you do to take your organization's performance to the next level if bribery isn't working? Try offering a different work experience to your talent. There is a growing and compelling body of evidence showing a direct correlation between progressive people management practices such as investment in training, worker participation in decision making, and employee recognition programs and hard measures of business performance such as sales revenue, market share, profits and shareholder value. One study of several hundred companies uncovered these stunning results: organizations using the most progressive people practices had 50 percent less turnover, 3.5 times greater sales per employee, and over three times greater market value to book value of their shares. Several others show similarly impressive results.

So if you want performance, start paying more attention to people and less to pay. Give people the work environment they need to excel. Shape your work environment around a meaningful mission. Give workers a voice in decision-making. Provide opportunities for achievement and learning. Create a positive and fun social environment. Show appreciation in more ways than money. Allow workers to strike a balance between work and personal priorities and commitments. Spend more time delivering a fulfilling work experience and less fiddling with incentive compensation schemes and watch your company take off.

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