Should anyone have needed proof that the topic of pay induces intense emotions, the Italian government provided it on April 30. For a few hours on that date, Italians were treated to a chance to retrieve online the tax returns of all 40 million of their fellow citizens who paid taxes in 2005. The access was a parting gift from the outgoing government of Prime Minister Romano Prodi. Posting everyone's income was a "simple matter of transparency and democracy," said the departing deputy economy minister who authorized the move.

Italians reacted with a combination of horror that their own data were revealed and eagerness to know what the rich, the famous, and the neighbors were earning -- or at least saying they were earning in a system known for rampant tax evasion. The Web site was clogged with the curious before public outrage shut it down.

Two years earlier, British newspaper columnist Polly Toynbee touched the same live wire when she advocated making all pay public. "People do know more or less what everyone else earns in the public sector, so why not make it compulsory for all?" she argued.

Norway and Finland make tax returns public, she observed. Toynbee cited research finding that fairness and "transparency" are more important than the actual amount of one's salary, so why not -- as the column's headline said -- "Throw open the books so that we can see what everyone earns." "After the initial shock," she assured her readers, "people would soon get used to the idea."

The day the piece appeared, a blogger wrote to the columnist, asking, "How much do you earn per annum?" She refused to answer the question. "An organisation has to go public all together."

In ways they may not have intended, the Italian government and the British columnist made a crucial point: Pay is complicated. In fact, pay is so thorny that it behaves like none of the 12 Elements of Great Managing, the dozen aspects of the work environment that Gallup's research showed are most important to measure and improve. (See sidebar "The Twelve Elements of Great Managing.")

Companies frequently ask why Gallup does not include a compensation statement in its Q¹² employee engagement assessment. The answer is that while an employee's response to each of the 12 Elements predicts how he will perform in the future, his answer to a pay question is so bundled up in psychological complexities that asking it usually causes more problems than it solves. Pay is a status-laden, envy-inspiring, politically charged monster. Getting it right is crucial, and that begins by not underestimating its hazards or lumping it in with other aspects of an engaging workplace.

In its irrationality, pay is like many of the 12 Elements -- ideas that seem logical on the surface, yet are both surprising and exceptionally complex when processed through the human mind. But compensation is much messier than any of the 12 Elements. A number of basic truths about the psychology of pay demonstrate why managers must view their compensation strategies through an emotional lens if they want to maximize how well they motivate workers:

Higher pay does not guarantee greater engagement.

A supervisor might assume going in that the more she pays her team, the happier they will be. But there's a lot of truth to the old saying that "Money doesn't buy happiness." It doesn't necessarily buy engagement either.

One of the sociological puzzles that presented itself in the last few decades is why, if people spend so much of their energy in pursuit of higher incomes, the attainment doesn't bring the hoped-for result. "Increases in our stocks of material goods produce virtually no measurable gains in our psychological or physical well-being. Bigger houses and faster cars, it seems, don't make us any happier," wrote Robert H. Frank in his book Luxury Fever: Why Money Fails to Satisfy in an Era of Excess.

Five leading researchers writing in the journal Science concluded: "The belief that high income is associated with good mood is widespread but mostly illusory. People with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense, and do not spend more time in particularly enjoyable activities."

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Article from The Gallup Management Journal