Good and bad employees are equally likely to think they deserve a raise.

Most employees are less than completely satisfied with the pay they are receiving. This should not come as a shock, given people's desire to progress, ability to find things to buy, and awareness of their every sacrifice for their employers. But the real fly in the ointment is that when asked a pay question, the worst performers are not very objective. They are just as likely as the best employees to say they should be paid more. At one company, when employees were allowed to set their own salaries, "it was a disaster: the good workers set them far too low, and the bad ones set them far too high," wrote the company's chief executive.

In posing any question to its associates, a company sets up an expectation that it will do something about the results -- an expectation that can backfire if the issue is not addressed. If you ask a friend if he'd like to go to the baseball game with you, he's likely to not just say, "Yes," but also, "When do we leave?" If you ask if someone is happy with her pay, she will likely not just say, "No," but also, "Where's my raise?" Although some employees in almost any company "deserve" an increase in pay, asking every employee his opinion neither identifies who should get a raise nor gives any useful information to company leaders.

Some incentives can backfire, decreasing employee motivation.

When companies slice incentives into too many small pieces, they have the opposite of their intended effect. Paying for a small act communicates to the worker: "You wouldn't normally want to do this, so we're going to pay you to do it." While logically the reward should be a further inducement, it instead decreases motivation. What is meant as a bonus the mind unconsciously takes as a bribe. (See "Fixing a 'Sneaky Broke' Hotel" in the "See Also" area on this page.)

"When people are rewarded for doing an interesting activity, they are likely to attribute their behavior to the reward and thus discount their interest in the activity," wrote professors Edward L. Deci, Richard Koestner, and Richard M. Ryan after analyzing 128 studies of how rewards influence behavior.

When children are asked to collect money for a charity, those who receive a higher reward do, in fact, collect more than those who are offered a smaller incentive. But children whose only inducement is the knowledge they are doing something good for someone else collect more than either the high- or low-reward groups.

If a small payment is given to induce more blood donations, the number of people who show up at the blood bank is less than if there is no payment at all. "The stipend turned a noble act of charity into a painful way to make a few dollars, and it wasn't worth it," wrote Steven Levitt and Stephen Dubner in their book Freakonomics. In the scientists' terminology, the piecemeal rewards "crowd out" the "intrinsic motivation" of the task itself.

Sales commissions and piecework pay are sometimes the best ways to hold people accountable. Pay-for-performance tactics can help keep workers' eyes on the goal and can even build engagement. But when used as a catch-all strategy, paying for doing can just as often backfire.

Pay is more about status than about paying the bills.

Numerous studies show that a person's satisfaction with his pay is affected more by how much he out-earns those around him than by the absolute level of his pay. Assuming the purchasing power of a dollar is the same in the following two situations, which would you prefer? (A) Your yearly income is $50,000, while others earn $25,000 or (B) Your annual income is $100,000, while others earn $200,000? Given that choice, half the people will choose a lower absolute salary that puts them at the top of the heap.

Columnist Toynbee argued that shining light on everyone's salary would lead to greater equality, "trust and social glue." Several pieces of evidence suggest just the opposite. Publicly traded companies in the United States are already required to report the compensation of their CEOs and the four other highest paid executives in the business. It may be that executive compensation has grown incredibly fast not in spite of the disclosures, but because of them, as corporate leaders fought for position on published lists of the highly compensated.

If the goal of disclosures is restraint of executive pay, "history is not promising," wrote columnist Floyd Norris in The New York Times. "The rise in executive pay began after more disclosure was required and bosses could see what others were getting. Their standard of comparison went from what others in the company were getting to what other bosses got. And every boss deemed himself above average."

Copyright Ó 2008 The Gallup Organization, Princeton, NJ.  All rights reserved.  Reprinted with permission.  Visit The Gallup Management Journal at http://gmj.gallup.com/

Article from The Gallup Management Journal