The research, conducted by Stanford University associate professor Chip Heath, found that managers are not as good at judging what motivates their employees as they think they are. In one test, Heath asked 25 managers of a Citibank call center to rate what motivated the center's 25 customer service reps, all of whom they knew well. The managers consistently overestimated how important extrinsic rewards (such as pay and benefits) were to these people. Meanwhile, the employees included only one extrinsic reward (benefits) when asked to list the four things that motivated them. What mattered most were things such as feeling good about themselves, being praised when they did good work, and having the opportunity to grow their skills.

The survey has implications for companies that rely on bonuses and incentives without considering more closely what drives each individual to perform, says Heath. “High-powered bonus systems like those found in sales contexts certainly work to motivate people on a day-to-day basis, but those only work for a subset of people. In fact, many people avoid working in sales because they don't like so much of their pay being tied to incentives.”

In another test, participants — this time 94 MBA students — were asked to “frame” a $1,000 cash incentive in terms of its value to them (for example, “a down payment on a car” versus “recognition for a job well done”). Once again, managers were often wrong in their perceptions that students were more interested in what the money would buy than in what it meant to them.

“When managers think about most people in the organization, they are probably going to motivate them more by giving them interesting, meaningful work than by adjusting their pay, benefits, and incentives,” says Heath. “Unfortunately,” he adds, “managers often miss out on this insight.”