When you think more money will motivate your employees. Think again...

A recent study by several prominent psychologists on happiness and major life events seems to support the notion that raises and bonuses will have only short-lived effects. The study argues that only life events which occurred within the past three months have any influence on one's happiness...or more specifically, on one's "feelings of subjective well-being."

Among the life events mentioned is a raise. Study results suggest to us that a raise is like a martini, inducing optimism and elevating the spirit - but only temporarily.

Previous studies seem to concur. Researchers tell us that only 1-2% of people's difference in happiness is attributable to their difference in income.

Is it in some way the employer's fault?

Research says no. One study says that even lottery winners aren't significantly happier than the rest of us. Men and women are essentially the same on subjective well-being, or self-rated happiness, and so are young and old, black and white.

In fact, a study done recently by the University of Minnesota on twins indicates that happiness is in large measure due to genetics - not money. The stable component, or "set-point" of happiness, is 80% gene-driven, say scientists.

The life event study concludes that after a major external life event (either positive or negative) one's degree of subjective well-being "reverts to a level predetermined by an individual's personality as soon as the pattern of life events regains its equilibrium"...generally within less than three months.

Ed Diener, Department of Psychology , University of Illinois at Urbana - Champaign, coauthored the study of the short-lived effect of life events on subjective well-being. "A raise just won't have an effect on employee satisfaction long-term," says Diener. "It may be forgotten by next week."

Although Diener's study was conducted on a sampling of recent college graduates, he and fellow researchers theorize that the personality stability they observed is likely to be even stronger in older adults.

In discussing the study results, Diener cites other studies in the subjective well- being field and points out that "successful pursuit of personal goals does play an important role in maintaining and increasing one's psychological well-being."

"During the goal striving process, one uses life events as a cue for checking one's rate of progress. Positive events, like a promotion, are a sign of progress toward one's goals and are likely to increase the sense of well-being, even if only for a short while," says Diener.

Smart Workplace Practice: Like rungs on a ladder, smaller, frequent rewards and short-term attainable goals are more likely to motivate and encourage employees to keep striving for better skills and greater productivity. Use a compensation and rewards system that provides frequent and continual encouragement rather than one based solely on relatively far-distant raises or promotions.