[This article was first published in September of 2009]

It has been interesting how much attention has been paid to Dan Pink’s latest message on motivation that was presented at TED.  The number of tweets, blogs, and other messages about this have been huge.  We ourselves highlighted the speech here on this blog a couple of weeks ago (http://wp.me/pypb9-31 ).

What I find interesting and a little worrisome, is the idea that many are taking from Dan’s presentation that all incentives (or at least most) are bad.  I disagree 100% with that concept.   I would like to expand the conversation to explore why.

The debate about intrinsic vs extrinsic motivation has been going on for a long time.  The candle experiment presented by Pink was done in the 1950’s.  Deci & Ryan research from 1970’s and 1980’s suggested that extrinsic rewards can decrease intrinsic motivation.  Alfie Kohn wrote about how he thought extrinsic rewards were bad in “Punished by Rewards” in the 1990’s.   All of this research suggested a negative correlation between extrinsic rewards and intrinsic motivation.

However, that is not the only research out there!  Research based on both real life corporate performance data and academic experiments show a different side to this debate.

First, performance data from a number of sources points to an increase in performance when incentives are used.  Stajkovic and Luthans’ meta-analysis of 72 contingent based behavior programs found that money incentives increased performance by 23%, social recognition increased performance by 17%, and feedback increased performance by 10%.   BI, a performance improvement company, has shown increases of over 300% between a control group and an incentivized group in sales performance.

Those are hard numbers to ignore!

Also, Paul Hebert does a nice job of highlighting research by the International Society for Performance Improvement that indicate a 22% increase in performance for individual incentives and 44% for team based incentives – (see it here http://tiny.cc/nHfAj –  he also discusses some other arguments around Dan Pink’s message).

Second researchers have found that the way that incentives are structured has a significant impact on their performance as well as on the impact they have on intrinsic motivation.   Work by Eisenberger, Cameron and Pierce show that extrinsic rewards, if structured correctly, can actually increase intrinsic reward. They state, “The findings suggest that reward procedures requiring ill-defined or minimal performance convey task triviality, hereby decreasing intrinsic motivation. Reward procedures requiring specific high task performance convey a task’s personal or social significance, increasing intrinsic motivation.”  Specific to creativity, Eisenberger and Cameron “concluded that decremental effects of reward on intrinsic task interest occur under highly restricted, easily avoidable conditions and that positive effects of reward on generalized creativity are readily attainable by using procedures derived from behavior theory” [emphasis added].  Yet Dan Pink does not reference any of their work in his book (see here for some research articles that point to how extrinsic rewards can increase creativity: Eisenberger, Armeli, and Pretz, Eisenberger and Rhoades, and Eisenberger, Cameron and Pierce)

In our own work, we’ve seen that when individuals are given a choice in choosing levels of goals and subsequent rewards, they have an increased motivation to choose (and achieve) higher goals than what management would have given them.

That being said, Dan Pink has gotten the discussion flowing on this – which I think is very good.  He has also highlighted the fact that most organizations only see one lever to pull when trying to impact employee motivation – i.e. pay systems. As he points out, there are other aspects that influence employee’s motivation.  This is vital.  To improve performance, creativity, and accountability businesses need to look at more than just rewards!  I hope that this will help expand the use of other motivators!

Dan talks about Autonomy, Mastery and Purpose – these fit right into the Four Drive Model of Employee Motivation.  Autonomy and Mastery align with our Drive to Challenge and Comprehend, while purpose fit nicely with the Drive to Defend.  What Dan leaves out is the power that the Drive to Bond has on motivating employees.

Overall, I think the discussion that will result from Dan’s presentation is great, I just hope that it doesn’t get boiled down to the simple sound bite that “incentives are bad.”

UPDATE APRIL 1, 2011

Let’s start with the positive: Dan’s book has done very well and has helped focus people on the the need for looking beyond the pay system to help drive motivation throughout the business.  This is a very, very positive impact.

Now for the bad: the mantra that “incentives are bad” has been one of the larger themes to arise from the success of his book.  This is not a positive impact.   It has led to a number of non-experts jumping on the bandwagon expounding their personal belief that all pay-for-performance measures should be gotten rid of.  That incentives themselves are bad.  And that people will be 100% fully motivated if we can just figure out how to make jobs more autonomous, provide mastery and have a purpose.  Of course, this doesn’t really account for a lot of what really happens in the world as we know it.

Moving forward, I would like to propose that the discussion around this topic is good – as long as we look at all the research and at how incentives should / should not be used.  We need to look at all the tools in our tool belt – that includes things such as Mastery, Autonomy and Purpose – but also includes other things like rewards.

Let me know your thoughts – click on the comment section below!

Kurt