For this article, however, I am going to take you on a journey deep into the mountains of northern Pakistan. Right now, you are probably wondering: “what could the Hindu Kush possibly have to do with behavioral science!?
Well, as we have been telling you, it’s everywhere!
So, bear with me and let’s have some fun while we talk about behavioral insights in action; observed from a recent adventure in northern Pakistan.
[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 attainableby 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!
Dan Airely, Richard Thaley, Cass Sunstein, Daniel Kahneman, Ran Kivitz, and many more psychology and behavioral economics researchers have shown that while we like to think of ourselves as rational, thinking human beings who are out to optimize our well being, we aren’t.
In fact, we are very far from it.
Sharon Begley at Newsweek wrote this interesting blog “The Limits of Reason” in it, she states, “But as psychologists have been documenting since the 1960s, humans are really, really bad at reasoning. It’s not just that we follow our emotions so often, in contexts from voting to ethics. No, even when we intend to deploy the full force of our rational faculties, we are often as ineffectual as eunuchs at an orgy.”
We see this all the time. I wrote about it in my earlier post from today “5 Lessons from the Maze.” We tend to act and behave in very non-rational ways. There are lots of irrational types of behavior and thinking and lots of theory’s about them (i.e., Loss Aversion, Status Quo Bias, Gambler’s Fallacy, Hedonistic Bias, Anchoring, Reciprocity, Inequity Aversion, etc…).
Here is what is interesting – we tend to still design our incentive programs and our motivational strategies based on believing that people act in a rational manner. We create programs that have 10 different ways to earn, with multipliers, qualifiers, and ratchet effects. We create programs with multiple components and factors that we think will drive specific behaviors and elicit particular performance results. We believe we know what people want and use only extrinsic rewards to drive our results.
I have been touting the 4-Drive Model of Employee Motivation since I first read the 2008 Harvard Business Review article “Employee Motivation: A Powerful New Model” by Nohria, , Groysberg, and Lee. It is a powerful theory on human motivation in general, and in particular, employee motivation. First presented in the 2002 book, “Driven: How Human Nature Shapes Our Choices” by Lawrence and Nohria, the model outlines four main drives of motivation.
At the Lantern Group, we’ve been working with this model for almost three years now. We’ve posted on it several times in this blog (see 4-Drive Model here, Impact on Leaders here, and other info here, here, here, here and here for just a few examples).
It’s good – but not perfect.
Right away we realized that it needed to be tweaked.
As the hiring outlook improves with anticipation of the new calendar year on the horizon, election dust settling and corporate tax liability gaining clarity, the talent exodus will begin in next few months.
Are you ready?
If your organization has not installed proactive mitigation efforts, you could lose your best talent over the next 2 quarters (in other words, if your not doing something now, you’re going to pay for it later). Successful recession recovery strategy should not ignore the critical variable of having the best talent on-board as well as engaging the “survivors”, lest ye not forget;
“High-commitment organizations outperform low-commitment organizations by 47%”
“Engaged employees are 43% more productive.”
The Hay Group
Our research shows that engaged employees can increase your financial position by almost 200% while disengaged employees can decrease your financial position by almost 25%.
I read “Sales Comp Demands a Deep Sales Dive, Not a Best Practices Quest” by Ann Bares on Compensation Force yesterday – the article really resonated with me. The basic premise of the article is that companies should focus on understanding their sales force and not depend on best practices. Ann states it best when she says, “the problem with the notion of best practices in HR is that it too often leads to a blind search-copy-cut-paste effort whereby we simply lift popular program elements (out of professional journals, books, studies, etc.) and implement them, without sufficient thought as to their fit and strategic applicability.”
It resonated because it is right-on but also because I just completed an assignment for a company where they were looking for “best practices.”
I didn’t give them any (we’ll not really – more on that later…).
Are there certain people who just can’t be motivated? Are there Wally’s who render the motivation fairy powerless? While I would like to believe that isn’t the case, I have to wonder…
Motivation is Personal
One of the core beliefs that I have is that motivation is very personal. People are individuals with different motivational triggers and drives. While there are basic underlying motivational drives (see 4-Drive Model), those drives impact each of us differently and create a unique motivational profile.
This implies that if one can understand that motivational profile of a person, one should be able to understand what to do to motivate them…right?
That is the implication…however I believe reality is a little different.
Salespeople who are engaged in their roles, who are motivated to succeed, and who’s goals are aligned with the organizational goals have been shown to have a significant impact on helping an organization succeed (Badovick, Hadaway, & Kaminski, 1992). Successful organizations understand this and try to keep their sales employees motivated and engaged through a variety of motivational methods – mostly involving extrinsic rewards.
While much has been much written about how extrinsic rewards may have a detrimental effect of on a sales person’s intrinsic motivation (Deci & Ryan, Kohn, or Pink – note: there is also a lot of research on how this extrinsic/intrinsic effect can be mitigated) there is little disagreement on the short-term impact that extrinsic rewards can have on a company’s performance . The short-term benefit of extrinsic rewards assures us that these rewards will be used in businesses no matter what Dan Pink has to say on the topic. However, this does not mean that these types of programs can’t be improved.
Successful organizations and leaders of the future not only need to focus on the optimization of extrinsic reward programs but also on moving other levers within the organization that can drive sales motivation. Using the Four-Drive Model of Employee Motivation (Lawrence and Nohria, 2002) provides a clear framework for how to do this.
This was our most viewed slideshare presentation with over 14,000 views – I’ve now turned it into a 4-minute youtube video….with music and everything. Hope you enjoy and please forward on to anyone you think would benefit from watching.
A few weeks ago Susan and I spent the day interviewing 11 employees at Oak Ridge Hotel & Conference Center in Chaska, MN (see Oak Ridge Part 1 here). We had observed that Oak Ridge had “gotten the formula right on employee motivation” and wanted to probe more to find out how. From our original findings, we highlighted five things that stood out: 1) leadership counts, 2) It is not about the money, 3) It is about the team, 4) Genuine recognition rejuvenates and 5) It is all about appreciating people. I’m taking a different approach this time, looking at it from the 4-Drive Model and seeing how each of the drives showed up in the 11 interviews.
The Lantern Group is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.