Why organizations need to rethink their carrot and stick approach if they want to motivate employees to deliver higher performance.
The “carrot and stick” approach is a tried and trusted classical way of rewarding performance in business organizations. Paying someone more for reaching specific objectives is generally considered as a simple way of driving the behaviors an organization needs to get the results it requires to satisfy customers and share holders. Money is considered to be the key driver of employee motivation and most organizations have some form of “carrot and stick” policy whereby they reward good performers with bonues and ignore poor performers (or worse). This “carrot and stick” approach is indeed so classical that most organizations take it as self-evident and as “the only way” to recognize performance and motivate employees.
But what if this very simple and fairly universal way of driving performance is not as effective as it is generally thought to be? Not only that, what if the good old “carrot and stick” approach not only doesn’t deliver the good performance it is supposed to but in fact even drives poor performance, the very opposite of its intended purpose?
This is what Dan Pink asserts in a very thought-provoking presentation on the subject of Employee motivation and the factors that drive higher performance.
For Dan Pink, the basic and supposedly “self-evident” notion that you inevitably get the “behaviors you reward” needs to be challenged. He draws upon different studies made by experts at MIT on the link between monetary reward and increased performance which seem to demonstrate that increased monetary reward, rather than driving higher performance, produces in fact poorer performance. Briefly stated, MIT performed a series of tests with students where they rewarded the participants according to their performance in a series of academic and cognitive tests. The best performers would receive most financial reward, the worst performers would receive nothing.
Surprisingly, these tests reveal two startling results:
- As long as the test involves purely mechanical skills, the higher the reward, the better the performance. In other words, the “carrot and stick” approach seems to work perfectly for mechanical, unimaginative tasks.
- However, once the task calls for more than rudimentary cognitive skills, surprisingly, a larger financial reward led to poorer performance. The more the task requires conceptual and creative thinking, the less financial reward seems to drive performance.
This does not mean to say that money is not a motivator. However, money, as Maslow and Hertzberg amongst many other thinkers on human motivation have pointed out, usually only helps to reduce the impact of “dissatisfaction” rather than increasing causes of satisfaction.
Paying someone more is simply a way of getting money off the table as an issue and removing it as a distraction.
However, paying someone more won’t necessarily get you better performance, particularly when it comes to knowledge workers.
So if money in organizational terms doesn’t make the world go round, what does?
Pink points to 3 key factors leading to better performance:
Back in the 80’s, Peter Drucker already pointed out that you can’t manage people the way they were managed in previous decades. The more educated the worker, the more he/she is driven by a desire to be self-directed. The old “command and control” management mindset cannot work with today’s generation of highly educated, technology biased, highly mobile, generation Y workforce. Today’s workforce needs to feel in command of its own destiny and self-direction is key. Command and control is great if you want compliance but not so great if you want engagement and today, all organizations know that it’s no longer enough to enforce compliance to get good performance. Engagement is the key and engagement cannot be commanded. It must be nurtured.
The key to higher performance today is employee engagement. Organizations need employees to engage, go the extra mile and you can’t force employees to engage and give the necessary discretionary effort upon which all success really depends today. The less self-directed an employee is in his job, the less motivated he will be and the size of the carrot won’t change this. So for Dan Pink, the first challenge facing all organizations seeking to drive higher performance is to drive autonomy down into the organizations so that employees can direct their own activity aligned to the organizations goals.
People will no longer accept being told what to do. They can accept being told what goals need to be reached but they won’t accept being told how to achieve those goals. Empowerment is therefore critical to driving higher performance. Give people more autonomy, empower them to act and you increase the chances of ensuring they deliver more.
Pink gives a very concrete example of how a company can seek to empower its workforce to be more productive through greater creativity and innovation. He mentions an Australian software company, Atlassian, which seeks to encourage the creativity and innovation of its employees, not through an “innovation bonus” but by allowing their software engineers once every quarter to work on what they want for a whole day. There is only one precondition: the software engineers then have to produce the results to the company in special workshops. Just one way management can get out of the way (if only for a day) and allow employees the autonomy to do what they want to do aligned to corporate objectives.
A second factor driving performance is mastery. The more we feel we master an area of expertise, the more satisfied we are. This is why people take up different hobbies and try to develop expertise in all sorts of exotic areas. We all like to progress and grow and become better at something. More money won’t give us a feeling of mastery if our role is more restricted, more specialized and if we feel we are not growing as individuals and learning more. So individuals will be motivated by tasks which help them acquire more mastery of their area of expertise and money won’t replace satisfaction felt when one has more mastery of a subject.
Finally, more and more organizations realize that we as individuals are not only “profit maximizers” but “purpose-maximizers“. We all need a purpose greater than ourselves to get us up in the morning and get us to engage fully in any activity. Sportsmen in any arena will give their all for their team and the winners are not always the highest paid. Some people will give up everything to dedicate their lives to helping the poor and the destitute. Why?
Because a fundamental aspect of all human motivation is transcendence and living one’s life dedicated to a purpose greater than oneself. More and more organizations are coming to realize this. This is why so many organizations spend so much time and effort formulating mission statements with elaborate declarations of purpose, in the hope of engaging employees to adhere to a common purpose which transcends the simple pursuit of profit. As Pink points out, more and more organizations realize that if you fail to link your profit motive to a “purpose”, you not only fail to deliver good performance but you drive bad performance and the result is poor products, poor customer service, poor working conditions, higher accident rates, etc. Many examples abound of corporations who have lost the link between their “profit motive” and their “purpose motive” to quite often dramatic effect (Enron, etc.). In Pink’s words, there is a higher risk of poor performance when the “profit motive” becomes “unmoored” to the “purpose motive“.
So money can buy you a lot of things but it can’t always buy you higher performance because to get higher performance, you need to build an organization which gives employees more autonomy, allows them to develop their skills and mastery of their chosen areas of expertise and allows them to feel that their efforts and commitment feeds into a greater purpose beyond the pure pursuit of profit.
So how does your organization seek to empower your employees? How does it seek to develop their mastery of a specific field of expertise? How does it link its financial purpose to a greater, more socially responsible purpose? How is your company moving away from the classical “carrot-and-stick approach” to capture the creativity and conceptual talents of your workforce?
Many thanks for your ideas.