If a worker’s salary is fair and adequate, more money doesn’t always drive better performance, according to organizational consultant Hal Resnick.
He advises employers to determine what does.
Resnick writes in his latest newsletter that compensation, incentives and pay-for-performance systems are taken for granted as tools for influencing employee motivation and behavior.
Resnick, based in Ponte Vedra Beach, is president of Work Systems Associates Inc. His 30 years in organizational development and training include work with EverBank, The Haskell Co., Lockheed Martin, Shell Oil and others. His newsletters are posted at his www.worksystems.com website.
In his recent newsletter, he wrote that the assumptions about human motivation and human behavior that drive the incentive-based models come from the earliest days of the industrial revolution. “And for many years they accomplished their goals,” he said.
“However, there is substantial research evidence that in today’s complex work environment, these assumptions may not only fail to drive desired behavior, they may actually cause serious harm,” he said.
Resnick said many of the concepts he addresses are based on a 2009 book by Daniel Pink, “Drive, The Surprising Truth About What Motivates Us.”
Why do we behave as we do?
Resnick used an example of a neighborhood tennis club composed of teams with A, B and C players. The players are all amateurs, but some of them take their tennis very seriously.
He wrote that they play competitively among themselves and against other clubs. At the end of each season the players, teams and clubs are rated and trophies are awarded to winning players and teams. The prize is improved personal performance, recognition and the trophy at the end of the season.
“But what happens when the rules are changed so that every game is a contest in which the winning team receives $100?” he asked.
Based on the traditional understanding of the relationship between motivation and compensation, the $100 per game would be expected to boost performance, he said.
“But the reverse happens,” Resnick wrote. “Performance goes down, attendance goes down, players drop out, and the team spirit is destroyed. Why? What’s going on?”
People don’t generally play tennis for the money, he said. They play tennis because they enjoy it, they want to belong to a group, they like the exercise, they receive recognition and they like improving their skills.
“But why should performance go down if people are paid when they win? Very simply, the compensation changes the game from fun to work,” Resnick wrote.
“Now winning is about the money — not about the game, the relationships, or personal mastery. And people behave very differently when it’s just about the money — they become more focused on the short-term goal, less relaxed, less creative, less participatory, less team-oriented,” he wrote.
The lesson can be transferred to the work environment.
“The same concepts apply,” Resnick said.
“When specific short-term incentives are used to drive behavior, the result may be the desired behavior in the short-term – but at a very significant price,” he said.
The three levels of motivation
Resnick wrote that motivation can be classified into three levels, and he cites Pink’s classification of them as 1.0, 2.0 and 3.0.
Resnick calls them “DNA, external drives and internal drives.”
DNA motivation is hardwired in the species, he said.
“We are all driven to survive, to feel safe, to satisfy needs for hunger and thirst, and to reproduce our species. It’s part of our universal biological programming,” he said.
“External drives” represent the model of motivation in use since the beginning of the industrial revolution.
“It is the carrot-and-stick principle, based on the belief that if we reward certain types of behavior we will get more of them. If we punish certain types of behavior we will get less of them,” he wrote.
“This is the basis for incentive programs, goal-setting models and disciplinary action. It is based on the principle of ‘if-then.’ If you do the following, then this will be the outcome,” he said.
That system can work well as long as the task is relatively simple and straightforward, does not require creative or conceptual thinking and is routine, he said.
Resnick said the model works perfectly for routine piecework production in a manufacturing facility.
“The dilemma is that applying this model for all activities will drive short-term focused behavior, but often at the expense of longer-term goals,” Resnick wrote.
“This model created Enron, Lehman Brothers, and hedge fund managers. It is the model that causes many CEOs to drive short-term quarterly profits often at the expense of longer-term investments and customer satisfaction,” he said.
However, Resnick’s third motivation driver consists of “our internal drives.”
“We all share three core internal drives: the desire for purpose, or meaningfulness; the desire for mastery; and the desire for autonomy,” he wrote.
“That is why human beings volunteer, learn to play the guitar, contribute to Wikipedia without pay, and engage in thousands of other activities for which they are neither compensated nor driven by external forces,” he said.
The activities seem more like play than work.
“When people spend their weekend building a HabiJax house they work very hard — but it’s fun,” he said.
When a complex work environment requires conceptual thinking and working together, the addition of incentives has a negative effect, he said.
“Creativity, quality, timeliness and output are all negatively impacted when tangible incentives are added to a complex task using an incentive-based ‘if-then’ model,” he said.
What to do?
How should compensation systems be designed for conceptual work that requires creative thinking and teamwork, such as writing software, analyzing customer information and developing business plans?
Resnick said that first, “people must be paid adequately so that the fundamental issue of compensation is taken off the table. People must believe that they are being paid appropriately for their value and equitably compared to their peers.
“If either of these conditions is not met, then compensation will be a major issue,” he said.
Once employees are comfortable that they are paid fairly, the environment then should be created to focus on purpose, mastery and autonomy, he said.
“Everyone must understand why the work is important, have the opportunity to develop their skills and be given the autonomy to work using their own approach,” Resnick wrote.
He said when work is accomplished, both rewards and recognition can be offered using what he called a “now that” model.
“Now that we have achieved our goals, we can fund our profit-sharing program, or celebrate with a big dinner together, or have an outing, or invest in the new equipment everyone wants,” he said.
“Specific recognition is often just as powerful as a tangible reward. The reward is not contractual. It is not pre-announced. It is not guaranteed and it comes after the fact,” he said.
Resnick suggested that employers set up an experimental group for a specific project to try out the model.
“You may be pleasantly surprised,” he said.
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