1. Does Compensation Motivate Workers?…Or not! Michael Strand, SPHR October 15, 2013 HRA-NCA Compensation & Benefits Summit

2. What Is Motivation? A driving force. Causes workers to complete a task. A psychological feature that arouses an organism to act towards a desired goal and elicits, controls, and sustains certain goal directed behaviors. 2

3. Two Books Drive by Daniel H. PinkPunished by Rewards by Alfie Kohn 3 X

4. 44 Two Approaches to Motivation Frederick Taylor (1890-1911) – Scientific Management – Time & Motion Studies – Stop Watches Henry Fayol (1916) – Principles of Management B.F. Skinner (1948+) – Behavioral Management – Actions Controlled by Punishment & Reward

5. According to Taylor: “Work consists mainly of simple, not particularly interesting, tasks. The only way to get people to do the tasks is to incentivize them properly and monitor them carefully.” In the early 1900s, Taylor had a point. Today, in much of the world, it is less true. For some people work remains routine, unchallenging, and directed by others. But for a large number of people, jobs have become more complex, more interesting, and more self-directed. 5

6. Two Different Task Categories Algorithmic: You follow a set of established instructions…down a single pathway…to one conclusion. (There is an algorithm for solving it.) Heuristic: No algorithm exists for the task. You have to experiment with possibilities and devise a novel solution. 6

7. In the twentieth century, most work was algorithmic. Blue collar jobs shifted to white collar jobs. Unions, to survive, shifted their organizing activities to white collar jobs: teachers and government workers. Routine white collar work is disappearing. Jobs are going offshore: to India, China, the Philippines. Lower-paid workers in these offshore locations essentially run the algorithm. They figure out the correct answer and deliver it instantaneously from their computer to someone thousands of miles away. 7

8. External rewards and punishments (carrots & sticks) --- can work nicely for algorithmic tasks…but they can be devastating for heuristic ones. 8

9. Trends in the Workforce Telecommuting: less direct supervision…more worker autonomy…more worker control over how he/she completes the tasks. Organizations Flatten…become leaner and develop less of a hierarchy. To reduce costs, they trim managerial layers. – Result: managers supervise more workers and therefore scrutinize each one less closely. They rely more on the workers to do their tasks on their own. As organizations flatten, companies need people who are self-motivated. 9

10. Routine, not-so-interesting jobs require direction. Non-routine, more interesting work depends on self-direction. A Manager: “It is not my job to motivate my workers. I expect them to motivate themselves.” A Job Interviewer: “If you need me to motivate you, I probably don’t want to hire you.” 10

11. When Any Type of Motivation May Not Work Some “carrots” are necessary: – People have to earn a living. – Baseline Rewards: salary & some benefits are necessary. If a worker’s baseline rewards aren’t adequate or equitable, their focus will be on the unfairness of the situation and the anxiety of his/her circumstance. – Result: you get very little motivation at all. 11

12. 12 TWO PATHS MOTIVATION ExternalInternal

13. 13 TWO PATHS MOTIVATION ExternalInternal Extrinsic

14. 14 TWO PATHS MOTIVATION ExternalInternal ExtrinsicIntrinsic

15. 15 Two Approaches Frederick Taylor (1890-1911) – Scientific Management – Time & Motion Studies – Stop Watches Henry Fayol (1916) – Principles of Management B.F. Skinner (1948+) – Behavioral Management – Stimulus -- Response Abraham Maslow – Hierarchy of Needs (1943) Frederick Herzberg – Motivational Theory (1959) Douglas McGregor – Theory X – Theory Y (1960)

16. 16 Two Approaches Frederick Taylor (1890-1911) Henry Fayol (1916) B.F. Skinner (1948+) MOTIVATION Carrot – Stick Extrinsic Abraham Maslow Frederick Herzberg Douglas McGregor MOTIVATION Internal Intrinsic

17. The “Sawyer Effect” From The Adventures of Tom Sawyer Tom Sawyer faces the dreary task of whitewashing Aunt Polly’s fence. When his friend Ben comes along and mocks Tom for his mundane chore, Tom acts confused... “Ben, this is great fun!” So Ben asks to try a few brushstrokes. Tom refuses, initially. Then Tom relents when Ben gives up his apple…and Tom lets Ben paint. Twain: “Work consists of whatever a body is OBLIGED to do, and that Play consists of whatever a body is NOT obliged to do.” 17

18. Sawyer Effect Conclusion Rewards can transform an interesting task into a drudge. They can turn play into work. When Tom pretended that the whitewashing task was fun, Ben joined the task…thinking it was fun. 18

19. 1978 Study of Preschoolers Three researchers (Lepper, Greene & Nisbett) did a study after observing that many preschoolers in a classroom spent their “free play” time drawing. So the researchers divided the children into 3 groups: Group A. Asked these children if they wanted to draw in order to receive the reward: A “good player” certificate. Group B. Asked these children if they wanted to draw. If they decided to, when the session ended each child was given one of the “Good Player” certificates. Group C. Asked these children if they wanted to draw, but did not promise them a certificate at the beginning nor gave them one at the end. 19

20. Group A: The “expected-award” Group. – The “Good Player” Certificate Group B: The “unexpected-award” Group. – At Session End: The “Good Player” Certificate Group C: The “no-award” Group. – No promise…no certificate Two weeks later, back in the classroom, teachers set out paper and markers during the preschool’s free- play period. 20

21. Group A: The “expected-award” Group. Group B: The “unexpected-award” Group. Group C: The “no-award” Group. Children drew just as much as before the experiment. 21

22. Group A: The “expected-award” Group. Group B: The “unexpected-award” Group. Children drew just as much as before the experiment. Group C: The “no-award” Group. Children drew just as much as before the experiment. 22

23. Group A: The “expected-award” Group. Children showed much less interest and spent much less time drawing. Group B: The “unexpected-award” Group. Children drew just as much as before the experiment. Group C: The “no-award” Group. Children drew just as much as before the experiment. 23

24. Conclusion It wasn’t the reward itself that dampened the children’s interest. When children didn’t expect a reward, receiving one had little impact in their intrinsic motivation. Only contingent rewards (“if you do this, then you’ll get that”) had a negative effect. By providing a pre-activity reward, the children’s motivation was changed from intrinsic to extrinsic. 24

25. Lepper and Greene replicated these results in several subsequent experiments with children. Other researchers found similar results with adults. Over and over again, they discovered that extrinsic rewards (contingent, expected, “if- then” rewards) undermined intrinsic motivation. 25

26. Blood Donors Is paying folks to donate blood immoral or moral? Does paying for blood motivate folks to donate more blood…or less? 26

27. Blood Donors In the 1990s two Swedish economists did a field experiment. At a regional blood center in Gothenburg they found 153 women who were interested in giving blood. The economists divided the women into 3 groups: Group A. Blood donation was voluntary. No pay. Group B. If they gave blood, they’d each receive 50 kronor (about $7). Group C. If they gave blood, they’d each receive 50 kronor but had an immediate option to donate the amount to a children’s cancer charity. 27

28. Blood Donors Results Group A (Volunteers): Group B (Paid 50 Kronor): Group C (Paid but could donate): 28

29. Blood Donors Results Group A (Volunteers): 52% Donated Group B (Paid 50 Kronor): Group C (Paid but could donate): 29

30. Blood Donors Results Group A (Volunteers): 52% Donated Group B (Paid 50 Kronor): Group C (Paid but could donate): 53% Donated 30

31. Blood Donors Results Group A (Volunteers): 52% Donated Group B (Paid 50 Kronor): 30% Donated Group C (Paid but could donate): 53% Donated 31

32. Conclusion: adding a monetary incentive didn’t lead to more of the desired behavior. It lead to less. Reason: It tainted an altruistic act and “crowded out” the intrinsic desire to do something good. The American Red Cross brochures say: “Doing good is what blood donation is all about.” 32

33. The Neurology of Motivation Left Brain Right Brain 33

34. The Physiology of Motivation Left Brain Pleasure/reward Center Right Brain Altruistic Center 34

35. The Physiology of Motivation Left Brain Pleasure/reward Center Nucleus Accumbens Right Brain Altruistic Center Posterior Superior Temporal Sulcus 35

36. The Physiology of Motivation Left Brain Pleasure/Reward Center Nucleus Accumbens Right Brain Altruistic Center Posterior Superior Temporal Sulcus 36

37. Stimulus Pleasure Center Dopamine – Pending hot date – Last-minute victory – Excitement of Las Vegas – Cocaine, methamphetamine Altruistic Center 37

38. Stimulus Pleasure Center Dopamine (Drugs, Sex & Gambling) Altruistic Center Helping Someone Making a Positive Impact Doing Good for Society 38 WALL From: SWAY—The Irresistible Pull of Irrational Behavior by Ori and Rom Brafman; CH 7 “Compensation and Cocaine”

39. When Carrots and Sticks Might Work Your Checklist – Assure your baseline rewards (wages, salaries & benefits) are adequate and fair. – Understand that the prospect of a reward will narrow the worker’s focus and limit their ability to see an inventive, non-obvious solution. Is the task at hand routine? Not very interesting? Does not demand much creative thinking? Then rewards can provide a motivational booster. 39

40. When Carrots and Sticks Work For some workers, much of what they do ALL DAY consists of these routine, not terribly captivating, tasks. Then… – The best you can do is re-direct to the positive side of the Sawyer Effect…attempt to turn work into play. Or… – Use the task to help the worker master other skills. – If that is not always possible...sometimes “if- then” rewards are an option. 40

41. Mitigate the Circumstances Offer a rational for why the task is necessary. – A job that’s not inherently interesting can become more meaningful if it is part of a larger purpose. Acknowledge that the task is boring. – Act of empathy. Acknowledgment that “if-then” rewards have to happen. Allow people to complete the task their own way. – Think autonomy…not control. State the outcome you need. Give them the freedom over how to do the job. 41

42. Mitigate the Circumstances Any extrinsic reward should be unexpected and offered after the task is complete. Alternatives: – Consider nontangible rewards: praise and positive feedback. It is much less corrosive than cash. – Provide useful information. People are interested to learn how they’re doing. “I liked how you did “Project X” because.” 42 MAN

43. Self-Determination Theory (SDT) There are three innate psychological needs: autonomy, competence; and relatedness. Human beings have an innate inner drive to be autonomous, self-directed, and connected to one another. STD depends on three nutrients: – Autonomy – Mastery – Purpose 43

44. AUTONOMY Meddius is a company in Charlottesville, VA that creates computer software and hardware to help hospitals integrate their information systems; Meddius has 22 employees. ROWE is the Results-Only Work Environment Meddius has adopted. The first large company to go ROWE, in its corporate office, was Best Buy. 44

45. ROWE’s “Rules” Employees don’t have schedules. They show up when they want. They don’t have to be in the office at a certain time—or any time. They just have to get their work done. How they do it, when they do it, and where they do it is up to them. THIS IS AUTONOMY! 45

46. Changing to the ROWE environment is a challenge. – People didn’t take to it. – A few staffers had come out of controlling environments and weren’t accustomed to this kind of leeway. – But after a few weeks, most people “found their groove.” – Productivity rose. – Stress declined. – Two employees struggled with the freedom and left. 46

47. In the end: – The team was accomplishing more under this new arrangement. – REASON: They were focused on the work itself rather than whether someone would call themselves a slacker for leaving at 3:00 PM to watch a daughter’s soccer game. – Since most of the staff consists of software developers, designers, and others doing high-level creative work, it was essential that they be provided autonomy. – The CEO believes that money is only a “threshold motivator.” Once the company meets this baseline, dollars and cents don’t much affect performance and motivation. 47

48. Autonomy is one of three basic needs… the MOST IMPORTANT! In a Cornell University study of 320 small businesses, half granted workers autonomy, the other half relied on top-down direction. The businesses that offered autonomy grew at four times the rate of the control-oriented firms and had one-third the turnover. Sadly, too many businesses believe in the twentieth-century notions of management that presume that people are pawns rather than players. 48

49. MASTERY The desire to get better and better at something that matters. Only engagement can produce mastery. Mastery moves the worker towards Maslow’s highest level of need: self-actualization. Gallup’s research on engagement in U.S. – Over 50% of employees are not engaged at work – Almost 20% are actively disengaged 49

50. Ericsson (Swedish Telecommunications Co.) Managers configured work assignments so that employees had clear objectives and a way to get quick feedback. Instead of meeting with their direct reports for once-a-year performance reviews, managers sat down with employees one-on- one six times a year, often for as long as ninety minutes, to discuss their level of engagement and path toward mastery. 50

51. Study of 11,000 industrial scientists and engineers working at companies in the U.S. – Found: the desire for intellectual challenge—the urge to master something new and engaging— was the best predictor of productivity. Scientists motivated by this intrinsic desire filed significantly more patents than those whose main motivation was money. 51

52. PURPOSE Autonomous people working toward mastery perform at very high levels. But those who do so in the service of some greater objective can achieve even more. 52

53. TOMS Shoes Offer canvas, flat-soled shoes. Every time TOMS sell a pair of new shoes, it gives away another pair of new shoes to a child in a developing country. Says TOMS: “The company’s business model transforms our customers into benefactors.” 53

54. Mayo Clinic Physicians in high-profile settings like the Mayo Clinic face pressures and demands that can often lead to burnout. Field research at the Mayo Clinic found that letting doctors spend one day a week on the aspect of their job that was most meaningful to them (patient care, research, or community service) could reduce the physical and emotional exhaustion that accompanies their work. Doctors who participated in this trial policy had half the burnout rate of those who did not. 54

55. Summary On behalf of Alfie Kohn and Daniel Pink: – We reviewed and compared management theory – Shown how rewards can affect motivation – The brain’s two centers affecting motivation Pleasure/Reward Center Altruistic Center – When/how carrots & sticks can work – Self-Determination Theory (SDT) Autonomy Mastery Purpose 55

56. Final Note Watch for intrinsic motivation When intrinsic motivation happens, don’t destroy it with rewards (carrots) or criticism (sticks) 56

57. Final Note Watch for intrinsic motivation When intrinsic motivation happens, don’t destroy it with rewards (carrots) or criticism (sticks) 57

58. 58 Questions Mike Strand hrdyna@aol.com 240/800-4364