When and Why Financial Incentives Don’t Work

A Short History of Human Motivation

In the beginning, behavior was driven by the physiological drive for food, water and sex 3

4 As humans evolved into farmers, the need for coordination increased

Extrinsic motivators quickly became the standard Extrinsic motivators assume that people are driven to maximize rewards and minimize punishment 5 Manufacturing quotas Sales targets Behavioral ultimatums

6 Extrinsic motivators are very effective at aligning effort behind routine tasks

Ford announced that he would voluntarily double the average daily wage while reducing the workday 7 +19% +114%

Extrinsic motivators are far less effective with non-routine tasks

And the reasons are numerous.. Diminish problem solving ability Foster short term thinking Encourage cheating Discourage charitable behavior Create dependence 9 Drive: The Surprising Truth About What Motivates Us, by Daniel Pink, April 2011

So what’s the best way to motivate people to perform non-routine tasks?

That’s precisely the question that Harry Harlow set out to answer Professor of primate research at University of Wisconsin Harlow conducted a series of experiments in 1949 that forever changed our understanding of motivation 11 Professor Harry Harlow Drive: The Surprising Truth About What Motivates Us, by Daniel Pink, April 2011

Harlow devised a simple mechanical puzzle for the rhesus monkeys he was studying 12 Starting positionSolved

So Harlow concluded that.. The performance of this task provided intrinsic reward The monkeys solved the puzzles simply because they found it gratifying to solve puzzles The joy of the task was its own reward Drive: The Surprising Truth About What Motivates Us, by Daniel Pink, April 2011

Harlow gave some of the monkeys rewards for solving the puzzles Reward But if intrinsic motivation was good, could the addition of rewards make it even better? No Reward

This led Harlow to refine his conclusions about motivation There’s a 3 rd drive known as intrinsic motivation that may be as basic and strong as the other two drives There is reason to believe that the 3 rd drive may be even more relevant than the other drives in facilitating the kind of learning based tasks that knowledge workers perform Drive: The Surprising Truth About What Motivates Us, by Daniel Pink, April 2011

Subsequent research led to a more complete understanding of intrinsic motivation Components of intrinsic motivation 1.Desire for autonomy 2.Desire to master skills 3.Desire to belong to a something 4.Desire for sense of purpose 16 Components of intrinsic motivation 1.Desire for autonomy 2.Desire to master skills 3.Desire to belong to a something 4.Desire for sense of purpose

1. Desire for autonomy Known as NUMMI the joint venture began in 1984 GM’s goal was to introduce a compact car into the US market using Japan’s latest manufacturing techniques Toyota’s goal was to learn how to build cars in the US market The plant was notorious for being one of the most unmanageable plants in the entire GM system 17

1. Desire for autonomy, ctd. Toyota was responsible for leading operations but GM insisted that all employees had to come from previous Fremont talent pool Toyota’s operating philosophy emphasized human development, empowerment, continuous improvement and mutual trust If problems emerged on the floor, Toyota expected workers to act like owners and stop the line to fix the problem 18

And the NUMMI results speak for themselves Only 3 months after the first cars rolled out of NUMMI, they were already receiving 140 point ratings – meaning virtually no defects More than one year after production began, GM surveys ranked the Chevy Nova among the company’s top 3 models in initial quality Compared with NUMMI, the old plant would have required 50% more workers to assemble the same car 19

2. Desire to master new skills Pursuits like Karate are an excellent example 20

3. Desire to belong to something 21

4. Desire for sense of purpose 22

Summary 23 There are three different drivers of human motivation: –The physiological drive for food, water and sex –The extrinsic drive to maximize rewards and minimize punishment –The intrinsic drive for self actualization While extrinsic motivation can be effective in aligning effort behind routine tasks it’s less relevant to the kinds of learning based tasks that knowledge workers perform To motivate and inspire today, managers must grant autonomy, promote mastery, create a sense of belonging and inspire a feeling of purpose