A Case for Rethinking Business Motivation

Introduction

• Confession:
  • Lecturer attended law school in the late 1980s, didn't perform well.
  • Graduated near the bottom of the class.
  • Never practiced law.
  • Aims to use legal skills to make a case rather than tell a story.
  • The focus of the case: Rethinking business operations.

The Candle Problem

• Experiment by Karl Duncker (1945):
  • Participants given a candle, thumbtacks, and matches.
  • Task: Attach the candle to the wall without dripping wax on the table.
  • Common but failed solutions: Thumbtacking the candle, melting the candle to stick.
  • Solution: Use the thumbtack box as a platform for the candle (overcoming functional fixedness).

The Power of Incentives

• Experiment by Sam Glucksberg:
  • Two groups: One timed for norms, one incentivized with monetary rewards.
  • Result: Incentivized group took 3.5 minutes longer on average.

Interpretation

• Incentives intended to sharpen thinking and accelerate creativity can sometimes dull thinking and block creativity.
• Robust Scientific Finding:
  • Contingent motivators (if-then rewards) sometimes don’t work or do harm for complex tasks.

Mismatch Between Science and Business

• Dynamics of Motivation: Extrinsic vs Intrinsic:
  • Extrinsic motivators: Carrots and sticks.
  • Intrinsic motivators: Doing things because they matter, are interesting, or are part of something important.
  • Science shows a mismatch between what is known and common business practices.

Glucksberg's Second Experiment

• Variation with tacks outside the box.
• Incentivized group performed better (simple task with clear rules).
• Rewards narrow focus, which can be beneficial for simple tasks but harmful for complex ones.

Changes in Work Environment

• 21st Century Work:
  • Shift from routine, rule-based tasks to creative, conceptual tasks.
  • Routine tasks can be automated or outsourced.
  • Creative tasks require different motivation.

Evidence from Economics

• Dan Ariely Study:

  • Three rewards levels for MIT students' performance on various tasks.
  • Mechanical skills: Higher rewards led to better performance.
  • Cognitive skills: Higher rewards led to poorer performance.
  • Replicated in Madurai, India: Same results.

• London School of Economics Study:

  • Reviewed 51 studies on pay-for-performance plans.
  • Findings: Financial incentives can negatively impact overall performance.

A New Approach: Autonomy, Mastery, and Purpose

• Intrinsic Motivation:
  • Autonomy: Self-direction in work lives.
  • Mastery: Improving in matters we care about.
  • Purpose: Serving something larger than ourselves.

Examples of Autonomy in Action

• Atlassian's FedEx Days:

  • Engineers work on any project for 24 hours.
  • Meeting to present projects, leading to significant software innovations.

• Google's 20% Time:

  • Engineers spend 20% of their time on any project they want.
  • Led to products like Gmail, Orkut, Google News.

• Results-Only Work Environment (ROWE):

  • Employees have no fixed schedule; judged on output.
  • Results: Increased productivity, engagement, satisfaction, and reduced turnover.

Paradigm Shift in Motivation

• Contrast with Encarta vs. Wikipedia:
  • Encarta: Professional, paid model.
  • Wikipedia: Volunteer, intrinsic motivation model.
  • Outcome: Wikipedia became more successful.

Conclusion

• Science vs. Business:
  • 20th Century rewards only work in specific cases.
  • If-then rewards can hinder creativity.
  • High performance driven by intrinsic motivations.
• Call to Action:
  • Align business practices with scientific findings on motivation.
  • Move beyond carrots and sticks.
  • Strengthen businesses and solve complex problems through autonomy, mastery, and purpose.