Everything you know about motivation is wrong

Employees are motivated by money--the more money, the more they're motivated. Bonuses are a great way to get employees to work harder and do a better job. If you can't motivate people with carrots (money), you've got to do it with sticks (the threat of dismissal), because they're inherently lazy. Do you believe any of this? All of this? If you do, you're not alone. This is the way that workers in the U.S. have been motivated for more than 100 years. Carrots and sticks. They work when employees are doing low-value, repetitive work. However, if your business requires creative, high-value work, the carrot and stick model not only doesn't work, it's counterproductive.

Three recent books, Dan Ariely's "The Upside of Irrationality," Daniel K. Pink's "Drive", and Clay Shirky's "Cognitive Surplus", cover some of the most recent research in behavioral economics. In particular, Ariely and his associates have done a lot of research, verified independently, that turns much of what we thought we knew about motivation on its head.

Consider the relationship between money and performance. Paying someone more will result in better performance, right? Ariely and his associates conducted studies in multiple countries where they asked volunteers to complete a series of tasks, ranging from very simple to very complex. Participants were ramdomly assigned to one of three groups. The first group was offered a nominal payment--perhaps the equivalent of a day's pay--for fully completing all the tasks. The second group was offered the equivalent of a week's pay, and the third group was offered the equivalent of a month's pay. For each task, the volunteer had to successfully complete a series of tests or actions. If they completed a at least a minimum number, they would receive 50% of the money for that task. If they completed a higher number, they would receive 100% of the money for that task. If they didn't complete the minimum number, they would receive nothing for that task.

The first two groups--the day's pay and week's pay groups--had almost exactly the same performance. However, the month's pay group was so fixated on the money that it did far worse than the other two groups. The pressure to perform interfered with the month's pay group's ability to concentrate on the tasks. The bottom line is that putting more money at stake can actually decrease, rather than increase, performance.

Next, let's look at the value of money vs. personal accomplishment. In one study, the researchers asked participants to assemble Lego Bionicle toys. For each toy built, each participant would be paid on a sliding scale: $2.00 for the first one, $1.89 for the second one, and $0.11 less for each following completed toy. They could build as many toys as they wanted, and stop whenever they wanted to. Participants were randomly assigned to two groups: Those in the first group were told that at the end of the experiment, their toys would be disassembled so that they could be used by another participant. In the second group, after the participant completed building the first toy and started building the second, the experiment's supervisor disassembled the first one in front of the participant, telling the participant that they were doing it in for them to have another toy to assemble.

If money was the motivating factor, it shouldn't have mattered whether or not the toys were disassembled by the supervisor, but those in the first group that didn't see the toys disassembled before their eyes built substantially more toys and made substantially more money than those in the second group. The participants in the first group also enjoyed the project much more and were more satisfied by their work. 

How about bonuses? Aren't they a great way to motivate employees to work harder? Experiments show that the first time a bonus is offered, it does have some benefit, subject to the situation discussed above--if the bonus is too big, employees fixate on the money and can't concentrate on the work. However, workers subsequently associate the bonus with the effort and expect to get it again. If they don't get it, they're demotivated and their work suffers. This is why companies find themselves locked into offering bigger and bigger bonuses in order to get the same amount of performance improvement.

Multiple studies have shown that money is a strong motivator when people are struggling to make ends meet--when they're at the lower rungs of Maslow's Hierarchy of Needs. However, in the U.S., once a person's annual income passes $60,000 (on average), the motivating power of money diminishes rapidly. It's at this point that, in Daniel Pink's terms, primary motivation shifts from extrinsic (carrots and sticks) to intrinsic (finding challenges, satisfaction and worth.)

Pink defines intrinsic motivation as having three components:

• Mastery: Performing your task well and being challenged by it. Both Pink and Ariely refer to the groundbreaking work of Mihaly Csikszentmilalyi, who identified "Flow", a state of intense concentration where the participant loses track of time. Flow is a state of optimal performance, and it occurs when you're working on a challenge that's difficult enough to tax you but not so difficult that it's impossible to do. If a task is too simple, it leads to dissatisfaction through boredom; if it's too difficult, frustration leads to dissatisfaction and disengagement.
  
  This is a reason why athletes are kept relatively closely grouped by skill level while they're learning a sport. If an athlete's skills are too advanced for his or her group and they don't get a chance to play with more advanced players, they get bored and lose motivation. On the other hand, if an athlete is grouped together with others who are much better skilled, he or she may get frustrated, lose motivation and quit.
  
  You don't have to be an expert at a subject in order to experience mastery, but you have to be good enough at it to accomplish key tasks, yet still find challenges that push you to become better.
  
• Autonomy: Autonomy is the amount of control that you have over how you do your job. Specifically:
  
• Where you do it: Are you required to do your job in an office or factory, or can you work from home or another location of your choosing?
  
• When you do it: Can you set the hours that you work, or are you required to begin and end your workday at specified times? Can you eat when you want and take time to handle personal matters, or do you have to clock in and out at specific times and get permission from your manager for any personal time?
  
• Who you do it with: Do you have control over who you work with, or are you assigned to work with individuals and teams and have no say in the matter?
  
• What process you use to do it: Do you have a lot of latitude in deciding how to achieve your objectives, or are you required to follow a set of tightly-defined procedures and use a specified set of tools?
  
• Purpose: Can you find a purpose for your work (other than earning a paycheck, of course)? Is your work meaningful to you, or is the reason you're doing it because you were told to do it by your supervisor? Do you believe that you're adding value or doing "make work"? Satisfaction and motivation are strongly driven by a sense of purpose. Workers who find an intrinsic purpose to their efforts have been shown to be more motivated and more efficient. On the other hand, people for whom a paycheck is their only purpose have been shown to have much lower job satisfaction, are more likely to change jobs and typically require more money over time in order to maintain the same level of performance.
  
  In fact, one could argue that the entire system of promotions, pay increases and bonuses that has evolved since the late 19th Century is based on a lack on intrinsic purpose. When pay becomes the purpose, it's inherently demotivating over time, so more pay is needed to "increase" motivation, which in turn creates a dependency on future pay increases.

With all this as background, what are a few of the things that progressive employers can do to improve motivation and job satisfaction?

• Pay above-average salaries at the start in order to attract better employees, instead of relying on bonuses to motivate better performance.
• Keep employees challenged with new projects that help them hone their skills. Projects that are too simple lead to boredom, and those that are too difficult lead to frustration.
• Give employees as much autonomy as possible. Things like flextime and personal days only give the appearance of autonomy. Employees need to have control over how, when, where and with whom they do their jobs.
• Enable employees to find an intrinsic purpose for what they do. If they don't understand why they've been asked to do something, or they know that what they've been asked to do won't make a meaningful contribution to the company's success, their sole motivation will become money, and money loses its effectiveness over time.

Moving from extrinsic to intrinsic motivation goes against most of the management practice and economic theory of the last century or more, as well as against the culture of most companies. It may well be impossible for most existing organizations to make the change. If that's the case, it's up to new, agile organizations to adopt the lessons of behavioral economics for better productivity, greater employee satisfaction and lower costs.