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When Incentives Harm Performance: What Scientists Know That Managers Don’t

The way most managers reward employees is all wrong and harming their organizations, says Dan Pink, author and behavioral expert, during a TED talk on the puzzle of motivation. And he has a slew of social science experiments to back up his claims.

Traditionally, businesses have sought to reward employees through extrinsic motivators: money, vacation time, branded gifts, perhaps an afternoon playing basketball or a swanky holiday party.

And yet, studies replicated around the world for more than 40 years show that contingent motivators (if you do this, you get that) don’t work. Worse yet, they often damage performance.

“This is not a feeling. This is not a philosophy. This is a fact,” says Pink, adding that “this is one of the most robust findings in social science, and also one of the most ignored.”

Let’s back up a moment: The carrot-and-stick model does work in some cases ¾ 20th century tasks, to be specific, when there’s a simple set of rules and a clear destination. In those scenarios, extrinsic rewards work by narrowing our focus and restricting our possibilities.

The problem is that routine, rule-based, left-brain work is fairly easy to outsource or automate these days. “Software can do it faster and low-cost providers around the world can do it cheaper,” says Pink.

By contrast, what really matters for businesses today are the right-brain, creative, conceptual kinds of abilities. “Think about your own work,” Pink argues: “Do the problems you face have a clear set of rules and a single solution? No! The rules are mystifying, and the solution, if it exists at all, is surprising and not obvious.”

For those problems, the if-then reward system doesn’t work because it dulls thinking and blocks creativity. In fact, studies directed by leading economists show that once a task calls for “even rudimentary cognitive skills,” higher incentives have a negative impact in overall performance.

It’s a huge mismatch between what science knows and what business does.

The solution, says Pink, is to stop doing the wrong things. Stop acting based on folklore and start acting on science.

So what does work to motivate employees? Intrinsic drivers: the desire to do things because they matter, because we like them, because they’re interesting and part of something bigger, says Pink.

This new operating system revolves around three elements:

  • Autonomy: the urge to direct our own lives
  • Mastery: the desire to get better at something that matters
  • Purpose: the yearning to do what we do in service of something larger than ourselves

What does this look like in the real world?

Watch Pink present his case and practical applications in the full, 18-minute presentation here: