#17: Rethinking Employee Motivation: Beyond Extrinsic Incentives

Employee? motivation is an age-old puzzle that employers have been trying to solve. You know the drill: salary increments, bonuses, fancy titles, and extra days off. It almost feels instinctual: more rewards should equal more work done, right? While there’s some truth to that, over 50 years of research tells us that we’ve been going about it the wrong way.?

In a study titled “Do Intrinsic and Extrinsic Motivation Relate Differently to Employee Outcomes?” by Bard Kuvaas, Robert Buch, Antoinette Weibel, Anders Dysvik, and Christina G.L. Nerstad, the researchers uncovered a key insight. They found that ‘extrinsic’ motivation or rewards work well when applied to tasks that are simple, standardized, and perhaps less inherently engaging. Tasks that are repetitive or straightforward, for example tree planting, exhibit improved productivity when linked to extrinsic incentives. However, they also found that extrinsic motivation led to poorer states of well-being and “has negative associations with life satisfaction and life happiness”, including “more conflict between work and family lives, and a higher likelihood that people will leave their jobs”.?

Following are a few more studies (from countless others) conducted by researchers to understand the impact of extrinsic motivation on problem solving and performance:

The Candle Problem ??

The famous “Candle Problem” experiment devised by Karl Duncker in 1945 evaluated creative problem-solving abilities. Participants were challenged to affix a lit candle to a wall without dripping wax onto a table below, demonstrating a phenomenon called “Functional Fixedness”. Functional Fixedness is a cognitive bias that limits one’s perception of an object’s utility beyond its traditional purpose.?

Sam Glucksberg later conducted a variation of this test to investigate the impact of incentives using two test groups. Group A was asked to solve the problem without incentives, while Group B was offered monetary rewards for faster solutions. Surprisingly, the introduction of external incentives hindered Group B’s ability to overcome cognitive bias, rendering them less effective at solving the problem.

The Overjustification Effect ??

The “Overjustification Effect” delves deeper into the complexities of extrinsic motivation. A study conducted by researchers Mark Lepper, David Greene and Richard Nisbett revealed a counterintuitive outcome. The researchers ran an experiment in which they encouraged two groups of children to draw with felt tip pens, lavishly rewarding one group for their efforts and not the other. The children rewarded for drawing showed decreased interest in the task when rewards were removed, compared to those who weren’t initially rewarded. This phenomenon suggests that excessive external rewards can undermine intrinsic motivation, diminishing the genuine enthusiasm individuals have for a task.

Raising the Stakes ?

A compelling experiment conducted by Dan Ariely, Uri Gneezy, George Loewenstein and Nina Mazar at MIT in 2002 demonstrated the varying impacts of rewards on different types of tasks. Performance on effort-based tasks increased in relation to the reward size, while cognitive-based tasks exhibited a decline in performance. Additionally, a similar study carried out in a rural town in India revealed that offering higher rewards led to worse performance. These findings suggest that the relationship between external incentives and performance is not as straightforward as it seems.

A Paradigm Shift ??

Recognizing the discrepancy between scientific insights and business practices, motivation theory trailblazer Daniel Pink highlights the need for a paradigm shift. In his influential 2009 TED Talk, “The Puzzle of Motivation”, Pink stresses that many organizations base talent decisions on outdated assumptions rather than scientific evidence. While extrinsic motivation does have its merits, it’s crucial to consider its limitations and explore alternative approaches.

In conclusion, the intricate interplay between extrinsic and intrinsic motivation is reshaping our understanding of what drives employee performance. Employers are challenged to strike a balance between external rewards and fostering intrinsic motivation to harness the full potential of their employees. As the workplace evolves, so must our strategies for motivating and inspiring employees, ensuring that they remain not only engaged but also fulfilled in their roles.?

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?? What we’re reading/listening to this week:

Stumbling on Happiness by Daniel Gilbert

In “Stumbling on Happiness”, Daniel Gilbert challenges common beliefs about what makes us happy and highlights the discrepancies between what we think will bring us joy and what actually does. Gilbert’s blend of humor, relatable examples, and scientific research offers readers a fresh perspective on how our minds work. The book encourages us to question our assumptions about happiness, consider the impact of our choices on our well-being, and appreciate the present moment.?

About Attuned

Attuned is a psychology-backed, AI-driven platform that shows companies what really matters to their employees by measuring and visualizing the values and intrinsic motivations that drive each person. This allows busy managers to get to know their teams quicker, identify blind spots at-a-glance, and communicate more effectively. The result: increased engagement, productivity and innovation, more Psychological Safety, and ultimately happier organizations.

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