Ten years ago, management guru Daniel Pink wrote a book called Drive. It was a provocative book, because it challenged the received wisdom that the best way to get people to try harder is to offer them more money.
Pink quotes a study from MIT, in which students were given a series of different tasks to perform – first with no incentive and then with the incentive of a monetary reward. There were three levels of reward: low performers would only get a small reward, middling performers did slightly better and those who performed each task best would get a significantly higher reward than the others – the classic pay-for-performance reward model you find in most businesses.
The results were intriguing.
For simple, mechanical tasks, the rewards worked exactly in line with the received wisdom: performance improved where there was a financial incentive to do better.
However, as soon as there was even a small cognitive element to the task (solving a puzzle, for instance), the average performance actually got worse when a financial incentive was introduced.
That may sound surprising. But there is now a substantial body of evidence to support the conclusion that, for heuristic tasks – tasks that require some degree of conceptual or creative thinking – greater financial incentives actually lead to poorer performance.
Worse than that, they can turn your employees against each other.
In a separate study by the American psychologist Kathleen Vohs, half the subjects were primed beforehand with subtle cues to put the idea of money unconsciously into their brains: a stack of monopoly notes on a table, a computer with a screensaver of dollar bills floating in water, and so on.
The researchers then carried out a series of experiments. In the first, one of the researchers ‘accidentally’ dropped some pencils on the floor. The money-primed subjects were much less willing to help pick them up than the control group.
In another, the subjects were told they were going to have a get-to-know-you conversation with a fellow participant and asked to set up two chairs facing each other. The money-primed subjects set them an average of 118cm apart, while the others set them an average of just 80cm apart.
In other words, people who are distracted by financial incentives are much less likely to be empathetic and much more likely to act from self-interest.
Which means that, if you’re relying on money to motivate your people, you may be unconsciously undermining your own performance.