Sunday, December 26, 2010

Rewards and the Motivation Paradox

I'm finally getting around to reading Daniel Pink's "Drive." I had held off for a long time, figuring that I didn't need to read someone else's rehashing of Deci, since I'd already read the source material.

I was wrong.

Pink does a great job of synthesizing a number of different strands, including behavioral economics, Deci's work, as well as reformers like Alfie Kohn. I found myself discovering unexpected new insights.

1) I've always had difficulty reconciling studies that show that extrinsic rewards hamper productivity with clear business examples where they help. For example, one of the classic studies I recall from HBS is Emerson Electric, which uses piecework rewards to drive incredibly high levels of productivity.

Pink explains this paradox by highlighting the mechanism of action. Extrinsic rewards harm productivity by displacing intrinsic motivations. But in cases where intrinsic motivations don't apply (e.g. situations where the work is routine and straightforward), extrinsic rewards increase motivation and productivity.

That fits perfectly with piecework assembly of electronic components (though even then, one must be careful to specify a quality target as well, since extrinsic rewards tend to encourage corner-cutting).

2) I've also had difficulty swallowing the notion that money doesn't motivate simply because Silicon Valley is built on money. For all the high-falutin' talk about changing the world, most entrepreneurs still fight like hell to avoid dilution.

But after reading Pink's book, the answer there is clear as well. For entrepreneurs, the intrinsic motivations for starting a successful company are so strong that no amount of external rewards can affect them. Creating a new company is a process that drips with the key factors of autonomy, mastery, and purpose.

In addition, the very uncertainty of entrepreneurship may inoculate entrepreneurs against the negative effects of rewards. Researchers have found that contingent ("if-then") rewards affect motivation, but unexpected rewards do not. Since no one can guarantee the results of your startup, the potential reward doesn't reduce intrinsic motivation.

For proof, just look at instances where startups are acquired with a contingent earn-out--how often have you seen acquired entrepreneurs go nuts as they "punch the clock" and "turn the crank", counting the days until they're free to start a new company.

I'm only 1/3 through the book--hopefully I'll have more insights to report when I'm done!


Roy said...

Nice summary, Chris, and I enjoyed the Deci post you linked to even more. Learned some stuff, but even more so about you. Like the fact that you like your looks. j/k ;)

If at some point you want to take the red pill beyond the best-sellers, this guy is one of the most brilliant yet pragmatic essayists on the mind:

Deepam said...

I need to read this book. But there’s so much other stuff to read that it keeps getting on hold. So to my surprise, I came across this nice part summary. Thanks Chris. I’m looking forward to your next post summing up the book in a good wrap up. :)