delanceyplace.com 6/14/13 - incentives can impede productivity
In today's selection -- financial incentives, or "pay-for-performance," have been demonstrated as effective for improving productivity in jobs that are repetitive or transactional. But as the type of work in our society increasingly evolves toward creative work -- such as designing new software, creating new marketing campaigns or inventing new products -- it is worth noting that not only are financial incentives less effective in eliciting improved performance for this type of work, they can actually impede performance:
"Behavioral scientists often divide what we do on the job or learn in school into two categories: 'algorithmic' and 'heuristic.' An algorithmic task is one in which you follow a set of established instructions down a single pathway to one conclusion. That is, there's an algorithm for solving it. A heuristic task is the opposite. Precisely because no algorithm exists for it, you have to experiment with possibilities and devise a novel solution. Working as a grocery checkout clerk is mostly algorithmic. You do pretty much the same thing over and over in a certain way. Creating an ad campaign is mostly heuristic. You have to come up with something new.
"During the twentieth century, most work was algorithmic -- and not just jobs where you turned the same screw the same way all day long. Even when we traded blue collars for white, the tasks we carried out were often routine. That is, we could reduce much of what we did -- in accounting, law, computer programming, and other fields -- to a script, a spec sheet, a formula, or a series of steps that produced a right answer. ... The consulting firm McKinsey & Co. estimates that in the United States, only 30 percent of job growth now comes from algorithmic work, while 70 percent comes from heuristic work. A key reason: Routine work can be outsourced or automated; artistic, empathic, nonroutine work generally cannot.
"The implications for motivation are vast. Researchers such as Harvard Business School's Teresa Amabile have found that external rewards and punishments -- both carrots and sticks -- can work nicely for algorithmic tasks. But they can be devastating for heuristic ones. Those sorts of challenges -- solving novel problems or creating something the world didn't know it was missing -- depend heavily on ... the intrinsic motivation principle of creativity, which holds, in part: 'Intrinsic motivation is conducive to creativity; controlling extrinsic motivation is detrimental to creativity.' In other words, the central tenets of Motivation 2.0 [external 'carrot and stick' motivation] may actually impair performance of the heuristic, right-brain work on which modern economies depend.
"Partly because work has become more creative and less routine, it has also become more enjoyable. That, too, scrambles Motivation 2.0's assumptions. This operating system rests on the belief that work is not inherently enjoyable -- which is precisely why we must coax people with external rewards and threaten them with outside punishment. One unexpected finding of the psychologist Mihaly Csikszentmihalyi ... is that people are much more likely to report having 'optimal experiences' on the job [in heuristic work] than during leisure. But if work is inherently enjoyable for more and more people, then the external inducements at the heart of Motivation 2.0 become less necessary. Worse, as [Edward L.] Deci began discovering forty years ago, adding certain kinds of extrinsic rewards on top of inherently interesting tasks can often dampen motivation and diminish performance. ...
"What happens when you give people a [complex] conceptual [problem] and offer them rewards for speedy solutions? Sam Glucksberg, a psychologist now at Princeton University, tested this in the early 1960s by timing how quickly two groups of participants solved the ... problem. He told the first group that he was timing their work merely to establish norms for how long it typically took someone to complete this sort of puzzle. To the second group he offered incentives. If a participant's time was among the fastest 25 percent of all the people being tested, that participant would receive $5. If the participant's time was the fastest of all, the reward would be $20. Adjusted for inflation, those are decent sums of money for a few minutes of effort -- a nice motivator.
"How much faster did the incentivized group come up with a solution? On average, it took them nearly three and a half minutes longer.' Yes, three and a half minutes longer. (Whenever I've relayed these results to a group of business people, the reaction is almost always a loud, pained, involuntary gasp.) In direct contravention to the core tenets of Motivation 2.0, an incentive designed to clarify thinking and sharpen creativity ended up clouding thinking and dulling creativity. Why? Rewards, by their very nature, narrow our focus. That's helpful when there's a clear path to a solution. They help us stare ahead and race faster. But 'if-then' motivators are terrible for [complex conceptual problems]. As this experiment shows, the rewards narrowed people's focus and blinkered the wide view that might have allowed them to see new uses for old objects."