Last Friday we sent out the first edition of our new Denny Business Development Digest. The topic was motivation, “The Candle Problem”. Interestingly, last week’s Economist, which also came out on Friday morning, covered the same topic. Click Here
We both looked at some work on motivation done by Karl Duncker and Sam Glucksberg, recently reexamined by Daniel Pink. But according to the Economist article Pink’s argument that “There’s a mismatch between what science knows and what business does” “depends on a highly selective reading of the academic literature”. The Economist article goes on to mention four studies and discusses two in particular. It states that a study of an American glass installation company found that shifting from salaries to incentives increased productivity by 44%. It also states that research on workers at a Chinese electronics factory confirms that performance-related pay is an excellent motivator. But the article misses the point. What the experiments show is, with a simple set of rules, a single, clear solution, and a narrow focus – extrinsic motivators do work. And when only mechanical skills are needed, incentives work. But when cognitive skills are required, a larger reward equals poorer performance. And similarly, when real thinking needs to be done, higher standards equal poorer performance. A glass installation company and workers at an electronics factory. Surely this is mechanical work? As I say, the Economist article appears to miss the point. When setting incentives for work that requires cognitive skills, be wary. Bankers please take note.