How & why incentives do not work

Firstly, if you have 18 minutes to spare, then rather than read this, go and watch Dan Pink's video at TED.com. It really is food for thought.


In short, Dan says that proof exists to support the statement that incentives - the carrot or the sharp stick - do not work.
They do not work in many types of work. Not all, but most that we are likely to deal with.

But, and here's an interesting thing. Not only do they not work, they actually do harm. They give the opposite of the desired effect.


The candle problem
Dan starts by looking at the the candle problem.

If you give people the following: a candle, a box of pins and some matches, and you then ask them to fix the candle to the wall so that the lit candle's wax doesn't drip onto the table. How could this be done? and do they perform?

(A clue. To solve this you over come functional fixedness)

Do incentives work
If you incentivise this task, i.e. if you give a group incentives such as, 'if you're the fastest you'll get £50, if you're in the top 10% you'll get £20'. Then you get interesting results. (these £ values were not the ones used in the quoted experiement but I have adjusted for inflation :).  I'm sure the experiment holds)

The team that were given the financial incentives actually did a lot worse, and this is not a freak of this experiment or of this challenge. There are many more examples and experiments that back this up.

The solution to the candle problem?
It is at the bottom of the blog page.


Restate the problem and...
If you restate the problem as in this diagram and still give incentives, then the incentives make a significant difference. They have the desired effect and deliver an improvement in performance.

I think it's clear to see why when you realise the pins are no longer in the tray that was being used to collect them together.

So incentives appear to work for mechanistic, well defined tasks, but not for jobs that require creative thought. If the work is clearly defined and has an easy to see goal then the incentives work. It is almost as if the value of the incentive narrows the focus through a fear of losing the sweet carrot or money, or fear of meeting the pointy end of the stick.

This kind of left-brain work seems ideally suited to incentives but more and more our work is right-brain - creative, inventive.

A couple of quotes:

As long as the task involved only mechanical skill, bonuses worked as they would be expected: the higher the pay , the better the performance. 

But once the task called for "even rudimentary cognitive skill," a larger reward "led to poorer performance."

D. Ariely, U. Gneezy, G. Lowenstein, & N. Mazar, Federal Reserve Bank of Boston Working Paper No. 05-11, July 2005; NY Times, 20 Nov. 08



Autonomy - Mastery - Purpose
If we can no longer motivate using incentives or threats then what can motivates?
Dan suggests:
Autonomy - the urge to direct our own lives
Mastery - to get better and better at something
Purpose - the urge to be a art of something bigger than ourselves.


Traditional management
Management is a recent concept and it did not emanate from nature. It's an invention from mankind. It's ideal for compliance but it does not mean that it's always right. Maybe, at times, we need to rethink the management styles based on the three themes above.

I currently work in a very traditional environment and have found myself in a team of dispirited developers that distrust management, distrust each other, and are distrusted by management. I'm stuck in the middle as a Development Manager. My approach has been to apply two themes to improve things. One, traditional management - that is, clearly manage the tasks, the projects and the list of work. Senior management folk like that and the developers do too. The estimates are still off a bit but we can work on that.
The other theme is non-traditional. I encourage Mastery and Autonomy in the way I treat developer tasks and collaboration. I expand their range of influence and never pass on their successes as my own up the traditional management line. I motivate by letting them motivate themselves.
Warning. Senior management don't get this. Not mine anyway and that's probably why my days will be numbered. But I'll keep on trying. It's the only right way.




The answer.