Chapter 5 Out with the Carrot and Stick: Leaders Often Make the Mistake of Only Motivating Extrinsically – Leadership Insights

CHAPTER 5

Out with the Carrot and Stick

Leaders Often Make the Mistake of Only Motivating Extrinsically

The Status Quo

Does the basketball player, who gets paid 100,000 U.S. dollars per week score twice as many points as his team mate whose agent only negotiated their player a 50,000 U.S. dollar per week contract? Does the fat-cat CEO who sets himself up with a six million U.S. dollars annual salary plus bonus (paid out irrespective of whether or not targets are met) generate five million U.S. dollars more than a CEO paid one million U.S. dollars per year? (Ariely 2008). Do graphic designers create more innovative conceptions if they are threatened with redundancy if the next design is not groundbreaking?

Think of a task, that you do not enjoy doing. When you do this particular task, do you often watch the clock, counting the seconds until it is finished. It brings you no joy, and you do not consider that you are very good at it. Indeed, others (including your superior) have given you the feedback that you are not good at it. They watch over you closely to see whether or how badly you complete the task.

Would you perform this task better (i.e., deliver souped-up performance, resulting in improved overall quality), if I offered to paid you more than you usually get paid for it or threatened to fire you if you do not perform?

Many scientific teams over the years have looked at just these questions: Does more money motivate us to be more productive? Does fear of punishment drive us to better performance? In other words, does the proverbial carrot dangled in front of the donkey or the threat of the stick smacking down on its backside motivate the animal to deliver eminence?

The business world has predominantly worked on the premise of the carrot and stick since … well since forever. Many companies (and this accelerated after the loosening of labor laws and employment restrictions in the 1980s) expect top performance, staff retention, and loyalty from their staff, but motivate solely extrinsically (Luthans 2011). Organizations sometimes offer only short-term contracts, fleeting periods of notice, or prolonged probation periods designed to drive hard work for fear of redundancy. Some offer benefits (for example, dental care) only after certain milestones have been achieved or after X years of service or set future pay-rises only when recorded achievements have been triggered. The fear of redundancy is very real for millions of employees (irrespective of whether this is voiced directly or implied more subtly), and huge numbers of people working today have success-related pay schemes built into their remuneration packages, whereby they have the potential to be paid more as long as they, their team, or the corporation achieves certain targets. Classic examples would be a salesperson, who, for every 1,000 gizmos he or she sells, earns 500 Euros more for the team, which, at the end of the fiscal year, upon reaching its targets1 of units sold splits a (taxable) bonus pot.

This form of extrinsic motivation (i.e., motivation by tangible, outside factors) has created a high-pressure scenario in which we have been led to believe that, if we work harder, we will be paid more or at least not get fired. In many cases, such motivation does lead staff to toil and graft more, but evidence suggests that it does not bolster distinction. A ­paradigm exists where staff overexert themselves to achieve externally set goals in pursuance of their bonus payout. Meanwhile, many ­others work long hours to impress management, often clocking-up large accounts of (sometimes unpaid) overtime to avoid the dreaded sack and resulting unemployment.

For generations, an assumed staple of professional motivation, the carrot and the stick approach does not actually work. Extrinsic motivation sometimes makes people work more; it does not make them work better.

Despite overwhelming evidence to the contrary, generations of leaders, one after the other, have continued to tread the same path, and largely with the same unsatisfactory results. Try this2 : make a fist with one hand. Close your fist as tightly as possible. Now, ask a friend to try to pry open your fist. Encourage them verbally as they do so, but keep your fist firmly closed the whole time. Let them try for a couple of minutes. They will almost certainly not be able to ease your fingers away from your hand; to do so would require a huge amount of strength and a much better purchase on your fingers. But, that is not the point. The point is that, your friend, nine times out of 10, will use the same technique for the whole two minutes. Most normally start by trying to get their fingers under your fingers to then pull them upward and outward. When this does not work, what do most people do? More of the same! Most continue (unsuccessfully) with exactly the same prying technique over and over again. Many people, when a strategy fails at the first attempt, employ exactly the same game plan again and again. It is time to break the mold, listen to what science is telling us about motivation, and rouse a culture of intrinsic motivation that spawns passionate high performance.

The Truth About Intrinsic Motivation

The science world has shown in copious studies that it disagrees with the business world’s view that an offer of the carrot or threat of the stick expedites excellence. Extrinsic motivation does not lead to higher performance. It may, in some cases, lead to longer working hours and burnout (Lemyre et al. 2006; ten Brummelhuis et al. 2011; Bakker and Costa 2014), but it does not lead to better performance. And, at the end of the day, what is our goal as leaders if not to strive to develop our team and to aid them in getting the best out of themselves? In this section of the ­chapter, I would like to share with you the findings from a number of seminal studies, which vociferously suggest that leaders should be motivating in an entirely different way.

Glucksberg, with two experiments (1962 and 1964), was one of the first in the modern era to investigate the correlation between extrinsic (in this case, financial) rewards and the quality and speed of completing conceptual, cognitive tasks. In other words, if I pay someone, then will they complete a task better than a person who has not been paid? Such positions are known as if-then frameworks (Winne and Hadwin 2008). In the study, Glucksberg asked two groups of participants to solve the cognitive performance test first designed by Karl Duncker in the 1930s and published posthumously known as Duncker’s candle problem (Duncker and Lees 1945). The candle problem goes like this:

You observe some items on a table (Figure 5.1), near a wooden wall. Some tacks, a candle, and a set of matches. Your task is to firmly attach the candle to the wall, making sure the wax does not drip onto the table, using only the objects in front of you.

Figure 5.1 The candle experiment

How might you solve this puzzle? You cannot pin the candle to the wall with the tacks; the tacks are too short; the candle is too thick. What is more, the candle wax breaks off when you stick a pin in it. So that is a no go. You can heat the candle with a match until it drips and then use the melted wax as adhesive to stick the candle to the wall, but you will find that the candle is too heavy for the wax to hold it.

There is only one way to solve the conundrum, and most people stumble across it after a few minutes of consideration. Take the tacks out of the box, pin the box to the wall with the tacks, stand the candle in the box, and light it with a match. It seems so easy once you know the solution, right? But many of us do not quickly recognize the box as contributive. We appreciate the box only as a holder for the tacks, seldom as a distinct tool in itself. Or, indeed, some of us do not notice the box at all. This is called functional fixedness (Glucksberg and Weisberg 1966), that is, only seeing something in one state and not appreciating its potential other uses. Duncker’s candle problem has been repeated by other scientists and with much larger sample groups, always with the same results (Adamson 1952).

Interestingly, if subjects are shown the tacks lying on the table outside of the now empty box, then the candle problem can be solved much more quickly. People almost immediately recognize the box as being helpful in the task and a potential holder for the candle, and there is little or no functional fixedness, so the task is easy. More on this later.

What Glucksberg found was that, if he incentivized people to solve the initial candle problem faster by pledging to pay the fastest 20 percent of people five U.S. dollars and the fastest of all 20 U.S. dollars (adjusted for inflation that’s about around 40 and 160 U.S. dollars, respectively, today, not bad for a few minutes thought), then they, in fact, were slower than people who had not been paid or offered anything at all to decipher the same challenge. On an average, it took the group that was offered an extrinsic reward 3.5 minutes longer than those who were offered nothing. Glucksberg then restaged the experiment with one significant difference. This time he set the tacks up outside of the box and left the empty box in view on the table. This time around the incentivized group was faster than the other group.

So what does this all mean? It shows us that reward-based if-then signatures apply with straightforward tasks, but when assignments require more advanced cognitive processing, then promise of extrinsic reward can actually be counterproductive and produce worse performance. This seems to go against all we think we know about motivation. It seems to make little common sense, and yet, it is accurate. Dan Pink explains it best: “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 [cognitive processing] challenges like the candle problem. (Pink 44) In fact Pink later goes further by adding that “‘if-then’ motivators that are the staple of most businesses often stifle, rather than stir, creative thinking” (46).

As this experiment shows, the rewards narrowed people’s focus and blinkered the wide view. (Pink 44). It goes against decades of assumed logic, but extrinsic motivation does not improve high-level cognitive performance (i.e., exactly what we expect from our teams every day). But, one swallow does not make a summer. That constitutes just the result from one guy’s experiments. What do other scholars have to say about motivation?

One could argue that the reward amounts in Glucksberg’s study were too small to strongly affect subjects’ motivations or levels of effort, but similar experiments have returned comparable results. In the United States, five U.S. dollars is a small amount of money, but in some countries, it carries far greater value due to different economies and buying power.

A group of U.S.-based academics (Ariely et al. 2009) investigated the effect of extrinsic motivation, in a similar study to Glucksberg (1962, 1964), but took their study to Madurai, India. With the price of living and earnings-to-value ratio markedly different in India, significant rewards could be offered without blowing the academics’ budget. They got a group of participants to complete a series of tasks that tested their motor skills, concentration levels, and creativity. The subjects were split into three groups, and all were set certain targets in each of the exercises. About 33 percent of the group was told that they would be remunerated with a small monetary reward (4 rupees: around 50¢ or equivalent to about one day’s pay) if they reached their performance targets, another third would receive a medium-sized reward (around five U.S. dollars, equivalent to about two week’s pay), and the last group was promised a very large reward (about 50 U.S. dollars: around five month’s pay) if they met their targets. The results, again, contradicted popular motivation wisdom. The group paid the largest extrinsic rewards fared the worst in eight out of the nine exercises.

In yet another study, The London School of Economics (2009) looked at over 50 financially incentivized payment schemes and found that, rather than motivate positive behavior, pay-for-performance plans actually stymie effectiveness.

We find that financial incentives may indeed reduce intrinsic motivation and diminish ethical or other reasons for complying with workplace social norms such as fairness. As a consequence, the provision of incentives can result in a negative impact on overall performance (Irlenbusch cited in Morningstar 2012, p. 7).

Leaders commonly reward KPI-derived and measurable performance, and not creativity. Consequently, employees often offer up this type of more-of-the-same performance rather than creative thinking (Eisenhower and Shanock 2003). As we have seen, motivation narrows focus, and this narrowing—often caused by blinkered attempts to achieve goals—in addition to stunting creativity and excellence can also precipitate unethical, untrustworthy behavior, risk-taking, and decreased cooperation. The staff sees only the goal and may employ any means to justify the end.

Looking into the effects of motivation on creativity, Harvard academic Theresa Amabile (1996) set up a clever study where she had 23 artists present 20 paintings each to a panel of art experts. Half were commissioned and half noncommissioned. The panel judged the commissioned paintings (i.e., those that were ordered for payment) as “significantly less creative” (Amabile, cited in Pink 45) than the ones that were simply created for the artist’s own pleasure. What is more, the artists noted their lack of joy and the creative restraint that they felt when producing work on demand.

This is known as the Sawyer effect (Ariely, Loewenstein, and Prelec 2006): Mark Twain’s famous hero Tom Sawyer, once lumbered with the chore of whitewashing a huge fence in the mid-day sun had the brainwave of persuading his friends to take over his work by convincing them that it was a rare opportunity to be able to do such a task (scarcity, see ­Chapter 9), and that many had previously wanted to (consensus, see Chapter 9). As he sat on a nearby tree stump watching his peers gladly complete the task, which he had only minutes before hated, he mused that “Work consists of whatever a body is obliged to do, and that Play consists of whatever a body is not obliged to do.” If we present something as work by offering a reward, then people we are trying to motivate instinctively recognize it as undesirable. The potential issue here for leaders is that we also set a precedent. If I ask you to complete a task that you do not want to do and you say no, maybe I could offer to reward you for it. The thing is, I will now have to reward you every time in the future, to the same level, to bag your compliance.

We have looked at the carrot, but what about the stick. Surely threat of punishment compels people to follow rules. Doesn’t it? Gneezy and Rustichini (2000) observed a daycare facility post a sign to warn delinquent parents that if they turned up late to pick up their child they would in future be faced with a fine. After the notice was posted twice, as many parents on average as before arrived late to collect their sons and daughters. The threat of the fine, hoping to hone parents’ feeling of responsibility, and prime their behavior, served the opposite and encouraged unpunctuality. The fine, instead of motivating good attitude, had turned a human relationship between the parents and teachers into a transaction. Now, the parents could simply buy extra time, if they need it (Suvorov 2003).

The carrot and the stick do not work. To stimulate cognition, creativity, and desire, people require intrinsic motivation. Dan Pink cutely sums up the dangerous side-effects of extrinsic motivation in his seven deadly carrot and stick flaws:

  1. They can extinguish intrinsic motivation.
  2. They can diminish performance.
  3. They can crush creativity.
  4. They can crowd-out good behavior.
  5. They can encourage cheating, shortcuts, and unethical behavior.
  6. They can become addictive.
  7. They can foster short-term thinking.

Now, I would like to make something clear at this point. I am not saying: money is not nice. It helps us fund our lives and keep our family safe and warm, and that is doubtless a good thing. I am not saying: we should stop remunerating our staff. I am not saying: people do not work for money and enjoy earning, having, and spending money. What I am saying is that, after a certain socially acceptable level of remuneration that is comparable in that industry, people are content in their roles. To encourage best-in-class performance, out-of-the-box thinking, and state-of the-art creativity, leaders need to plug in intrinsic motivation for their teams.

High-Performance Motivation

If we cannot coerce preeminence out of our teams with the proverbial carrot dangle or with the intimidation of the stick slap, how can we get our guys to perform?

Luckily, many experts have looked at the subject of extrinsic motivation, and some have proposed starting blocks to help employees discover their own intrinsic drivers. At the first reflective stage, intrinsic motivators can be divided into 12 categories (see the following table). This list of drivers should by no means be construed as conclusive, but as a helpful suggestion of the types of areas one should look at to glean intrinsic motivation. This list has been compiled from eight models on human needs and desires.3

I make that 48 drivers that scientists suggest may intrinsically motivate people to work better. The problem with this list, as I see it, is twofold:

  1. Most of your team, when shown this list, will probably highlight ­different selections from the table as their own personal drivers. Helping each member of your group identify their own motivators may prove fiddly.
  2. Your leadership would have to be so situational (see Chapter 8) as to be microscopic in order to constantly seek to motivate all at their own, individual level.

Thankfully, Pink (2010) has provided us with a much simpler, concise model of intrinsic motivation that is both easy to recognize for the employee and manageable for a leader. According to Pink, we, as leaders, have a responsibility to create an environment where our subordinates, with our support, can blossom in a climate of trust and be purely and intrinsically motivated by giving them just three motivational foci: autonomy, mastery, and purpose.

Autonomy

Let your people work when and how they want to. When leading your team, instill the why in them (see Chapter 2), but leave the how up to them. Entrepreneur and multiple company CEO Jeff Gunther calls this ROWE: results-only work environment (Forbes online). In ROWEs, it is irrelevant when people show up for work, where they work, and with whom they collaborate. It is only important that they deliver results. Give talented people the tools they need, but also, critically, the space they crave to work autonomously, and they will be driven to achieve for achievements sake. No carrot in sight. Teleworking, flextime, and spatial decentralization have all been shown to positively affect industrial performance (Martínez Sánchez et al. 2007). If your company regulations allow (see Chapter 11), then let your team off the leash, transactionally set goals together with them (see Chapter 8) and let them work as autonomously as possible.

Mastery

Have people doing the things they are great at. There will be lots of overlap on this point with Chapter 8, so please check that out too, but, in short, people achieve best when they are doing what they love. When we work autonomously, we are engaged and driven to want to improve. Sadly, this engagement is lacking in so many modern offices and workplaces. According to a McKinsey study, in some countries, no more than a few percent of the workforce claims to be engaged in their work all the time (Kirkland 2009). But, outside of the workplace, it proliferates. Mastering a challenging skill, be it painting that landscape, climbing that rock face, or building that tree-house, we would all do any of these and more stimulating, fascinating, challenging tasks for no money, just for the thrill of being able to say afterward: “I did that.” Millions of us take dance classes or learn musical instruments or uncover the artistry behind creative writing or sculpture, or whatever. We do all these things for free. Amateur musicians spend hours practicing their scales because it makes them better, and that development of mastery is powerfully addictive. In such pursuits, the activity is reward in itself. Motivation and happiness guru Csikszentmihalyi (1997) called these autotelic experiences (from the Greek for self (auto) and the Greek for goal (telos)). He later shortened the word to the far pithier: flow. One simple question: why don’t your people deserve as much autotelic experience at work as they have in their private lives? Just think what they might achieve if they were in flow every day.

Purpose

If you were to draw a graph with time (let us say the last 100 years) on the x-axis and numbers of engaged workers and numbers of people volunteering for good causes on the y-axis, you would see the engagement line steadily heading down, but being intersected by the volunteerism line rising exponentially. In the last couple of generations, the numbers of people searching for a purpose in charities, clubs, schools, political parties, good causes, social or environmental groups, and so on has continued to rise, while worker engagement falls year on year. This suggests that people are searching for something in their voluntary contributions that they are simply not finding at work. What can we learn from this social activity?

A survey commissioned in the United Kingdom in 2015 found that 58 percent of full-time staff (and 70 percent of part-time staff) feel that they have little or no influence at work, and 59 percent think they have no control over big business (UK.coop). Many seem disillusioned with the business world they work in and feel their contribution changes little. Many recognize little purpose in their work.

Such industrial disenchantment is one of the main reasons why we have seen such a dramatic rise in cooperative-styled startups in recent years (uk.coop). A cooperative (coop) can take many forms, but recently, we have seen numerous not-for-profit or profit-sharing organizations, that is worker cooperatives managed or owned by the staff, and consumer cooperatives that are managed by their customers, popping up. What is most intriguing is not so much that many seem drawn to businesses operating under a cooperative framework (as employees and as customers), but that such organizations are so successful. A 2007 study found that 90 ­percent of the coops were still operating after five years, compared with 3 to 5 ­percent of traditional corporations. The 30,000 cooperative companies in the United States in 2009 helped create over two million jobs and ­contributed over 150 million U.S. dollars to the U.S. economy. People seem to want coops to work. Coop members share a vision that drives them to not let them fail (http://geo.coop/story/fact-sheet).

Now, I am not proposing you all quit your jobs and go set up coops tomorrow. That is not the message here. The coop, like any other company form, has its pros and cons. Of interest here is the drive, connection, and motivation that is often shown by coop members. They identify a purpose in their work; they recognize direction; and they are prepared to invest significant time and energy (irrespective of material gains) to contribute to that shared success. We can certainly learn something for our capitalist companies about the power of purpose as a motivator from such constructs.

Chapter Leadership Challenge

What motivates you, and how would you like to motivate? Go back to the motivators in Table 5.1 and develop a personal ranking for you. Which of those would motivate you the most to bring best performance, and which would you need the least? Reflect and make notes on why each motivates you.


Table 5.1 Common intrinsic and extrinsic motivators

Responsibility

Loyalty, integrity, principles, values

Autonomy

Freedom, ­independence

Curiosity

Learning something new, collecting experience, wanting to understand, thirst for knowledge

Social Recognition

Social ­acceptance, affiliation, ­recognition in social networks

Well-being

Relaxation, emotional security, without stress and fear, inner peace, calmness

Ownership and Wealth

Accumulation of material goods, property, assets, wealth

Performance and Competence

Leadership, influence, ambition, success, effectiveness of one’s own actions

Fairness

Social justice, social involvement, compassion

Collegiality and Care

Friendship, meeting, social contacts, proximity, helping

Status

Social standing, title, privileges, exclusiveness, prestige

Challenge

Competition, rivalry

Structure and Security

Stability, clarity, good organization, structure, detail


Next, think about your team or, if you do not yet lead a team, your process partners or colleagues. What do you think motivates them? Again, make a list and then transparently discuss your thoughts with them. The more we all know about what motivates each other, the more focused and happy we can all work.

1Such targets are invariably established transactionally by management and are rarely determined autonomously by staff.

2 Many thanks to Michael Knieling for this great little aha exercise.

3 Hierarchy of Needs: Maslow (1971); ERG Theory: Alderfer (1969); System of Needs: Murray (1938); Life Motives: Reiss (2004); Theory of Motivation (Kasser and Ryan 1993), Self-Determination Theory: Ryan and Deci (2000); Needs ­Theory: McClelland (1951).