Motivation and Money: Bad Bedfellows?

Photodisc | Getty Images

Ask a group of managers how to motivate employees, and you can usually measure in seconds how long it will take one of them to suggest some sort of financial incentive.

The theory is simple: people work to earn money, so if you increase the amount on offer, the quality and quantity of work should increase accordingly.

But does it work that way in practice?

Not really: in a fascinating 10 minute segment during a recent presentation to the RSA, business and technology author Daniel Pink discussed the results of an MIT study into incentives and motivation. (The full 40-some minute presentation is here. The relevant 10-minute segment is below.)

In case you don't have 10 minutes to spare right now, here's the synopsis: the study found that incentives worked exactly as predicted provided the work was of a predictable or repetitive nature. As soon as the work involved "even rudimentary cognitive skill," however, the incentives had an inverse effect: those offered the highest bonuses performed the worst.

As Pink puts it: "When a task gets more complicated—when it requires some conceptual, creative thinking, those kinds of motivators [financial incentives] demonstrably don't work."

So what does work?

According to Pink, for the "creative" class of workers—the ones who are most likely to deliver that next great game-changing idea for your company—the best use of money as a motivator is to pay people "to take the issue off the table." Translation: employees who aren't worried about making ends meet—or focusing on who might be making more than them—are more likely to spend their time thinking about work, not to mention doing it. Result: higher productivity, and better end results.

Pink's theory rests on the assumption that motivated, self-directed employees will be more engaged with their work—and the company's aims—than employees who are merely asked to comply with directives from above.

That has obvious ramifications for managers.

If you ascribe to Pink's theory, the best things you can do as a manager are as follows: allow your employees a greater degree of freedom to set their own agendas, and start focusing on purpose—yours, theirs and the company's—as an incentive rather than finance.


Comments? Send them to executivecareers@cnbc.com