Feel like you’re getting poor value for money from your employees? Here’s why –

In 1949 Harry Harlow (a professor of psychology) carried out a series of experiments observing rhesus monkeys solving a puzzle. The puzzle looked similar to the latch on a door. 

At the start of the experiments he placed the puzzle in the cage with the monkey and waited…

What happened next caught him completely by surprise!

Without any prompting at all, the monkeys set to work trying to solve the puzzles. They worked with what seemed like diligence and looked (as much as monkeys can do) to be enjoying the task. 

As the days went by the monkeys got better and quicker at solving the puzzles, until they were opening the latch-like mechanism in no time at all.

This went against the grain of current thought about what powered behaviour. Harlow knew that there were two main motivators in life – the biological and the external. 

The first is present in all animals, the need for survival – to eat, drink and produce offspring. The second external motivator is reward or punishment by the environment, based on our actions. 

In the case of the puzzle solving monkeys, these couldn’t have been motivating them as neither were present. As Harlow says –  “the solution [of the puzzle] did not lead to food, water or sex”. Neither was there a reward for solving the puzzle, nor punishment for not solving it.

Harlow realised there must be a third motivator taking hold of the monkeys, driving them to solve the puzzles. 

“The performance of the task provided intrinsic reward”, he wrote. The monkeys seemed to be solving the puzzles because they found it fun – they enjoyed the challenge of doing so. 

He called this Intrinsic Motivation.

In one of his final experiments in this series, he decided to test the strength of this new “Third Drive” –  surely it must have been less motivating than the biological and extrinsic motivators. 

So, he experimented by rewarding the monkeys with raisins whenever they solved the puzzles –  what could be more pleasing for a monkey than to receive food for doing good work! 

However, what happened shocked Harlow even more. 

The monkeys actually got worse at solving the puzzles, making more errors and completing them less often. It seemed that providing a reward decreased performance. (1)

Who decided paying a performance bonus was a good idea?

In 1900 at the Exposition Universelle in Paris, Henry Winslow Taylor demonstrated his ‘Scientific Management’ method of producing more at a factory, faster and with less material. 

Having turned down a place at Harvard to work in a steel factory, he had become fascinated by how such a revolutionary technology (that time’s finest industrial machinery) could be used in such a haphazard, unscientific way by the people working there. 

Ways of carrying out processes in the factory were a hangover from the days of Artisans. Knowledge was passed down through the team and instructions were given using approximations (at best). 

He felt that there must be something to be done to improve the way work at the factory was performed.

By using a watch to measure results, he broke down the actions of the factory workers into their separate parts. He then set about creating ways of reducing the amount of time it took to complete them. 

The small reductions in the time it took to perform each task, meant the finished product was manufactured much faster overall.

The usual rate of manufacture in factories like Taylor’s cut nine feet of steel per minute. His new method cut fifty feet per minute. 

It was nearly 6 times faster! 

At the Exposition in Paris, his demonstration caused a storm. People queued for hours to catch a glimpse of his operation. 

Once news spread, people travelled across Europe to see for themselves this miraculous way of churning out product. Prominent Industrialists of the time wrote – “Nobody quite believed at first in the prodigious result … but we had to accept the evidence of our eyes”. 

The process was “a landmark in the history of mankind” and people likened the breakthrough to the invention of the electric lightbulb.

Taylor’s Scientific Management was so popular that people devoted their lives to his vision. 

It moved from factory to factory, industry to industry. Always improving what had gone before. It meant that workers became cogs in a machine built for efficiency. 

It also meant that what was once skilled work, became simple steps that could be executed by anyone, once trained. What were once seen as complex tasks only to be performed by an educated worker, could now be carried out at a more efficient rate by someone unskilled, uneducated and … cheaper. 

To be sure these unskilled and uneducated workers worked in the right way, at the right time (producing as much as the system could achieve) methods of reward and punishment were brought in. 

These were meant to produce more of the behaviour that was required and less of the behaviour that was not. 

Eventually, a monetary incentive to work was settled on. If a worker produced what the system was capable of, they were paid accordingly. If they overachieved this target they would be paid more. 

The Bonus Scheme was born!!!

This premise of industry (to reward good work and punish bad) has remained in our everyday lives since that demonstration in the 1900 event in Paris. 

It worked well. Very well. 

It helped us transform our work from blue collar to white collar – there has been a best way to insert paper into a typewriter, the quickest way of clipping paper together and scripts for handling sales calls. 

Scientific Management and the financial incentive has built our economy to where we are today. 

However, what has worked before is now (to all intents and purposes) a hindrance.

The New “Work”

As economic progress has shifted from blue collar to white, Taylor’s methods could be applied to reduce tasks to scripts, formulas and step-by-step processes. 

Scientific Management is in evidence today. 

But what was once highly skilled, highly educated white collar work (carried out in the Developed World of North America, Western Europe, Japan, South Korea and Australia) is moving off-shore where it can be completed cheaper.

Whilst outsourcing routine work has become more common and easier to do, the type of work the Western World produces has become more complex. 

The West now produces problem solving, learning and discovery. What Daniel Kahneman (the author of Thinking Fast and Slow) has termed Heuristic Work. 

McKinsey & Co estimate that 70% of job growth in the United States is of heuristic work (2).

Kaheman says that work can now be divided into two categories – algorithmic and heuristic – the former meaning process oriented, the latter artistic and non-routine.

Algorithmic work can be outsourced and automated – technology can now perform tasks that only a few years ago relied on a human to carry out. For example tax preparation software and automatic retail checkouts. 

In fact, a recent study by PwC warned that 10 million jobs in the UK are set to be replaced by technology in the next 15 years (3). 

Heuristic work, however, can’t be outsourced or automated.

Whereas the old methods of reward and punishment work (to a certain extent) in the world of algorithmic work, findings say that they actually hinder production of the heuristic work Western economies now rely upon.

Rewards Hinder Performance

Harvard Business School’s Teresa Amabile has found that creative heuristic work relies heavily on Harlow’s third drive, intrinsic motivation (4). 

Experiments into rewarding heuristic tasks conducted by Edward Deci and colleagues found that there was a “hidden cost of rewards”. 

They observed a group of pre-school children who enjoyed spending their free play time drawing (which they clearly enjoyed). They created an experiment to test what effect providing a reward had on the childrens’ drawing. 

The children were divided into three groups – those given no reward for drawing, those given an unexpected reward for drawing and those told that if they spent time drawing they would receive a reward. 

A few weeks later (when researchers visited the pre-school again) they could clearly see that children in the no reward and unexpected reward group were drawing with the same enjoyment as before. 

However, children who had expected a reward for drawing showed much less interest and drew less than before. They experienced something which we’ve all felt before – once enjoyable work can become a drag… 

Only the children who expected a reward for drawing were impacted. 

Those who had no expectation of a reward, yet received one seemed to have the same enjoyment of drawing as before.

The conclusion – ‘if-then’ rewards (if a task was performed then a reward would be given) affected the performance of heuristic tasks negatively. 

The reason reseachers’ gave was these ‘if-then’ rewards asked people to forfeit some of their autonomy. 

They varied the experiment over and over with different groups of people, with the same result. 

Rewards (especially ‘if-then’ rewards) in over 100 experiments were shown to have a negative impact on motivation of performing heuristic tasks (5).

I know what you’re thinking – “I don’t need my team to be intrinsically motivated. I pay people to work. When they perform well, they get paid more”. 

But in fact the reverse is true.

A 2005 study by economists from MIT, Carnegie Mellon and the University of Chicago for the Federal Reserve Bank of Boston, showed high pay to hinder high performance. 

In the study of 87 participants in India, they set a series of tasks ranging from unscrambling anagrams to recalling a string of numbers – all needing creativity, concentration and some needing motor skill. 

Divided into three groups, the participants were to earn a reward:

Group 1 would earn 4 rupees (at the time worth around a day’s pay) for hitting their performance target. Group 2 would earn 40 rupees (about two week’s pay). And Group 3 would earn 400 rupees (nearly 5 months pay).

As it turned out, the medium level of pay (Group 2) had no more effect over the level of performance produced by participants than the low level of pay. Medium and low pay produced the same results.

However, the high level of reward made participants perform worse than the other two groups on nearly every task. 

“In eight of the nine tasks we examined across the three experiments, higher incentives led to worse performance”, they concluded (6).

Further research carried out by the London School of Economics in 2009 analysed 51 studies of corporate pay for performance plans. The conclusion – financial incentives have “a negative impact on overall performance” (7).

As researchers of the study in India wrote, we “cannot assume that introducing or raising incentives always improves performance”.

They also stated that using bonus structures in the corporate world may be “a losing proposition”.

Controversy

As these experiments clearly show, rewards given in the usual “if-then” way (such as a pay-for-performance bonus) can have a negative effect on your team’s performance. 

These findings were so controversial at the time that the researchers were forced to re-analyse almost 3 decades of data from their experiments. 

Still they came to the same conclusion – when institutions (families, schools, businesses and athletic programmes) focus on the short-term and opt for controlling people’s behaviour they do so to the detriment of long-term performance (8).

If you enjoyed reading this, then you might want to talk to me about any issues you have with your team.

If that’s the case, then you can arrange a free consultation by contacting me – info@parrisperformancecoaching.com

Notes

1.     Harlow et al., “Learning Motivated by Manipulation Drive” , Journal of Experimental Psychology 40, 1950

2.     Bradford et al., “The Next Revolution in Interaction”, McKinsey Quarterly 4, 2005

3.     Hawksworth et al., “UK Economic Outlook July 2017”, PwC

4. Teresa Amabile, “Creativity in Context”, 1996

5.     Mark Lepper, David Greene and Robert Nisbett, “Undermining Children’s Intrinsic Interest with Extrinsic Rewards”, Journal of Personality and Social Psychology 28, 1973

6.     Ariely et al., “Large Stakes and Big Mistakes”, Federal Reserve Bank of Boston Working Paper No 05-11, July 2005

7.     “LSE: When Performance-Related Pay Backfires”, Financial June, 20098.     Deci at al., “A Meta-Analytic Review of Experiements Examining the Effects of Extrinsic Rewards on Intrinsic Motivatioin”, Psychological Bulletin 125, 1999

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