One of my all-time favorite anecdotes for motivating people describes how Charles Schwab turned around a struggling mill with little more than a piece of chalk. Here’s how Dale Carnegie describes it in his classic book How to Win Friends and Influence People,
“Schwab asked the manager for a piece of chalk, then, turning to the nearest man, asked: ‘How many heats did your shift make today?’
“Without another word, Schwab chalked a big figure six on the floor and walked away. When the night shift came in, they saw the ‘six’ and asked what it meant. ‘The big boss was in here today’ the day people said. He asked us how many heats we made, and we told him six. He chalked it down on the floor.”
The next day, Schwab returned to see the results,
“The night shift had rubbed out ‘six’ and replaced it with a big seven.
“When the day shift reported for work the next morning, they saw a big ‘seven’ chalked on the floor. So the night shift thought they were better than the day shift did they? Well, they would show the night shift a thing or two. The crew pitched in with enthusiasm, and when they quit that night, they left behind them an enormous, swaggering 10. Things were stepping up.
“Shortly this mill, which had been lagging way behind in production, was turning out more work than any other mill in the plant.”
Unbeknownst to most managers and entrepreneurs, research has consistently shown that financial incentives are far less effective than many other simpler (and cheaper) methods of motivating employees, contractors, colleagues and just about everyone else.
In fact, financial incentives may not just be useless, but counterproductive. As Daniel Pink notes in his book Drive, “In 2009, scholars at the London School of Economics… analyzed fifty-one studies of corporate pay-for-performance incentives.” The conclusion? “‘We find that financial incentives… can result in a negative impact on overall performance.”
Pink persuasively argues that financial incentives can lead to all sorts of negative consequences; from reducing internal motivation, fostering short-term thinking and crushing creativity. Probably the worst consequence of such incentives is that it incentivizes cheating though. If, for example, an employee gets a bonus if that employee sells 1K units, it’s hardly surprising if that employee uses some underhanded and perhaps unethical or illegal techniques to hit that mark.
We have seen this same story play out over and over again. Indeed, Wells Fargo blamed its recent scandal (where it opened millions of fraudulent checking and savings accounts) on “people trying to meet minimum goals to hang onto their job.” This is somewhat ironic, because as Nick Clements notes on the scandal, “Opening fake accounts was never in the interest of Wells Fargo. The company will have lost money on dormant accounts. It will have paid incentives for unprofitable accounts and lost consumer trust.”
Obviously, we saw mortgage originators acting on similar bad incentives prior to the 2008 financial crisis as well. These types of scandals can go beyond simple financial marks as well. And they permeate the public sector too. For example, the Atlanta Public Schools cheating scandal had to do with teachers and principals cheating on standardized tests so as to meet minimum requirements set by the No Child Left Behind Act. Yes, they didn’t get bonuses for hitting those standards, but there was still a massive incentive for them to cheat in order to hit particular scores.
And to think, simply writing a number on the floor was all that Charles Schwab needed to motivate his staff! No wasted money and no bad incentives. Just chalk!
Daniel Pink recommends rethinking motivation from the ground up. His work is particularly directed at managers who supervise employees, but it can apply to pretty much anyone. He refers to this type of motivation as “Motivation 3.0.” (Motivation 1.0 is survival, Motivation 2.0 is carrots and sticks.)
Motivation 3.0 is about inspiring someone’s “intrinsic interest.” He recommends four major motivators to inspire someone’s intrinsic interest and align it with your company’s goals:
No one is a big fan of being micromanaged and told what to do. Of course, if you give the wrong people autonomy, they’ll accomplish little if anything. But this should become obvious very quickly. On the other hand, the right people will find autonomy refreshing and motivating.
Indeed, Charles Schwab didn’t micromanage anything when he stopped by the underperforming mill. What he did is what Liz Wiseman and Greg McKeown call “laying down the challenge” in their book Multipliers. A big challenge mixed in with autonomy can lead to amazing results!
It should also go without saying that people aren’t hugely motivated to stay in a dead-end job all of their life. Any opportunity you have to offer people a chance to improve, get better or master something is an opportunity you should take.
And this goes beyond just managing employees. If you have the ability to offer such opportunities to your friends, colleagues, spouse and especially to your children, you should absolutely take it.
Jim Collins pointed out in Good to Great that profit is like “air or water for the body.” Yes, it’s nice, but air and water are not the reasons we live. A company should have a larger goal to inspire its staff (and customers) than just to make money. Disney’s, for example, is simple but effective: “To make people happy.”
We live in an atomized world in which we seem to be pulled further and further apart from each other every single day. People are dying for some form of community and more human interaction. While some companies may take this too far with almost cult-like chants and the like, the importance of providing opportunities to work in teams, develop friendships and achieve goals together is essential.
Even the little things count. You should never underestimate the importance of things like company happy hours, barbecues and going to baseball games together.
As far as compensation goes, Pink recommends that you “Pay enough so it’s not an issue.” Money is important, sure, but it’s not sufficient to truly motivate someone in business. And it’s certainly not enough to motivate people in life in general.
To truly motivate your staff and others in your life, you have to inspire their “intrinsic interest.” And that’s just something that money can’t buy.