Since the financial meltdown of 2008 there has been mounting public criticism of executive compensation in the US, especially in contrast to the pay of front line workers. (Today the disparity in income from the highest-paid executive to the average-paid worker in Fortune 500 companies is an ASTOUNDING 354 to 1.) Outsized CEO bonuses are probably the most controversial part of the equation. But while there is debate about whether those bonuses are merited, there is an absence of debate whether bonuses are useful motivators at all! I've reprised an older post to address this.
One of SO many things that the best rock groups can teach us about team performance is the value of self-direction.
Most of the top bands—from the Beatles to U2 to Green Day to the Dixie Chicks—have operated with a maximum of personal autonomy. No one was (or is) peeking over their shoulder, micromanaging them, directing them what to write or how to play.
This is helped by the fact that bands usually hire and fire their managers, not the other way around, which makes it abundantly clear who works for whom.
The importance of personal autonomy was brought home to me again reading psychologist Edward Deci's 1995 classic "Why We Do What We Do: Understanding Self-Motivation"—based on decades of research by himself, colleague Richard Ryan, and others.
Their experiments overwhelmingly confirmed a significant (and heterodox) proposition: under most conditions individuals and teams operate best when motivated by intrinsic values and worst when motivated by external controls and contingent rewards, including monetary bonuses. ("Contingent" means "IF you achieve X, THEN you'll be rewarded"—the classic "carrot" approach.)
Granted, it's important for workers to have sufficient—and equitable—baseline pay so that the whole issue of compensation is off the table. But additional financial incentives—contingent "if/then" rewards such as cash bonuses—are not useful motivators except for grunt work or tasks deemed undesirable.
To achieve outcomes that require some resourcefulness, intuition, or creativity, external controls and rewards are usually a bad idea—narrowing people's focus, blinding them to outside-the-lines solutions, encouraging them to take shortcuts, and compromising any long-term benefits that aren't rewarded by short-term bonuses. (Wall Street provides us ABUNDANT examples, including a quarterly-earnings obsession.)
Dan Pink in his 2009 bestseller "Drive: The Surprising Truth About What Motivates Us"—which pulls in dozens of additional field studies by behavioral scientists, sociologists, and economists—comes to a similar conclusion: "The science shows that the secret to high performance isn't our biological drive or our reward-and-punishment drive, but our third drive—our deep-seated desire to direct our own lives, to extend and expand our abilities, and to live a life of purpose."
Unfortunately in our business organizations, management—by virtue of its reliance on carrot-and-stick controls—pursues compliance at the expense of engagement, while undermining and weakening intrinsic motivation. In Pink's words: "This era doesn't call for better management. It calls for a renaissance of self-direction."
So while a disruptive world economy—especially the Creative Economy—demands from us more energetic, imaginative, and innovative performance our businesses (and our schools) too often incentivize the opposite.
No wonder many of us rely on rock & roll for daily inspiration! (Also, I'm here to tell you that managers of rock bands don't earn 354 times what band members earn.)
Here's a terrific video, animated by RSA, that illustrates Dan Pink's findings.