This article originally appeared in the LSE Business Review.
We’ve all met the eye-rollers. The leaders who say “business is business” and “people work to get paid.” The ones who leave “pastoral care” to the HR team down the hallway because there’s work to be done and money to be made.
When it comes to productivity and motivation, they’ve got a frustratingly clear view: that when you pay for performance you get more for your buck. So, while concepts like “engagement” and “purpose” are heard in their boardroom, the investment and energy they attract pales in comparison to the worship of remuneration strategy. Because really, they just think everyone is looking out for number one.
It’s time for a tougher pitch for meaningful work. The pay-for-performance practices that have come to dominate the corporate world are built on a foundation of standard economic theory. According to this set of beliefs, people act in their own interests, so they’ll work harder if there’s money on the table. The competition that’s fostered between employees scrapping for a limited bonus pot will serve to push the business forward. And those at the bottom can be left behind.
But just as behavioral economics has shown standard theory to be a poor predictor of human behavior, there’s little connection between pay-for-performance practices and the volumes of academic research on motivation and goal setting. One of our most pernicious systems, where employees are ranked against each other on a fixed distribution curve, is an almost perfect asymmetry of the evidence. It’s like we studied human behavior and flipped the findings on their heads in multiple ways:
/ By labeling over half our employees’ as average or below average by design;
/ By driving a competitive wedge between teams and fostering mistrust between people and their managers; and
/ By enforcing a process that removes any sense of independence and control.
In retrospect, perhaps we shouldn’t have needed academia to tell us this would end badly. Most will relate to a question that Dan Ariely, Professor of Psychology and Behavioral Economics at Duke University, says people will soon begin to ask themselves: “Really? That’s it? That’s the reason I’m here?”
Self-Determination Theory and Purposeful Work
Self-determination theory is a macro theory of human motivation. It studies how our behavior and performance changes according to what drives us, namely:
/ Inside-out motivations: pleasure, values, or the satisfaction of psychological needs
/ Outside-in motivations: the punishments or rewards of an outside entity
Inside-out motivations hold great promise for increases in productivity and wellbeing. But they require us to feel good about the contribution we’re making (competence), have control over our work (autonomy), and feel positively connected to our peers (relatedness). When we’re in this state, we’re not acting for reward or avoiding outside disapproval – we’re acting for ourselves. It’s a win-win because we bring heightened levels of excitement and confidence, better task performance, and improved creativity to our work. We’re also happier as a result; the pillars connect directly to a critical component of our wellbeing academics have called “eudemonic” – we reach for personal meaning and purpose.
Unfortunately, the two forms of motivation don’t always play nicely. Pay-for-performance practices, representing outside-in motivations, don’t just fail to promote our three pillars – they bully them away with a brash reminder that “we’re doing it for the money.” Purposeful work isn’t about avoiding a good and fair basic salary, mind; it’s just moving away from the illusion that performance will differ based on the variability of the reward. For knowledge workers particularly, there’s scant evidence that’s the case.
Helping People “Self-Determine” Their Performance
Let’s work from relatedness, competence, and autonomy. We need to feel connected to one another, so how about a shared purpose that’s powerful enough to bring people together? It needs to be more than annual profits, rising share prices, and innovation for innovation’s sake, but it can’t leave commercial growth by the wayside. It needs to find the value we bring to the world and put it at the core of our business strategy. If you want a blueprint for success, look to Unilever’s Sustainable Living Plan. It’s a long-term model that connects employees, shareholders, and customers under a shared vision of social impact and growth.
An integrated “corporate purpose” is a great starting point, but it’s not likely to improve employee performance on its own. We need to take that abstract vision and democratize it by helping people understand the important part they play; giving them time and space to interpret it personally; and encouraging them to take ownership of the impact they make. That’s easier said than done, but it’s an approach based on firm empirical ground. It deserves attention, resources, and exploration.
In the modern economy, we can’t simply pay people to perform. Those who cling to this view are not “rational” or “hard” or “commercial” – they are wrong. The future of performance needs us making connections, not just writing checks. Performance needs purpose.