Dan Pink provides irrefutable evidence in support of the fact that incentives (what we at Legitimate Leadership call “carrots”) are not successful motivators – they not only don’t produce better results, they  often have negative consequences. We concur with his research findings. Where tasks are non-cognitive and repetitive, incentives can raise output but even then they effect movement not willingness. Moreover the persistent use of “carrots” makes people feel manipulated. Their natural response is retaliation – they manipulate back! Dan Pink argues for replacing incentives with the intrinsic rewards of autonomy (what we call decision making authority), mastery (coaching for excellence) and purpose (know “why”). Again, we support Dan Pink’s argument, and we expand on it. Legitimate Leadership is convinced that what truly motivates people is to work for a boss who is in the relationship to “give” not to “get” from his/her people. The “give” is seven things: care, means, ability, censure, discipline, praise and reward.

OUR SUMMARY OF THIS VIDEO:  The “candle problem”, which is used in many experiments in behavioral science, was created in 1945 by a psychologist, Karl Duncker.

Here’s how it works: I’m the experimenter. I bring you into a room. I give you a candle, some thumbtacks and some matches and I say to you, “Your job is to attach the candle to the wall so the wax doesn’t drip onto the table.”

Many people begin trying to thumbtack the candle to the wall. Doesn’t work. Some people have a great idea where they light the match, melt the side of the candle, try to adhere it to the wall. Doesn’t work.

Eventually, after five or ten minutes, most people figure out the solution. The key is to overcome what’s called functional fixedness. You look at that box and you see it only as a receptacle for the tacks. But it can also have this other function, as a platform for the candle.

I want to tell you about an experiment using the candle problem, done by a scientist named Sam Glucksberg, who is now at Princeton University. This shows the power of incentives.

He gathered his participants and said, “I’m going to time how quickly you can solve this problem.”

To one group he said, “I’m going to time you to establish norms, averages for how long it typically takes someone to solve this sort of problem.”

To the second group he offered rewards, and said, “If you’re in the top 25% of the fastest times, you get 5 dollars. If you’re the fastest of everyone we’re testing here today, you get 20 dollars.” Several years ago, that was a decent sum of money for a few minutes of work – a nice motivator.

So, how much faster did the second group solve the problem?

Answer: It took them, on average, three and a half minutes longer.

This makes no sense, right? I mean, I’m an American. I believe in free markets. That’s not how it’s supposed to work, right?

If you want people to perform better, you reward them. Right? Bonuses, commissions, their own reality show. Incentivize them. That’s how business works. But that’s not happening here. You’ve got an incentive designed to sharpen thinking and accelerate creativity, and it does just the opposite. It dulls thinking and blocks creativity.

What’s interesting about this experiment is that it’s not an aberration. This has been replicated over and over again for nearly 40 years.

These contingent motivators — if you do this, then you get that — work in some circumstances. But for a lot of tasks, they actually either don’t work or, often, they do harm.

This is one of the most robust findings in social science, and also one of the most ignored.

I spent the last couple of years looking at the science of human motivation, particularly the dynamics of extrinsic motivators and intrinsic motivators. And I’m telling you, it’s not even close. If you look at the science, there is a mismatch between what science knows and what business does.

What’s alarming here is that our business operating system –  the set of assumptions and protocols beneath our businesses, how we motivate people, how we apply our human resources – is built entirely around these extrinsic motivators, around carrots and sticks.

That’s actually fine for many kinds of 20th century tasks. But for 21st century tasks, that mechanistic, reward-and-punishment approach often doesn’t work, and often does harm.

If-then rewards work really well for those sorts of tasks, where there is a simple set of rules and a clear destination to go to. Rewards, by their very nature, narrow our focus, concentrate the mind; that’s why they work in so many cases. So, for tasks where you just see the goal right there, zoom straight ahead to it, they work really well.

But for the real candle problem, you don’t want to be looking narrowly. The solution is on the periphery. You want to be looking around. That reward actually narrows our focus and restricts our possibility.

Let me tell you why this is so important. White-collar workers are doing less of this kind of routine work, and more cognitive work. That routine, rule-based, left-brain work – certain kinds of accounting, financial analysis, computer programming – has become fairly easy to outsource, fairly easy to automate. Software can do it faster. Low-cost providers can do it cheaper. So what really matters are the more right-brained creative, conceptual kinds of abilities.

Think about your own work. Do the problems that you face, or even the problems we’ve been talking about here, have a clear set of rules, and a single solution? No. The rules are mystifying. The solution, if it exists at all, is surprising and not obvious. Everybody in this room is dealing with their own version of the candle problem. And for candle problems of any kind, in any field, those if-then rewards, the things around which we’ve built so many of our businesses, don’t work!

It makes me crazy. And here’s the thing. This is not a feeling. I’m a lawyer; I don’t believe in feelings. This is not a philosophy. I’m an American; I don’t believe in philosophy.

This is a fact.

More evidence: Dan Ariely, one of the great economists of our time, with three colleagues, did a study of some MIT students. They gave these MIT students a bunch of games, games that involved creativity, and motor skills, and concentration. And they offered them, for performance, three levels of rewards: small, medium and large. If you do really well you get the large reward, on down.

What happened? As long as the task involved only mechanical skill, bonuses worked as they would be expected: the higher the pay, the better the performance. But once the task called for even rudimentary cognitive skill, a larger reward led to poorer performance.

Then they said, “Let’s see if there’s any cultural bias here. Let’s go to Madurai, India, and test it. There, the standard of living is lower and a reward that is modest in North American standards is more meaningful there. Same deal. A bunch of games, three levels of rewards.

What happens? People offered the medium level of rewards did no better than people offered the small rewards. But this time, people offered the highest rewards did the worst of all. In eight of the nine tasks we examined across three experiments, higher incentives led to worse performance.

Is this some kind of touchy-feely socialist conspiracy? No, these are economists from MIT, from Carnegie Mellon, from the University of Chicago. The Federal Reserve Bank of the United States sponsored this research.

The London School of Economics, looked at 51 studies of pay-for-performance plans, inside of companies. Here’s what they said: “We find that financial incentives can result in a negative impact on overall performance.”

There is a mismatch between what science knows and what business does. And what worries me is that too many organizations are making their decisions, their policies about talent and people, based on assumptions that are outdated, unexamined, and rooted more in folklore than in science. And if we really want to get out of this economic mess, if we really want high performance on those definitional tasks of the 21st century, the solution is not to do more of the wrong things, to entice people with a sweeter carrot, or threaten them with a sharper stick. We need a whole new approach.

The good news is that the scientists who’ve been studying motivation have given us this new approach. It’s built much more around intrinsic motivation. Around the desire to do things because they matter, because we like them, they’re interesting, or part of something important. And to my mind, that new operating system for our businesses revolves around three elements: autonomy, mastery and purpose.

Autonomy: the urge to direct our own lives. Mastery: the desire to get better and better at something that matters. Purpose: the yearning to do what we do in the service of something larger than ourselves. These are the building blocks of an entirely new operating system for our businesses.