A big hat tip to Rabbett Run, where I first saw this. Daniel Pink explains the counterintuitive research that shows bonuses not only don't work, they cause people to do do worse (as if anyone watching Wall Street of late hadn't begun to figure that out already). And as a bonus, animation! Very neat video below the fold:
In a talk for RSA, Pink summarizes years of research on motivation that show that the whole system we use to inceptive behavior in corporate America is backwards, and we shouldn't be surprised when absurdly paid CEOs and market traders screw up badly. To summarize his talk, these are the main points.
- For mechanical tasks that require little thought, money incentives work well.
- For anything that requires thought, creativity, cognitive problems and the like, incentiving people with more money actually produces worse results. (Though you do need to pay them enough that they don't have to worry about money)
- That for these kinds of tasks, people produce better work not when they are promised more money, but when they have autonomy, the opportunity to gain mastery in their field, and can see real purpose in what they do.
- This is backed up by a lot of research, with repeated results in many fields.
So when they tell us we can't tinker with Wall Street bonuses because people will lose incentive to do their best work, they don't know what their talking about. Greed of course can inspire a desire for more and more money, but in terms of producing anything but fatter paychecks for the recipient, it leads to worse results everywhere else.
The real secret to getting the best out of people: give people a chance to change the world, give them the opportunity to master their skills, and set them loose (oh and pay people decently but not absurdly).
So why again is our government defending Wall Street bonuses again?