If I gave you a puzzle, and offered you a little money if you completed it faster than another person who was not offered any money, would you solve the puzzle faster? Social scientists have been researching problems like this for decades and the answer: probably not. That’s strange — what if I offered to give you a large sum of money for completing a task before another unpaid competitor? The research suggests that you’d do even worse.
These are the findings of a study conducted by Professor Dan Ariely and colleagues at the Massachusetts Institute of Technology. Of the nine tasks the researchers tested in three experiments, eight revealed that “higher incentives led to worse performance.” Additionally, a meta-analysis of 51 studies of worker-performance done at the London School of Economics concluded that profit incentivizing “can result in a negative impact on overall performance.” These experiments and conclusions have been replicated time and time again.
This seems counterintuitive. Surely, if someone offered me a truckload of money to move a bunch of heavy boxes while competing against another person told to do it for “fun,” I’d win. Ariely’s experiments confirm this intuition, but what the research indicates is that when a task moves beyond simple physical work to include “even rudimentary cognitive skill,” higher incentives lead to worse performance.
Dan Pink, author and former speech writer for Al Gore, has written extensively about changing the way work is managed and done. In a recent TED video, he lays out an argument against traditional models of business based on management and financial incentives and claims that there is a “mismatch between what science knows and what business does.” According to Pink, the first thing businesses have to do is pay everybody equally, so internal competition for incentives disappears. Pink then points to businesses like Atlassian, a software programming company, and Google, who are now using management models that draw on these scientific findings. Both companies have a 20 percent rule, whereby they tell their engineers to go work on whatever they want for 20 percent of their paid work time. The engineers are not incentivized or pressured by management from above, but given free reign to work on what they want to. In both cases, the adoption of this policy has been unequivocally successful.
In the 1980s, Japanese companies also moved away from traditional business models and consequently became the second largest economy in the world. Harvard Professor Ezra Vogel identified the characteristics of Japanese companies that set them apart from traditional Western systems: bottom-up decision-making, less specialization, improved job security and group orientation as opposed to orienting the company around individuals. Each of these characteristics involve moving away from incentives for individual success and towards a more rounded and free participation in the company and its work. The success of these Japanese business models can be seen in the phenomenal widespread consumption of Japanese electronics and cars.
In Ariely’s experiments, and in many others, people are given a task and are either incentivized through material rewards or are just told to do it. The difference between the two groups is that one is motivated externally by money and the other is motivated internally by the challenge of the task at hand. This difference in motivation is the factor that alters the performance and self-satisfaction in completing the task.
The cognitive dissonance theory is a well-studied psychological framework which states that when a person experiences a contradiction in their head, an unpleasant emotional state arises. According to the theory, people act to reduce this unpleasant feeling of cognitive dissonance by altering their beliefs to make themselves appear more rational than they are.
In one classic study, two groups of children were told to do a certain task, one group was rewarded and the other was not. When questioned later about task was, the rewarded group thought the task had less value and expressed less interest in doing the task again than the group that wasn’t rewarded. The suggestion is that the group that was rewarded experienced cognitive dissonance between the beliefs of wanting to do the task for money and wanting to do it for it for fun, so they altered their beliefs unconsciously to think that they were just doing it for the money.
This doesn’t mean companies shouldn’t pay workers, but that companies should not focus the work around profit through incentives and instead around the work itself for it’s inherent value. Doing so would make people work more happily and more productively.
Some hardcore liberals might exclaim, “Equal pay! Less management! Sounds like a pile of socialist hogwash to me.” Well, if by socialism, they mean equality in the workplace and improved performance, then they’re right. The kinds of business models that this science points towards are the opposite of traditional capitalist notions where money is the fundamental mover and shaker that creates socioeconomic harmony. Keep in mind that the empirical evidence also rebukes the Soviet Communist model of extreme regulation and micromanaging of industry.
So what would this new model of business be called? I think it is equally compatible with non-state forms of socialism and pre-corporate free markets, like the American economy in most of the 18th and 19th centuries. Of course, the label applied to it is much less important than the urgent need for business reform in the United States.
Take the private bank system in the United States for instance. The yearly and quarterly bonuses are what bankers work to maximize and it doesn’t take an elephant to remember where those guys led us: total economic meltdown and the borrowing of almost $1 trillion, which the New York Times recently questioned would ever be paid back. The business models of banks is at the other end of the spectrum from what science favors.
Look at the disparity between income of those at the top and bottom of companies. Researchers at Cornell University have found that the ratio of executive salaries to worker salaries was 30-to-1 in the 1970s and was about 648-to-1 in 2000. How can people not be motivated externally by financial incentives when those around them are paid either vastly more or less than themselves?
The recent public demand to cap bonuses is a step in the right direction, but is just the beginning of the massive overhaul that is needed. Imagine going to work and being able to work on whatever you want without the threat of losing pay or your entire job. Of course this requires intelligence, creativity and motivation to work hard, but isn’t that exactly what higher education is capable of nurturing in its students?
A favorite example of mine is film director Stanley Kubrick (2001: A Space Odyssey, A Clockwork Orange, Dr. Strangelove), who was an utter failure in the reward-based system of public education; during some school years, his attendance rate was below 50 percent. Nonetheless, Kubrick went on to become one of the most respected artists and intellectuals of the 20th century. His quote on learning is equally applicable to the workplace: “Interest can produce learning on a scale compared to fear as a nuclear explosion to a firecracker.”
Max Hoiland is a senior majoring in cinema-television critical studies.