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Does More Money Motivate Higher Performance?

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One of my blog readers – Boaz Fletcher – sent me an awesome video this morning from RSA Animate.  It’s 11 minutes long and is a fascinating lecture by Dan Pink about The Surprising Truth About What Motivates Us.  I love the RSA Animate format – an artist animates the talk on a giant whiteboard in real time.

In this case Pink takes on the question of “Does More Money Motivate Higher Performance?”  In the first few minutes he shows that while this works for tasks requiring mechanical skill, this does not work for tasks that require even rudimentary cognitive skill.  In fact, in these cases there is an negative correlation between greater monetary reward and increased performance.  It’s counterintuitive, but the talk illustrates it beautifully with several examples that will appeal to any technology entrepreneur. 

There are several deeply insightful points including the notion that we crave autonomy and mastery in addition to simply making a contribution and getting rewarded economically for it.  Furthermore, if the “profit motive” gets unmoored from the “purpose motive”, bad things happen. 

Ultimately Pink makes a good case that as managers and entrepreneurs, we need to get past the ideology of using carrots and sticks to motivate people.  Grab 11 minutes and learn something important today.

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May 28th, 2010     Categories: Entrepreneurship     Tags: ,
  • http://www.facebook.com/johndmc John McCarthy

    Thanks for highlighting this. This was a great distillation of some very important themes.
    "Pay people enough to take the issue of money off the table."

  • http://intensedebate.com/people/BingChou virtuallybing

    This is great – thanks for sharing Brad. Especially timely for me as I contemplate a career change.

  • http://intensedebate.com/profiles/rockya Rocky Agrawal

    Pink's essay on the topic is also worth reading. He goes into more depth, with examples, here: http://www.thersa.org/fellowship/journal/features…

  • http://intensedebate.com/profiles/dpilling Derek Pilling

    Incredibly important topic Brad. I've read Pink's book "Drive", which covers this topic in detail in the context of the history of compensation theory. Although the emerging theories covered are not new, they are incredibly poorly adopted. We need a fundamental regime change in how we think about compensation. Carrots and sticks are disrespectful motivators and steal the only motivator that matters; the intrinsic human will to win.

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  • http://intensedebate.com/profiles/chaevans chaevans

    Does anyone have a pointer to the MIT study? I can't find it anywhere.

  • http://uniqueblogdesigns.com Joshua Mullineaux

    I've seen this study before and I think it is surprisingly relevant to investing, start-ups, etc. It makes me think of the debate between Fred Wilson and Ben Horowitz from TechCrunch Disrupt. The debate, if you missed it, was about lean vs. fat start-up funding.

    Fred's main point was about the motivation of entrepreneurs and investors being personal wealth while Ben's point was that to fuel truly great ideas sometimes being lean will stifle those ideas.

    From the audience's perspective Fred won the debate by a landslide.

    Brad, seeing as though you are a believer in the lean start-up model (as am I), how would you rationalize this video/study and the correlation to a lean start-up model?

    • http://intensedebate.com/people/bfeld Brad Feld

      I’m not sure how I rationalize this to a lean startup model.  There’s probably “deeper” stuff at work – some of it philosophical (e.g. “lean” vs. “fat”), some of it simply provocative (e.g. the argument between lean and fat is missing a lot of the point as there is more than one way to build a great company), and – most importantly, motivation varies dramatically (although success seems to correlate with “need for achievement” vs. “need for independence”). 

  • http://blog.botfu.com Kevin Marshall

    Pretty cool! Now I wish I could get a poster of the whiteboard that was created during this video!

  • http://intensedebate.com/profiles/jvaleski Jud

    with money… you can buy my time, however, you can't buy my passion and emotional commitment; those things come from other vectors. they're all related though.

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  • http://intensedebate.com/people/ckstevenson ckstevenson

    Your reader probably found it via Robert Scoble – http://scobleizer.com/2010/05/27/this-is-why-i-wo…

  • http://sotirov.com Emil Sotirov

    Extremely cool – on the positive, future-looking side.

    And extremely depressing – as a lens through which to look back at the last few decades of "show me the money" idiocy. Idiocy that not only pushed sociopaths to top corporate positions, but probably damaged a whole generation (those now in their late 30s and early 40s).

    Young people and companies could easily embrace this "new" way of thinking. But they'll have to fight their way through open hostility – from the older folks who would not accept easily the fact that they spent their lives driven (more like manipulated) by the wrong motives and values (or even worse – not really driven at all).

  • http://intensedebate.com/people/StartupTrekTV StartupTrekTV

    All entrepreneurs already know this!

  • http://www.alfiekohn.org/books/pbr.htm Jim Franklin

    “Punished by Rewards” is a good read on this topic and covers school and parenting issues as well.

  • Uri Z

    His thesis is very inspiring and highly relevant. However, it seems to me that this framework for "drive" is more informed by corporate culture than sheer compensation design. The sense of purpose, the granting of autonomy and encouragement to pursue mastery need to be emanated from the top-down.

    Joshua calls out an interesting point re the apparent friction between the profit-oriented lean start-up and the tenets of Drive. I can relate to both. Finding the optimum balance is the key….

  • http://www.tuneyfish.com Scott Golembiewski

    This goes much deeper beyond employee incentives. It’s proof that real world changing companies will come from passionate leaders, too bad those deeply passionate care so little about money they ever get funded and built beyond just sustaining the founders monetary needs.

  • http://twitter.com/andyidsinga andy idsinga

    Yeah – this is totally awesome stuff. Dan Pink's Ted talk on the same subject is totally worth watching – even just to see Dan give a slightly different version that is very entertaining and enlightening. http://www.ted.com/talks/dan_pink_on_motivation.h…

  • http://intensedebate.com/profiles/thestartupkid thestartupkid

    Awesome video! Thanks Brad and Boaz!

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  • http://intensedebate.com/profiles/glyphic glyphic

    It would be interesting to see if, in an environment where employees have autonomy, mastery, and purpose, adding additional monetary incentives affects performance positively or negatively. As presented in the talk, it seems like they primarily studied either/or situations.

  • DaveJ

    Not totally different than the Two-Factor Theory a.k.a. Motivator-Hygiene (1959). http://www.netmba.com/mgmt/ob/motivation/herzberg…

    If you recall some work I did for you a few years ago, we found anecdotally that managers see salesforce behavior being strongly tied to compensation – indeed, you have to be very careful of creating perverse incentives, because whatever you're paying for you get more of. Does this mean that the results Pink cites don't apply to sales, or does it mean that sales work falls below the "rudimentary cognitive challenge" threshold?

    The RSA animate is fun for a while but I got tired of it about halfway into the video. I found it taxing to process the written and oral language simultaneously, even though they were often similar.

  • http://www.housingassistanceonline.com Tina

    Money is always the lead motivator. Especially in this society. But as managers we need to break our employees away from thinking that way.

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  • http://www.LiveLoveCoffee.com Stephen

    Great video, and my gosh that guy could draw fast. Haha. I believe Google does something similar to this as well. I do not quite remember exactly how it is structured, but I believe employees are allowed something like 10-20 hours a week to work on their own personal projects much like that Australian company allows. Just seeing the progress of Google, I would have to say it is certainly working for them.

Brad Feld

Hi, I'm Brad Feld, a managing director at Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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