You know it’s January when it’s cold, raining and the debate about bankers’ bonuses is all over the press again. We have had this for the last three to four years – but are we missing the point?
What does actually motivate people to perform at their best? Are we using what we know about human motivation? There is strong scientific evidence that money achieves little in motivating work performance. We are motivated more by social than financial rewards. Maslow’s hierarchy of needs which places social reward in the ‘nice to have’ level was wrong. Social interaction is a prime need, like water, food and so on.
Daniel Pink pulled much of the science on reward and motivation together in his book Drive: the surprising truth about what motivates us and makes a compelling argument for fundamentally changing the bases of reward in organisations. If you are in the City and too swamped with bonus planning to read the book, there is an excellent summary on TED talks. Pink suggests we expect a fair reward but that money will not motivate discretionary effort. The neuroscience largely corroborates his conclusion. Rather than money we crave a good reputation, control over our job, certainty about the future and equitable treatment.
But reward is ultimately about job performance and while few would argue that motivation is not a key ingredient, many hard-nosed business people – bankers in particular – are more focused on performance outcomes than motivational inputs. How do they get people to perform better? The current reward mechanisms assume that paying more will result in better performance. But where’s the scientific evidence for that?
Research by Dan Ariely set out to test whether more money created higher performance. He tested both manual activities, where there was some correlation with performance, and thinking tasks. When groups were offered monetary reward for higher performance, those offered low and medium level rewards did better or just as well. The group offered the higher bonus did significantly worse, especially when the task involved cognitive effort. Add to this a further study that showed that when people were asked to perform in public, performance diminished.
Both pieces of work indicate that the stress of a situation overrides the motivation to do well. Ariely says he shared his results with Wall Street bankers who said the level of rewards in the study were too low to apply to their people. He offered to repeat the experiments with banking-level reward. Strangely the bankers declined. Why? Would this not prove or disprove the arguments about bonus once and for all?
Ariely calls the behaviour ‘predictable irrationality’, an excellent description of the bonus debate. In all the column inches and airtime devoted to banking bonuses, not once have I heard anyone ask whether we are actually right to reward people as we do and whether it really creates high performance.
Who in the city is looking at the science and reimagining reward policies? Are the regulators just tinkering at the edges? We need all the stakeholders, including the bankers and business leaders, to understand the science and the implications for business and have the courage to change the system. As someone who worked in the City, and was responsible for the bonus pool, I know this will take more than one bonus round. It is about education, challenging entrenched beliefs and courage. But it is also an opportunity for the HR profession to make a real difference. Are we up for it? Or do we prefer to be predictably irrational on this topic and keep giving the politicians something to create headlines about?