Is Reputation a Bigger Motivator Than Money?

Erez Yoeli, Moshe Hoffman, David Rand, and Martin Nowak have conducted a fascinating new study that suggests reputation sometimes can be a bigger motivator than money.   They conducted a field experiment associated with a utility company's program in California to try to prevent blackouts. Some individuals were offered financial incentives to participate.  For other individuals, sign-up sheets were posted in common areas of apartment buildings.  Financial incentives did boost participation in the program.  However, the sign-up sheets had a much more significant impact!   Rand explained to the Harvard Gazette:  “When people know it’s a cooperative effort, they feel peer pressure to take part.  They think, ‘If I don’t do this, I’m going to look like a jerk.’ But if it’s not observable, then there’s no problem with not participating.”   Making behavior observable brings reputation to the forefront.  People care a great deal, in many cases, about how others perceive them.   Hoffman explained that Toyota may have used this self-perception concern to its benefit when designing the Prius.    “In fact, we think this is one reason why the Prius, for instance, is such a different-looking car. The designers at Toyota seem to have intuitively had this idea: designing a car that didn’t look like any other car so your neighbors can tell you’re driving a hybrid." 

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Would You Like That Bonus in Cash or Some Other Form?

How should you reward people?  What concerns should you have about offering rewards to your employees?   One important factor to consider: Will the employees compare rewards with one another?  Will those who receive smaller rewards be highly dissatisfied?   Extensive research shows that people engage in social comparisons.  They care not just about how much they receive, but how much they receive as compared to their peers.  Kellogg Professor Neal Roese and doctoral student Jingjing Ma have conducted some fascinating research with regard to reward comparisons.   They have shown that making rewards less "countable" can reduce the "likelihood that recipients will compare rewards, which in turn increases their satisfaction." 

The original experiment went as follows.  They created two groups of students: an "overbenefit" group and an"underbenefit" group.   The groups split a fixed reward 60/40.   One half of each group received a "countable" reward - i.e. cash.  The other half received an "uncountable" reward - i.e. a slice of cake.   Naturally, people who received higher rewards were more satisfied in both cases (cash and cake).  However, between the two "underbenefit" groups, the recipients of cake were much less dissatisfied than the recipients of cash rewards.  

Kellogg Insights provides the scholars' explanations of this result: "According to Ma, offering cake encouraged the recipients to focus on the experiential aspect of their reward—'oh, this cake is delicious,' she says—instead of 'thinking about how they received less than the other guy.'"

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Creating Personal Accountability Systems

How do we motivate ourselves to achieve our important, but not necessarily highly urgent, goals and objectives?   Writer Laura Vanderkam has a neat article at Fortune.com about how to use personal accountability systems to keep us on track when it might otherwise be easy to procrastinate.   Vanderkam explains:

"So what do successful people do? They create external motivations for things they want to do but that life has a way of crowding out. They create accountability systems that boost important but not urgent items to the top of their priority lists -- ideally in a way that makes failure really uncomfortable. Effective people know that we succeed when success seems like the easiest choice."  

Vanderkam actually tried this technique herself while working on her novel.  She tapped someone as her "writing buddy."   She set out to write 2,000 words per week, and Vanderkam checked in with her writing  buddy each Friday to see how things were going.  Soon enough, she was writing more than 2,000 words per week, and then she actually finished her rough draft.   The buddy system worked. 

Why does this type of personal accountability system work?   Vanderkam argues that we don't like to appear lazy before others. Therefore, we are motivated to reach the goals that we have set out, and that we know our partner(s) will hold us accountable for achieving.

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Should You Purposefully Annoy Your Employees?

Ray Fisman and Tim Sullivan offer an interesting anecdote in today's "How To Be A Better Boss" article in the Wall Street Journal.   Fisman and Sullivan write:

Employees often wish managers were a little more understanding, but people tend to associate the idea of "understanding" with "nice." A little well-directed pain can be a good thing in getting workers to focus on the tasks they might otherwise choose to forget, and to increase overall productivity.  Given that developers often prefer programs to people, Kayak founder Paul English says, making them deal directly with customers' questions drove them nuts. Once they heard the same complaint two or three times, the engineers tended to stop and fix the code. As an added bonus, after taking his turn on customer-service duty, an engineer can pass the phone—along with its grating ring—down the line for someone else to deal with.

What an interesting example!   Of course, the phone calls work for reasons beyond the fact that they annoy the software developers.  The phone calls create a direct line of communication between the developers and the users.  Kayak has removed all the information filtering that often takes place between the users in the marketplace and the developers back at the office.  Moreover, developers get a real sense of what is just a one-off complaint versus a real pattern.   Too often, someone can shrug off a complaint from the sales force as an "isolated incident."  However, in this case, the developers can begin to see that a pattern exists, and that the incident is far from isolated.   Finally, the developers share the pain here.  We don't have a few "problem-solvers" focused on fixing bugs.  We have all the developers addressing bugs.  Everyone is accountable, as opposed to having a small unit that worries about fixing bugs.   The collective accountability goes a long way toward improving quality.  Once everyone knows that they will have to address these calls at some point, it also makes people take extra care to get it right the first time.  

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Millenials in a Process-Oriented Workplace

An executive asked me a terrific question today during a leadership development workshop.  He inquired, "How do we keep young people engaged and intrinsically motivated while, at the same time, maintaining disciplined, standardized processes in the organization?"  He worried that millenials working at the front lines (in distribution centers, for instance) will chafe at the notion of simply following standard processes. 

Naturally, companies like this particular one can't simply ditch their standardized processes.  However, they can provide plenty of opportunity for young people on the front lines to offer ideas for improving those processes.  The key, however, is not to simply allow people to begin making ad hoc changes to those processes at every localized unit of the organization.   Moreover, people don't want their ideas to simply get thrown into a suggestion box never to be heard from again.   Companies need to find ways for people on the front lines to experiment with improvement ideas in a systematic way, and then they need to assess those experiments carefully.  If the experiment goes well, they need to create a feedback loop, so that the idea doesn't just lead to change at the local level, but instead gets built into the standard processes across the organization.   If young people get to experiment in this manner, they will be pleased that they are being given some potential to make a broader impact, while the company maintains needed process discipline. 

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Motivation: The Power of Peer Comparison

Ian Larkin of Harvard Business School has conducted a very interesting field study to examine how comparison to one's peers motivates employees.  Larkin conducted a field study at a large enterprise software firm.  The company paid its sales people based on commission, naturally.   However, employees also could receive a nonmonetary recognition each year if they performed better than 90% of their peers.  They could be granted membership into the "President's Club."  The award did not come with extra monetary compensation.  Instead, employees received a gold star on their name card, company-wide recognition, an e-mail from the CEO, and a weekend trip to a tropical destination with the other club members.    Here is what Larkin found:

The software firm uses a "commission accelerator" program over the course of each financial quarter, meaning that a salesperson expecting a high-volume sale at the beginning of a quarter would receive a higher commission on any additional sales in the same quarter. A salesperson expecting a large sale early in the first quarter of the year would rationally want to delay any other potential sales until later in that quarter, so as to take advantage of the accelerating commission schedule.  However, making the sale right away, before the end of the year, could help the salesperson achieve special recognition as a member of the club. Thus, the salesperson faces a choice: delay the sale and garner eventual commission boosts, or make the sale right away and improve the chance of attaining club membership. In the paper, Larkin uses actual choices of hundreds of salespeople facing this decision to statistically estimate the average salesperson's "willingness to pay" for club induction—the point at which a salesperson is indifferent to waiting for greater commissions and closing the deal now and getting inducted into the club. The willingness-to-pay statistic at the software firm is calculated to be nearly $30,000, or approximately 5 percent of take-home pay.  "My research shows that salespeople who are right on the margin of club induction are actually willing to pay to get over the margin and into the club," Larkin says.


What's the implication of this study?  Well, as we have known for some time, social comparison is a very powerful motivator.  People don't simply worry about what they earn. They care about what they earn relative to their peers.  Designing reward schemes with this in mind can result in a more highly motivated workplace.  Disregarding these findings can lead to disenchanted employees.   I recall Michael Lewis writing about this phenomenon in Liar's Poker.  Bankers would receive huge bonuses, but still be very upset, because they learned that others had received higher bonuses.  We might just chalk that up to "banker greed" - but of course, this study and others show that social comparison is a powerful factor across many organizations. 

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Motivation: Daniel Pink

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