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Are We Going about Workforce Diversity Incentives All Wrong?

By Melissa J. Anderson

In his TED talk on “The Surprising Science of Motivation” workplace author Daniel Pink suggests that companies have the science of motivation all wrong for today’s employees. How wrong? Pink says that large financial incentives not are not only unmotivating for individuals engaged in critical thinking, innovative lines of work – high performers – but, he says, large financial incentives are demotivating for these individuals.

Pointing to a 1945 experiment, Pink discusses how groups offered a larger incentive to solve a problem took longer to solve the problem. And, he said, the experiment wasn’t just a fluke – it’s been performed over and over again with the same results. For critical thinking and problem solving, large financial incentives actually lead to less productive outcomes.

He says, “If you want people to perform better, you reward them. Right? Bonuses, commissions, their own reality show. Incentivize them. That’s how business works. But that’s not happening here. You’ve got an incentive designed to sharpen thinking and accelerate creativity. And it does just the opposite. It dulls thinking and blocks creativity.”

The problem here, he says, is that an extrinsic reward system – carrot and stick – is not an effective way to motivate individuals to solve 21st century workplace problems. Pink points out a few more experiments that show the same thing – that large financial incentives do not motivate employees to solve 21st century problems – one study by MIT and funded by the Federal Reserve and one study at the London School of Economics. Yet companies continue to attempt to motivate employees with financial rewards.

“There is a mismatch between what science knows and what business does,” he says.

On Evolved Employer, we’ve advocated for tying executive and managerial compensation to workforce diversity – holding business leaders responsible for diversity through financial means. But Pink’s points out a potential flaw here. Improving workforce diversity isn’t a simple, mechanical problem. In many cases, it requires innovative, critical thinking, especially when it comes to tackling problems like unconscious bias, leadership development, or pipeline management.

Pink says three things that motivates employees are autonomy, mastery, and purpose. Unlike extrinsic, carrot and stick motivators, these are intrinsic ones.

Another way to look at the problem of diversity accountability is to consider the business case for diversity. In the corporate space, attaching a financial reward to solving a problem, or at least making some headway, implies that the problem is one of business significance – that fixing the problem or making progress will help the firm make more money.

In this case, perhaps financial compensation for making progress can be considered an indicator of purpose – indication that there is a reason the manager or executive is engaged in the activity (that diversity is good for the company’s bottom line).

Pink’s research suggests is that financial rewards, when not tied to any greater purpose, are demotivating. The studies he used mentioned discuss rewards given for work done in a bubble. What about financial rewards that are used to indicate that the work being done is useful and important?

What Pink’s talk really suggests is that business leaders should not simply be compensated for making headway on corporate diversity, but also that the reason for the compensation must be conveyed in a purposeful matter. Leaders have to be convinced they are doing what’s right for the company – the reward must be tied to purpose (i.e. the business case for diversity).

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