blog write ups

8/9/2019 Blog Write Ups

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Employee Motivation getting it right Oak Ridge Part 2

Two weeks ago we interviewed 11 employees of Oak Ridge Conference Center in ChaskaMinnesota. We were trying to understand what Oak Ridge was doing to create such a highlymotivated work force.

Oak Ridge Part 2

The 4-Drives and motivation at Oak Ridge

A few weeks ago Susan and I spent the day interviewing 11 employees at Oak Ridge ConferenceCenter in Chaska, MN (see Oak Ridge Part 1 here). We had observed that Oak Ridge hadgotten the formula right on employee motivation and wanted to probe more to find out how.From our original findings, we highlighted five things that stood out: 1) leadership counts, 2) It is

not about the money, 3) It is about the team, 4) Genuine recognition rejuvenates and 5) It is allabout appreciating people. Im taking a different approach this time, looking at it from the 4-Drive Model and seeing how each of the drives is accounted for.

Drive to Acquire & Achieve:

The lack of emphasis on this drive was a bit surprising to me. There was much less focus onbonus and incentives than expected. Oak Ridge did have a few typical recognition programs thatwere seen as being moderately motivating (Employee of the Month, Shining Stars). The oneprogram that focused more on Achievement and was viewed as very motivating to a lot of peoplewas their weekly Legendary Moments. This was seen as a significant opportunity to be

showcased for your outstanding achievement not only by peers but also by customers.Legendary Moments is a weekly whole company gathering in which individuals are recognizedfor their outstanding service, highlights of the week are discussed, and fun updates are given.

One worker described Legendary Moments as A weekly pick-me-upI feel that it is a best practice. It is energizing, re-energizing,

and positive to listen to coworkers and customers tell about a job welldone. I really enjoy it.

Drive to Bond & Belong:

This was much higher than expected. People continually commented on how Oak Ridge felt likea family or that the sense of team was undeniable. There was a significant lack of territorialsilos with lots of discussion on how everyone was working on the same team. People expressedhow everyone pitched in to help when it was needed regardless of title or role if sheets neededto be changed, everybody would be there helping out including the General Manager. Thebonding goes beyond just the employees, but it is encouraged to happen with the customers aswell. As one person said, these arent just my customers, they are my friends.


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This sense of bonding and belonging started at the top with Senior Management taking the timeto get to know employees on an individual basis knowing employees names, what is going onin the employees family, activities that individual employees like to do at the initial interview. Itwas perpetuated by daily walk-abouts by the management team, with a cup of tea, asking howthings are going throughout the building, what is happening in their lives, what is new or exciting

in their lives. We see this personal bonding as a significant factor in the overall motivation andsatisfaction level at Oak Ridge.

One story that exemplifies this was how that when an employees youngchild was sick and in the hospital, the General Manager sent a care

package that included a stuffed hamster. From his frequent informaldiscussions with this employee, he knew that her child loved hamsters and

that it would be a special gift.

One person stated this about how they feel about their bond with theguests, The guests are my family and it is my job that I take care of them.

I keep them fed during break and take care of them. It makes me happywhen they are happy.

Drive to Challenge & Comprehend:

Being a service organization, people commented on how they were constantly being challengedby the various situations that occur naturally when dealing with customers. This was seen bymost interviewees as keeping their job interesting. They relished the opportunity to solvepeoples issues. As one worker stated, the attitude here is that we need to do everything possibleto serve the customer and make them happy. That provides an opportunity for employees tohave a sense of autonomy as they are empowered to solve those issues. They are given free rein

to serve the customer and make them happy.

This is translated into not only doing this reactively, but looking for opportunities to shine.Every customer that comes in is an opportunity to seek out what it is that really drives them andwhat they need. Stories abound about how a Server overheard that a client liked a soda notprovided and went out and got that for them, or how the Housekeeper realized that a client wasusing a lot of this product and brought in extra. Not as obvious but also very important was theconstant sharing that occurs. Legendary Moments is a structured communication tool, but alllevels of management also have meetings daily to review what is going on, and the informalcommunication that happens between teams and levels is constant. Management encourages thisand helps it with their daily walk-abouts.

One customer from Australia came into Oakridge very distraught and

upset that all her luggage had been lost. The front desk immediatelystarted to solve her issue, even though Oak Ridge had nothing to do

with it. The customer was given money from petty cash to go and buysome new clothes, transportation was provided to her to do this, the GM

okd phone calls back to Australia to talk with her family at no cost andthe IT person came in to configure her computer that wasnt working so


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she could e-mail. All of this happened without reviews or meetings much of it undertaken by front-line employees. By the end of her three

days, the customer had converted from being upset to being so gratefuland happy that she provided flowers for the staff as a thank you.

Drive to Define & Defend:

Oak Ridges reputation is outstanding. This brought a lot of pride and satisfaction to theemployees. They felt proud to tell their friends where they worked. One person said, I likegoing to parties and talking to people about [working here] because someone always tells meabout their great experience with us. The environment that Oak Ridge is situated in helps aswell as the building design which brings the outside in with lots of windows and natural light.It is enhanced by the service that is provided to their guests and the constant focus on serving.This is key to understanding the overall motivation of the employees. Psychologically theyidentified working at Oak Ridge as a part of who they were and they felt good about it. They

Oak Ridge Part 1

Susan and I just had the wonderful pleasure of spending a day interviewing 11 people at OakRidge Conference Center to try to uncover their secret - because they have gotten the formularight on employee motivation. Anyone who has ever stepped into their facility outside ofMinneapolis can attest to the customer service mentality that every employee exhibits - from thefront desk, to housekeeping, to the chefs, groundskeepers, and even in accounting. There is a

definite difference in how the majority of these employees "show up" at their job everyday andhow they view and take care of their "guests". They are truly a company that is doing somethingright. While we haven't had time to fully analyze the interviews (we will in the upcomingweeks), there are a few things that I can say definitively:

1. Leadership counts - the one overriding conclusion that hit us in the face was how importantleadership is in this process - they need to be present, genuine, and focused on the right things.

2. Its not about the money - I was a little surprise to hear (actually to NOT hear) about bonusplans or contests or other recognition that had a big dollar value. It wasn't important. It didn'tdrive their day-to-day activities or play an integral part in their motivation.

3. It is about the team - teamwork was an overriding theme in all of the interviews that we did.It wasn't ever about "my job" but instead about serving the customer. If that means that topmanagers have to change sheets, then that is what happens.

4. Genuine recognition rejuvenates - real, honest recognition that is done on a regular basis, inpublic, helps reinvigorate and help drive the culture. Knowing that their work is important andrecognized keeps people engaged.


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5. Its about people - employees were seen as people first. Management spent time getting toknow them, getting to understand who they were, spending time finding out about their familiesand interests. They care and it shows.

Over the next few weeks we will let you know more about our findings and get in depth with

some analysis. Oakridge has been kind enough to give us access to their people and allow us toshare our insights with you. There is something to learn here if you are interested in creating aworkforce that is motivated and engaged.

Amazon exiting the incentive game

The end of the game

So Amazon is leaving the incentive market which they just entered three years ago. From allreports it isn't because the venture isn't profitable, but instead it is about ensuring that their brandand their customer service reputation are not sullied. Paul Hebert in hisblog wrote, "the decisionwas made to drop fulfillment through incentive programs due to customer service issues.Specifically, the recipient, if they had problems with their order, would call Amazon for

resolution but Amazon would have to refer them back to the incentive company - who in turnwould do the due diligence to fix the problem. From Amazon's point of view this created a

negative impression of their customer service." In a nutshell, they are taking a hit on millions of$ to make sure there is no negative impact on the billions of $ that they do in their non-incentivebusiness. In my mind, that is a pretty smart move (one that you wouldn't see a lot of businesses

making). Now I'm sure there are other factors (i.e., tax issues, not controlling the customerrelationship, etc...). Nothing is ever quite as black and white as it seems.

In the short time that Amazon was in the market, they shook it up. They offered a new way offulfilling incentive program offerings. With their great number of items, their back endprocessing and handling, drop ship expertise, and their low price points, Amazon was able toprovide even the smallest incentive companies with a very sophisticated e-catalog of incentivegoods. No longer did an incentive house need to have the large capital expense of a warehouseand stocking products. Amazon was able to provide the back-end seamlessly for a price thatcouldn't be beat.

Playing against Amazon

I was part of a large pitch (as a partner with a traditional incentive house) last fall to a companythat loved what we did, trusted our customer service, thought that our creative approach was thebest and liked the way we brought behavioral science into the process (i.e., The Lantern Group) -but, ended up going with a different company because they could offer more merchandise at alower cost point. How did that other company do it - they used Amazon as their fulfillmentpartner. At that point, I thought I saw the writing on the wall - that the days of making large


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margins on merchandise were all but over. How could the traditional companies compete, whensmaller, more nimble and aggressive firms could come in and under-price while having a largeritem selection and great fulfillment services. In the debrief with the company about why we lostthe business, the purchasing agent said, "...this is the wave of the future, all [incentive]companies should be doing this." It was going to be a new world - and I was excited!

Changing the game

For years the pricing model used by incentive companies has been margin based. While there isnothing wrong with this conceptually, it does create an interesting dynamic. Merchandise is thecash cow for these companies. Without this, many of the companies will fail. There is anunderlying need to get people "into the warehouse." When I started my career (many eons ago) Iwas naive enough to think that when I was hired on at one of these incentive companies that Iwas going to work for a consulting firm that was trying to find the best way to motivate andengage employees. What I found out was they were all for that - as long as the way to domotivate and engage led through the warehouse (I'm exaggerating a little here for emphasis, but

there was an underlying culture of this). While that culture has shifted slightly over the years, itis still present in the industry. If Amazon was going to be able to undercut prices because oftheir buying power - then incentive companies were going to be forced to change their model.This would mean finding other ways to make money - which would lead them to finding otherways to increase motivation. The benefit would have been that these companies would havecreated a larger toolbox with more tools and thus not fall to the old idiom "when you only have ahammer, every problem looks like a nail."

The next competitor

While Amazon might be leaving, they showed that there was a desire in the marketplace for

something like this. I don't think there is another company right now that could fill that role, butthat doesn't mean in the future there couldn't be. So, with that in mind, it is important to thinkabout the next game. What will this mean for the traditional incentive houses, for the mid orsmall sized performance improvement firms? Will someone take that bold step to change thegame and bring in a different set of tools or will they exhale a deep breathe

Delta Airlines Customer Service Failure: Motivation Observations

Recently I was in Dallas conducting focus groups. After two long days of travel and facilitating,I raced back to DFW airport with the intent of trying to get on an earlier flight that I knew left at3:15 PM. Admittedly, this was a crapshoot and I would be cutting it close. I was scheduled forthe 5:55 PM flight, but the 3:15 PM flight would get me home in time to see my family beforemy two young children were in bed (which is pretty important to me). As luck would have it, I


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was able to return the rental car, run to catch the bus to the terminal, get my ticket, and getthrough security and arrive at the gate at 2:55 PM a good 20 minutes before the flight wasscheduled to depart. Here is an approximation of the exchange that occurred between me and thegate agent who we will call Mr. No.

Dallas, March 24

th

, 2:55P

M

Kurt standing at the counter said, Hi. Hows it going? Im on the 5:55 flight but was hopingthere might be a seat open that I could fly standby on this one.

Are you a gold or platinum member? Mr. No replied.

Not anymore. said Kurt, wondering why that mattered, Is there a seat available?

I cant help you if youre not a gold or platinum medallion member.

So theres a seat but you cant help me? Kurt asks with some despondency.

I cant get you on now. If you had been here ten minutes earlier I might have gotten you on.said Mr. No.

I dont have any checked bags and will sit down right away. I promise. Kurt says hoping alittle levity might help:

Im sorry. I cant have you go down there - they are getting ready to leave.

So you wont help me? There is 20 minutes before the flight leaves!

Youll just have to take your original flight.

Ill pay. What would it cost to change? Kurt said

$50. But I cant do that now. Mr. No says right before turning his back on me and checkingsome paper coming out of the printer.

Ok? Kurt said, while pulling out his i-phone to start Twittering about this horrible experiencewith Delta.

Motivation Observation

It appeared to me that the agent was concerned about the on-time status of the flight, the extrawork it would cause to put me on the flight, and the fact that I wasnt a premium status customermore than he was concerned about responding to my needs. I could go on and on about themotivation (or lack thereof) of the gate agent for Delta, but I do not know that agent, or theprocedural rules or incentives that Delta employs to drive motivation so any insight would beconjecture.


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What interests me was my response to this situation and the motivation that drove that response.My first inclination having been denied appropriate customer service was not to ask for amanager or send an e-mail to Deltas customer service it was to get on Twitter and to tell over700 people about my horrible experience. I ended up tweeting about this over 15 times in thenext 3 hours either directly about the experience or responding to other peoples tweets about

this. Here are my first 4 tweets (typos and all):

Delta airlines won't let me board plane on standby because it leaves in 20 minutes - horrible

cust service!

I understand why airlines get such a bad rap - counter agent too concerned about on timedeptarture and not cust service

Delta #failhere is plane that I can't boardhttp://twitpic.com/1aoaj7

Flight leaves at 3:15 I was here at 2:52 - agent couldn't accomodate me ( not gold or platinum)

even if I paid! http://twitpic.com/1aob2q

In terms of the four drives, which drives were activated? Clearly, my Defend drive was kickedinto high gear. The fact that I felt that my goals were being hindered by a Delta kicked thatDefense Drive into overdrive! I felt I needed to get payback and the idea of Twittering about thisprovided a means of vindication. I would make Delta pay by announcing how horrible they wereto the world. Hundreds of people would hear about it in real time and who knows, it could bepassed on to hundreds or thousands more through retweeting.

Therein lies a potential second drive the drive to Acquire. While this sounds contrary since Iwasnt going to the manager or to customer service to ask for money or a free ticket, what I was

doing was looking for recognition. Recognition from others on how I had been wronged. Iwanted the world to know about what I was going through and to recognize me for that fact.

This leads to a third drive that was Activated the drive to Bond. By tweeting about this I wasengaging in a conversation with other people about my experience. I was commensurating

The Lotto Game what would you do with your life if you won?

Spock or Kirk? How do you motivate?


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6 Lessons from The Maze

Over the past 18 years I have conducted a team buildingevent called the Electronic Maze with hundreds ofcompanies and thousands of participants. Sometimes called

the Magic Carpet the Electronic Maze is extraordinary, notbecause it is magic, but because of the team behaviors andemotional responses it elicits. Those behaviors andemotional responses are surprising similar across a widevariety of groups: senior managers, line workers, middlemanagement, cohesive teams, strangers, internationalaudiences, men, women, and every group that weve ever

done this with. Those behaviors are also very insightful as to how we perceive the world, workwith each other, and get things done.

The Maze works like this - between 10 and 25 participants gather around an 8 x 6 checkered

carpet that is broken into 48 black and gray squares (like a checker board). Some of thesesquares beep when stepped on while others do not. The facilitator begins by arbitrarilysplitting the group into two subgroups, one on each end of the carpet. The objective is thengiven:

To get everyone across the maze as quickly as possible via a non-beeping path with as few

penalties as possible.

However there are some rules. For every rule broken, the facilitator will assess a penalty.

Can move only to an adjacent square forward, backwards, sideways, and diagonal Only one person on carpet at a time from each side Must keep path in your head Nomarking the carpet or drawing it out No touching people on carpet After a person steps on a beeping square, they must retrace their exact path off of the carpet No talking - after2 minute strategy session Each side must determine a rotation for people to go across the maze

Over the years, six key learnings that have surfaced from this (there are others, but these sevenare pretty universal). Here they are:

We have a compulsion to compete

When we begin the event, we separate the team into two halves and put them at opposite ends ofthe maze. We specifically never say that they are individual teams yet 99% of the time, thetwo halves feel that they are competitors on different teams. Obviously the drive to compete isvery strong if this happens within seconds of being separated (research supports this see . Evenwhen one or more of the team members ask if they can work together (to which we always justrepeat the objective and point to the rules) they almost never do. The


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\\What we found was that even as we increased the premium on cooperation, so that playersmade most money by contributing 100 per cent of their money, on average people contributedsignificantly less than 100 per cent,' said Professor Stuart West of Oxford University's

Department of Zoology, one of the leaders of the study. 'In fact even when full cooperationdelivered the best financial returns between 66 and 94 per cent of people still saw fellow playersas their competitors.'

We have an obsession with moving forward

The path through the maze requires that at a specific point people are required to take a stepbackwards in order to proceed. At this point in the maze, every team Ive ever worked with hasrepeatedly stepped on one or more of the beeping squares that are forward of them. Manyteams even after repeated attempts cannot fathom that if they just step backwards they willultimately move forward. They step on the same beeping squares over and over and over again.

Sometimes for over 10 minutes stepping on the same three or four squares, somehow thinkingthat they will magically not beep this time. In fact, Ive had teams get so frustrated that theythrow away the path they already know works up to that point, and attempt to find a new way,convinced that the path they were on was a decoy path and that the true path forward must beelsewhere.

How quickly were let down

"I am not discouraged, because every wrong attempt discarded is another step forward."- ThomasEdison

The strength of patterns

Need to step

backwards


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Strategy plans usually fail, but strategy still happens

The facilitator gives the participants their two minute strategy session and then calls forquiet. The teams begin the process of trying to figure out how to get across the maze. Typically,they start by having people line up by each of the rows to remember the good and bad

squares for that row. They send the first person through. The first person steps on a square andit beeps or doesnt. That person keeps going until they do step on a beeping square (whichalways happens relatively quickly). This strategy typically falls apart as soon as one of thepeople assigned to keep track of a row needs to take his or her turn on the maze.

Trust is delicate

References:

University of Oxford (2010, May 21). Mistakes can explain 'cooperative' behavior. ScienceDaily.Retrieved May 22, 2010, from http://www.sciencedaily.com

The Motivation ofPatrick Rothfuss

What is it that motivates us to perform at a level above everyone else? Why is it that some

people strive for perfection while others settle for mediocrity?

I am a huge fan of Patrick Rothfuss, the author of The Name of the Wind(http://www.patrickrothfuss.com/content/index.asp). It is by far one of the best books Ive readin years (not just in the genre of fantasy, but one of the best books overall). Not only is the bookwonderful, but Mr. Rothfuss blog is fantastic. His writing is witty, fun, unabashful, honest,evocative, approachable and completely engaging. His video interviews are also extremelyenjoyable hearing him talk one quickly appreciates his wit and intelligence. I have oftenfound myself laughing out loud or having my head shake up and down in agreement withsomething he is saying.


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Would you rather have a $5,000 bonus check or a job that was challenging your intellect?

3 tips to increase the Drive to Acquire & Achieve

The first drive in the Four Drive Model of Employee Motivation is the drive to Acquire &Achieve. This is typically the drive that most organizations focus on when they are trying to finda lever to influence employee motivation. However, companies often get too caught up in thefinancial aspects of this drive (i.e., how much of a raise can we give, what is our targetedincentive/bonus payout, etc). The following are three quick tips to help you think about howto impact this drive and increase employee motivation.

1. Its not just about the money. This drive also includes the drive to achieve. Achievementtakes on a number of different forms. Think about this in terms of grades there is nomonetary component to this, yet we are driven to try to get an A. In organizations,

recognition is a very powerful motivator because it recognizes individuals or groupachievement (kind of like a report card). Organizations can tap into the drive to achieveby focusing on ensuring that recognition is done correctly (e.g., timely, relevant, andappropriate to the effort/result). Achievement is also about setting realistic goals that canbe achieved. Short-term milestones are elements to use to help keep this drive up. Oneway to think about this is to think about the need to reinforce achievement on atminimum every 5 weeks. If you dont have a milestones set up that fall within thattimeframe, you will tend to lose people. Make sure that you celebrate those milestones aswell, one thing that we are trying to get better at The Lantern Group is celebrating when aproject or milestone is done. We get so caught up in the next project or next event thatwe dont take the time to stop and congratulate ourselves on a job well done.

2. Perks. While we tend to focus on the big items like pay and bonuses with this drive,some of the more powerful levers that we get to pull are smaller perks such as officespace, titles, parking spots, flexibility to work from home and other things that helpsatisfy the Achieve drive. In addition, there are a number of small perks that also tie intothe Acquire side of the equation, such as pizza Fridays, movie days, lunch seminars,discounts on classes, days off, foosball or pool in the office, employee of themonth/quarter/year You will notice that a number of these also contribute to the otherthree drives ofBond & Belong, Challenge & Comprehend, and Define & Defend (seealso Four Drive Model).

3. Improve your Total Rewards Communication. Too many times weve worked withcompanies that offer fantastic total rewards not just their base salary, but their benefits,bonus programs, culture and recognition opportunities; however, no one at the companyknows about these programs because they are outlined in a legal terms in a five different50 page HR documents. It is vital that you market what you are providing to people in away that will capture their attention and convey the big picture. That means that youhave to overcome silos within the organization and market your Total Rewards as acomprehensive program that highlights the offerings from across the organization. Also,


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make sure that your Total Reward communications are not just a one-time effort at thebeginning of the year, but instead a campaign that highlights various aspects of youroffering throughout the year and keeps people engaged and charged up.

While the concept behind these ideas is simple, the implementation of them isnt always as easy.

If you need help, please give us a call. We can help you work through the issues and improveyour employees motivation!

Kurt

3 tips to increase the Drive to Bond & Belong

The 4-Drive Model of Employee Motivations second drive is the drive to Bond & Belong. Thedrive is defined by our innate desire to form close, positive relationships with people aroundus. The image of the lone wolf going it alone or the inventor holed up in his workshop areatypical most people want to bond with others and feel they belong to a group. Here are three

tips to increase theB

Drive:

1. Create a culture that encourages bondingMany organizations frown upon the fact that employees appear to waste time and effortby having personal conversations at work, goofing off, or having social activities goingon. Rules and regulations are put in place to limit this type of behavior or even outlaw italtogether. The fact of the matter is, allowing or even encouraging this behavior (in aresponsible manner) helps employees bond with each other and recharge. It also leads tocreating a sense of belonging that helps drive increased motivation and engagement withthe organization and its goals. Try getting rid of those rules and building a culture that

celebrates the human side of employees.

Tip: Try not to encourage people doing working lunches at their desks invite them tolunch or have lunch time activities that get them to come together in the break room.

2. Promote teamwork through job designA key way of developing increased bonding is to design it into the job. This meansputting people in small teams to work on projects, creating opportunities to engagecross-functional workgroups on projects, encourage job sharing, create a mentoringprocess, provide cross-training opportunities, and any other way you can structure jobs tobe more collaborative. This not only enhances peoples opportunities to bond, it alsoenhances creativity and learning.

Tip: Form a series of small, cross-functional best practice investigation teams who aretasked with coming up with ideas on how to foster greater collaboration and teamwork.

3. Sponsor social activities


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Corporate softball teams are more than just a way to blow off some steam, they activelyget people together and bonding. Organizations can increase the bonding drive bysponsoring any number of social activities including: happy hours, bowling leagues, bookclubs, brown bag lunch seminars hosted by an employee (or outside person), yoga,sessions, birthday celebrations, anniversary parties, summer picnics, winter skating

parties, and other types of social activities.

Tip: Hold a movie screening at the office. Get a projector, a conference room, bring insome popcorn and show a movie. You can even structure it so that you have a discussionabout it afterward or make fun comments throughout like Mystery Science Theatre 3000.

Would love to hear if you have any other ideas that would help increase the drive to bond. Letus know in the comments area!

3 tips to increase the Drive to be Challenged & Comprehend

3 tips to increase the Drive to Define & Defend

Four Drive Model of Motivation Explained

5 things Managers can do today to improve Employee Motivation

Top 3 fallacies on Employee Motivation

Children and Motivation

Walking with my child wants to be carried, until we get closer to the playground now he hasthe energy to run. Lazy kid or motivation kicking in? Proximity effect (predictably irrational).


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Behavioral Economics

This is a very interesting video (albeit a little long) about the rise of behavioral economics and itsimpact on the economic and political world . I find this topic fascinating as it helps inunderstanding some motivational impacts and also the limit of some motivational theories

(including the Four Drive Model). We can all learn from the insights here.

I want to state that while I agree with some of the comments and disagree wholeheartedly withsome others. In particular I tend to agree with the ideas brought up by Leigh Caldwell and MikeSavage and pretty much dismiss the conclusions made by Emre Ozendoren. The idea that bynudging behavior in a way that is deemed more appropriate is in some way totalitarian is utterlypreposterous. It is indeed, in my mind, dismissing the idea that we have choice. What Emre ismissing is that we are already constantly nudged. The fact that changing the nudge to besomething that Is going to be more beneficial for society or individuals is not invasive - it is justa different nudge than the one that is currently going on.

Also, I believe there is a little bit of sophistry going on when they talk about behavioraleconomists thinking people are irrational. The irrational component discussed by mostbehavioral economists is not to say that we are mad or a little cracked, but that we do not alwaysbehave in a classic economists rational manner. In other words, emotions come into play andwe dont always optimize our economic well being. The fact that some of the speakers in thisare trying to position the behavioral economists as thinking people mad is a little misleading.

All in all this video raises some good thoughts and sheds some light, I believe, on the junctureof classic economics with the newer thoughts around behavioral economics. Watch and enjoy!

What type of short-term incentives work best?

I poised the following question to an on-line professional sales group that Im a member of:

What type of short term sales incentive rewards work best? I was wondering what people in the group

thought were the best types of short term incentive rewards? Research shows that most people will

tend to pick cash but that performance actually is better with non-cash rewards (trips, merchandise,

etc...). What are your experiences with this - have you seen a difference in sales results with different

types of rewards? Within 24 hours I had received 45 responses. I summarized those 45 responses and

created the following summary that I presented back to them. I thought that this might be interesting

post for this blog as well here is my summary:

Thanks everyone for such great input on this question. Your responses have definitely provided some

great insight into what makes an effective short-term incentive. I will attempt to summarize the 45 posts

on this so far and would love more feedback in case Ive missed something.


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In general, it appears that most respondents felt that cash is a key part of the overall compensation, but

that it is probably NOT the best medium for a short-term program. There is a strong preference for non-

cash and recognition type of rewards. As Greg D put it, Recognition drives as much healthy sales will as

money. As indicated in the question itself, research has shown that non-cash awards typically

outperform cash awards in the same incentive program. The general gist from the responses so far

seems to support that finding. Dick O said it best when he said, I can't remember all of that cash that

I've won. ..I'll tell you though, that I remember each time I was recognized.

There was also a significant emphasis on not having a one-size fits all approach and to create

individual incentives whenever possible. Dana W summarizes this feeling with No one incentive is going

to work for all people. Another aspect that was discussed was bringing in others (spouse, family) to the

reward. These types of rewards were thought by some to provide extra incentive to earn them.

Allowing sales person input into the actual award was also mentioned.

A key component to this all was brought up by Tim M and Tom F that the structure of the incentive is

as important or more important than the type of reward offered. On this I would have to agree. In my

experience, how the program rules are structured, who is eligible to win (or more importantly believe

that they can win), the timing of the incentive, and how results are measured are going to make or

break any program. As Tim stated, the type of reward has less to do with the success or failure of a

contest or incentive than the STRUCTURE and TIMING of the incentive.

Thanks to everyone for their input Id love to have more discussion on this and how incentives can be

structured to be more effective moving forward. On an end note, just some of the fun reward offerings

that I found interesting: bottle of wine and dinner, time off, give to charitable foundation, becoming a

member of a special club.

Kurt

Litter Motivation

I am a little dismayed with humanity right now.

I spent last Saturday morning cleaning up my neighborhood. This is an annual volunteer event that the

Whittier Neighborhood association sponsors and weve done it for a couple of years now. In a matter of

a little over two hours my wife, my 3 year old, and myself collected three large garbage bags full of litter.

The things that people throw out and leave on the sidewalk and street are amazing. Obviously there are


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the cans and bottles, the candy wrappers, fast food wrappers, the old newspapers and magazines.

There were also expired prescription pill boxes (with pills in them), paint cans, CDs, and some items that

are used by young lovers in parked cars that get thrown out when done (ewhh.). But by far the largest

number of items I picked up were cigarette butts. There were literally thousands on the 10 blocks that

we had to clean. I felt like I was walking in an ashtray when I was done.

It all got me thinking what motivates someone to not litter? Obviously, it is often easier to just deposit

your trash out the window of your car or drop it on the sidewalk so what makes someone motivated

to go to the little extra effort to dispose of trash in a more proper form. I think that most of it comes

down to the D Drive (that is the Drive to Define and Defend). Ive written about this before (link here)

but here is a quick refresher. The Drive to Define and Defend is about how we defend those things that

are important to us when they are in danger our family, our business, our neighborhood. It is also

about how we define ourselves (i.e., what type of person am I) thus, I am motivated to do behaviors

that are consistent with my personal view of myself or that match the tribe or organization I live in. Our

motivation to not litter then is based on if we believe that our neighborhoods are in danger of being

overrun by trash (not literally overrun, although after my Saturday morning experience, who knows).Do we look at leaving a candy wrapper or a cigarette butt on the street as not respecting our

neighborhood or our world? Think about the Dont Mess With Texas slogan did you know that was

done originally to reduce litter on the Texas highway system? And it worked because it helped define

the problem for people and also activated their Drive to Defend. It was a great campaign that made

people realize that to feel proud about Texas, they needed to ensure that they didnt mess with it by

littering. Even the terminology is ripe with defensiveness.

Now if only we could create a Dont Mess With Minneapolis campaign!

While Im dismayed at the present moment, Im hopeful that with the revitalization of our

neighborhood, that the litter will decrease. People will feel more pride in living here and take more care

of our streets and sidewalks. That they will feel the pride necessary to defend the neighborhood from

trash and cigarette butts. So please dont mess with Minneapolis keep your Butts in the car!

Kurt


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Lets Get Sales incentives Right

Salespeople who are engaged in their roles, who are motivated to succeed, and who's goals are aligned

with the organizational goals have been shown to have a significant impact on helping an organization

succeed (Badovick, Hadaway, & Kaminski, 1992). Successful organizations understand this and try to

keep their sales employees motivated and engaged through a variety of motivational methods - mostlyinvolving extrinsic rewards. While much has been much written about how extrinsic rewards may have a

detrimental effect of on a sales persons intrinsic motivation (Deci & Ryan, Kohn, or Pink) there is little

disagreement on the short-term impact that extrinsic rewards can have on a companys performance.

The short-term benefit of extrinsic rewards assures us that these rewards will be used in businesses no

matter what Alfie Kohn or Dan Pink has to say on the topic.

It is important then that we get sales incentives right. We need to ensure that as leaders, we are not

limited in our thinking about how we can structure sales incentives and how they operate. We must

look at optimizing how our incentive plans are designed, the type of reward that is offered, and how

goals are set.

Extrinsic Reward Program Structure

There is a very clear framework, based on the research that suggests that extrinsic reward programs

should be designed such that the rewards are contingent on achieving increasing performance goals. By

doing this, companies not only limit the negative impact that extrinsic rewards can have an intrinsic

motivation, they also increase the actual performance that extrinsic rewards drive. This means that the

use of non-contingent incentive rewards should be limited. It means that incentive plans that are

strictly do this get that are not optimal. Contests that rank people against one another also are not

optimal as they only provide feedback that the sales person did better than the others not a

Extrinsic Reward Type

The typical reward for performance is usually cash. When surveyed, over 70% of sales people indicate

that they would prefer cash. However, there have been studies that show non-cash rewards (i.e., trips,

merchandise) have a bigger impact on performance than cash alone. This does not mean that one

would replace their annual sales incentive programs cash bonus with rewards of trips and tvs but it

does mean there should probably be a mix. It should also be noted, that sometimes extrinsic rewards

are based on fulfilling the drive for Achievement and as such, do not require significant outlays of dollars

recognition of performance by senior leaders can be a significant motivator for sales people.

Goal Setting

A majority of sales incentive plans have goals that are provided to individuals. Goals are good they

have been shown to increase performance across a myriad of environments (see Locke and Lathum).

However, weve seen significant backlash against goals when they are not understood or felt to be so

out of reach as to be laughable. The negative impact of this can outweigh any positive motivation that

you get from the incentives. Goals must be understood and bought into (i.e., perceived as fair) to be


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effective. There are a number of ways that companies can do this, but they often require changing

systems and processes that have been in place for years. The key is to get the setting of individual sales

goals to be as close to the sales representatives as possible, while still ensuring that they align with the

company sales objectives. The science (or art) of this can be very daunting but trust me, Ive seen it

done. One simple way to help is to provide a means for front-level managers to effectively shift quota

from one territory to another but provide mechanisms to ensure fairness.

Sales Motivation using the Four Drive Model

Salespeople who are engaged in their roles, who are motivated to succeed, and who's goals are aligned

with the organizational goals have been shown to have a significant impact on helping an organization

succeed (Badovick, Hadaway, & Kaminski, 1992). Successful organizations understand this and try to

keep their sales employees motivated and engaged through a variety of motivational methods - mostly

involving extrinsic rewards. While much has been much written about how extrinsic rewards may have a

detrimental effect of on a sales persons intrinsic motivation (Deci & Ryan, Kohn, or Pink) there is little

disagreement on the short-term impact that extrinsic rewards can have on a companys performance.

The short-term benefit of extrinsic rewards assures us that these rewards will be used in businesses no

matter what Dan Pink has to say on the topic.

Successful organizations and leaders of the future not only need to focus on the optimization of extrinsicreward programs but also on moving other levers within the organization that can drive sales

motivation. Using the Four-Drive Model of Employee Motivation (Lawrence and Nohria, 2002) provides

a clear framework for how to do this.

First, the Drive to Acquire or Achieve must be met. Thus, not only do the extrinsic incentive programs

need to be optimized, but other forms of Achievement need to be focused on as well. Therefore, the

way that outstanding performance is recognized, the type of perks that are provided, the career path

that is provided must be looked at in terms of their overall motivational value. The standard pay them

more and get more performance mantra doesnt apply it means that sometimes a written letter of

appreciation generates more motivation than a thousand dollar check (see ).

The Drive to Bond and Belong is also key to driving motivation. Leaders need to understand that sales

representatives thrive on building relationships both inside the company and with their clients.

However, systems, processes and rules that are put in place have a way of getting in the way of this.

Todays clients often dont allow for your sales people to take them out on the golf course or to a fancy

dinner. Sales representatives often work out of their home office with little interaction with other

employees. Successful leaders will look for new and unique opportunities for their sales people to


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interact and form social connections. Social media is a new tool that holds a huge potential for building

these relationships (see ).

The Drive to Comprehend or be Challenged motivates many sales representatives to higher

performance. For years it has been known that setting stretch goals can greatly impact sales

performance. The focus that new leaders will

The impact that this insight can have on the bottom line for an organization is significant.

More Pay More Motivation

How do you increase employee motivation? For many companies, it appears that they think it isdone by just changing their reward systems. In their worldview, more money equals moremotivation. I had one Regional Sales Manager tell me in an interview, if I could just getmore dollars down to my reps, they would be fully motivated. It often seems that companiesview their pay plans as the only lever they have to use to impact employee motivation. Thissimply isnt true.

Dan Pink, in the TED presentation he gave in July of 2009 (see post below), highlights some of

the fallacies that focusing only on the pay plan can have. I agree with a lot of what he says. Weknow that pay is a vital part of a comprehensive motivational strategy but that there is more tomotivation than just pay. Using the four-drive model we understand that there are other leversthat can be used to improve performance. Companies need to expand their thinking and look athow they are creating cultures that improve employees ability to bond with their co-workers,managers and customers. Leaders need to structure work so that employees are challenged andthat they have an opportunity to learn and grow. Organizations cultures need to be enhanced sothat workers feel like they belong to something worth defending.

However, we must also think about pay. The drive to acquire is a strong motivational force. Idont know of many people that would do their jobs for free (however, Im sure there are a fewout there). I also know that most people would consider leaving a job they loved if they wereoffered enough money to go to a different job. That being said, more money in and by itself isnot enough to drive significantly more motivation in the long run. Pay needs to be structured sothat it is fair, it provides guidance around what the organization values (i.e., incentive payfocused on revenue is very different than one focused on market share), provide feedback to theindividual about their performance, and allow the opportunity to satisfy the drive to acquire.


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Much of Dan Pinks presentation (Im anxiously waiting for his book) points to the negativeaspects that incentives can have on creativity and intrinsic motivation. This is true. Thealternative can also be true. Work by Eisenberger and Rhoades (2001) concluded that "how" theextrinsic reward is perceived by the participants has a significant impact on the effect it has onmotivation. They found that when extrinsic rewards are designed to reward improvement or

quality aspects of their work, their creativity improved. The important part then is not thatincentive pay (or pay in general) is bad, but how it is structured and perceived needs to be wellthought out to ensure that you are driving the right behaviors.

Kurt

Companies get Motivation Wrong

Ive had the wonderful opportunity to work with a number of companies on their incentive plansand sales awards programs. While a few of these companies understand how to motivate, many

of them just get it wrong. Here is a short list that describes just a few of the more commonmistakes that Ive seen:

1. Focus solely on the pay plan (i.e., incentive plan, bonus, base pay). We know that employeesare motivated by more than just a paycheck. Companies that do motivation right have acomprehensive plan that emphasizes more than just pay, but also teamwork, job environment,flexibility, work/life balance, opportunity for growth, new challenges, commitment to ideals, thecorporate identity and a broader purpose for being there.

2. Making incentives too complex. This is typically the result of companies trying to make theirincentives fair, however, if employees cant understand their IC plan, I promise you it wont

motivate them.

3. Reward the wrong measures. Companies often reward employees for behaviors or resultsthat dont match the long-term strategy of the organization. In one company I worked with, all ofthe sales awards focused solely on revenue (because thats what they could measure). When Italked to sales management, they needed sales people to focus on margin and conversion ofcompetitor business. Obviously, the behavior that was being driven by the Sales Awards did notalign with sales managements needs.


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4. Focusing on the cost of the program, and not on the results. Ive seen way too manycompanies focus on the cost of an incentive or sales program when they really needed to belooking at the impact it has. The cheapest solution is not always the best (not always the worsteither, but the focus should be on the impact it has and the lift it can bring).


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Intrinsic versus Extrinsic the wrong discussion

There has been a significant amount of research on the merits of intrinsic versus extrinsic motivation

(see Eisenberger, Deci, Ryan, Locke, Latham, etc).

Both sides of the controversy claim that their favored motivational drive is best. In my opinion, they are

both barking up the wrong tree. It has been shown empirically (insert citation) that both types of

motivation drive behavior. In the real world, both types of motivations are utilized in almost all work

situations. The real discussion should be on how do you leverage both to get behavior change.

Take a minute to say thank you the write way

I received a hand written thank you note for a project I did a few months ago. It was not only a pleasant

surprise, but one that has maintained some impact after several months. Im of the age that when I first

started in work, we used to give recognition through hand written cards and notes on a regular (ok,

maybe not so regular) basis. With the advent of e-mail and electronic forms of communication, the

hand written thank you has gone the way of the pay phone not quite dead, but pretty close.

There is something very special about a letter or note or thank you that is written by hand. It has a lot

of stickiness in todays electronic world - it stands out from the crowd. It also provides a sense of real

appreciation one that has taken a little bit of extra effort to do.

We did work with a large med device company this spring in which we interviewed a number of their

sales people. These people were very highly compensated, had significant incentive earning

opportunities, and fantastic recognition programs (valued at $10,000s of dollars). What struck me, was

the impact that one VP of Sales had by writing hand written letters of appreciation to his topperformers. One sales person went so far as to frame the letter and had it hanging in his office (note

he did not have the plaques or other awards that he earned up in his office). These letters had a

greater recognition value and motivational impact than some programs that cost millions of dollars to

the company.

So please excuse me, Im going to go write a few thank yous by hand.

Favorite Motivational Quotes

I like quotes, but often feel like they get misused. Quotes in and of themselves do not help create a

motivational workplace. Ive been in many offices where they have the Successories posters hanging

all around, and the motivation level is putrid. Ive seen managers pull out quotes to describe any

situation or provide a witty response to an employee need. Too often, I feel that quotes are a simple

way out of thinking too hard oneself.


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Quotes are best used, in my opinion, for three purposes: first, when they have an intrinsic connection to

the individual and provide them with insight, reflection, or a reminder of something that is important to

them; second, when they can say something better than we can to expound on an idea, a concept or an

attitude; and third, when the words take on a different significance because of the original author.

That being said, here are just a few of my favorite motivational quotes and why.

Never think you know author unknown.

This was written in a tunnel on the campus of the University of Iowa when I was a freshman there. I

copied it down on a ruled sheet of paper and had it posted to my bulletin board for years. To me it was

a way of challenging the presumptions that we all have. It touched a part of what drives me the drive

to comprehend, to understand, to know and not just presume. In my head, I typically said, know you

know after reading it. Go ahead, try it.

Become the change you want to see in the world Mahatma Gandhi

This quote is one that is often overused but I like it for the story behind it and the simple, clear message

it provides. Supposedly, Gandhi was approached by a woman and her son. The son was overweight.

The woman pleaded with Gandhi to tell her son to stop eating sweats, to which Gandhi answered, I

cannot. Come back in a month. The woman brought back her son in a month and this time Gandhi told

him to stop eating sweats. He himself had given them up therefore he had become the change that

was needed.

The important thing is to not stop questioning. - Albert Einstein

This quote has an intrinsic appeal to me, particularly coming from the likes of one of the greatest

scientists of all time. It gets at a point that I feel is important. It reminds me to keep pushing theboundaries and never stop asking the question why?

Please let me know some of your favorite quotes and more importantly why

Bonding as Motivation

Many people think that team building is really a waste of time and that there is no real legitimate

purpose for it.


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Do you really know what makes you tick? OR You think you know what motivates you but you

really dont

We believe we know what gets us up in the morning and rearing to go dont we? If someone asked

you what motivates you, you would be able to tell them right? Our ability to reflect on our own

motivations is a belief that we all think we do well. I would argue that we are fooling ourselves and we

really arent as good as it as we think.

Case in point, research has continually shown that when asked what type of reward employees think

would be most motivating or that they would most want, they choose cash. Our own research shows

that when asked, 70% to 80% of employees typically listed cash as the top reward. However, when you

actually look at studies that show performance lift, non-cash awards have a greater impact. Dan Ariely,

the author of Predictably Irrational recently blogged about this (See

http://www.predictablyirrational.com ). He cites an experiment done with Goodyear Tire company in

which non-cash rewards improved performance more than double what the cash rewards did. In fact,

there are numerous studies that support this idea.

So how can it be that if asked most people would state they prefer cash incentives but perform better

when offered non-cash incentives? Part of the reason is because we dont really understand what drives

us? Cash is easy. We understand it. Economists point out that cash has utility in other words it can

be used to purchase any number of items that we desire. Non-cash is not so simple. We might not like

the choices we have or feel limited by the selection. So what gives?

Dr. Scott Jeffreys has done much work on understanding this phenomena (see

http://www.incentivecentral.org/awards/whitepapers/benefits_of_tangible_non_monetary_incentives.1830.html). Much of it comes down to how we evaluate, separate, justify and are socially reinforced.

In other words, we evaluate the value of cash and non-cash differently resulting in a higher value placed

on non-cash elements do to affective factors (we can visualize ourselves with a new 56 TV and that

gives us a good feeling this is one step removed with cash). We also tend to lump cash bonuses in with

our paycheck and it isnt seen a separate, special reward. We have to justify spending our cash awards

on luxury items such as the above mentioned TV instead of paying down the mortgage not so when

we are only offered luxury items. And finally we tend to not talk about the cash we earn to our peers

and friends but we do tend to talk about that new TV (or trip to Hawaii, or new Golf Clubs, etc) and

are socially reinforced by the bragging rights of those conversations.

So back to the initial question of understanding our motivations we can see that there is much more to

the story than asking people what motivates them. The fact is we dont always consciously know what

motivates us (think Freud). So while asking your employees what they want is a good first step, make

sure it isnt your only step. You need to dig a little deeper to get at their underlying drives.

Kurt Nelson


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Intrinsic and Extrinsic Motivation Theory

Organizations use a number of different practices to try to motivate their workforce to perform

the duties and activities required for organizational success. How these different motivational practices

impact worker motivation and thus performance has a significant impact on a company's success

(Franken, 2002). Those organizations that can enhance their motivational practices and increase worker

performance should outperform organizations that do not. The motivational impact on sales

performance is of particular concern for organizations because (a) sales is often the key driver of

revenue for the company, (b) sales often acts as the main customer liaison and representative of the

company, and (c) sales organizations have typically used a wide variety of motivational practices (i.e.,

base pay, commission, incentive pay, bonus, recognition) to drive sales performance (Churchill, Ford, &

Walker, 1985; Franken, 2002).

Much of the research on motivational theory in recent years has focused on determining the

interrelationship of intrinsic and extrinsic motivation and how they influence each other. One of the key

areas of research in this field is how earning extrinsic rewards for an activity impacts one's intrinsic

motivation to do that activity. Seminal work by Deci (1972a) suggests that the use of extrinsic

motivation on interesting tasks decreases an individual's intrinsic motivation for that same task in

subsequent trials - where intrinsic motivation is operationalized by measuring the amount of free time

spent on that task in an unstructured environment. However, subsequent research showed mixed

results on this effect. Currently there is much debate in the field as to whether extrinsic reward is

detrimental to intrinsic motivation, has a neutral effect, or can increase intrinsic motivation. This paper

will explore the two major streams of research regarding this extrinsicintrinsic effect, analyze the

relative merits of both, and evaluate the validity and application of both to the field of sales motivation.

Intrinsic Motivation

Intrinsic motivation is defined as engaging in a task for its own sake without any apparent

reward except for doing the activity itself (Brehm, Kassin, & Fein, 2005; Deci, 1972a). This definition

takes some of its form from other concepts of motivation in the literature. Maslow's (1943) ideas of self-

actualization would be categorized as an intrinsic form of motivation. Carl Rogers (cited in Franken,

2002) discussed how individuals strive for a feeling of positive regard that comes from their activities.

McClelland's (1961) concept that people strive for achievement and have an internal desire for success

is also related to this definition of intrinsic motivation. Additionally, there are a number of biological

theories of motivation that look at how individuals biologically derive pleasure from different tasks thatare seen as exciting or challenging (Carlson, 2004). In a work environment this type of motivation is seen

as helping drive quality, performance, creativity, and dedication to the job (Wiersma, 1992).

It is important to understand the ways in which intrinsic motivation has been operationalized in

order to gain a better perspective on some of the differences in results and subsequent interpretation of

those results. Deci's (1972a) original research operationalized intrinsic motivation by measuring the

amount of free-time that a person spends on an interesting task. A typical research experiment using


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this type of operationalization had people work on an interesting task (e.g., putting together a puzzle,

drawing, playing games) where one group is given an extrinsic reward for the doing the task while the

control group is not. The real experiment begins after the initial portion is completed and the

participants are led to believe that they are done but that the researcher needs to get some forms or

finish some calculations before the participants can leave. The participants are then left alone and the

amount of time that they spend on their own working on the task compared to other activities is

measured through a non-obtrusive means (i.e., one-way mirror). People who work on the task during

this time are thought to be intrinsically motivated. This free-time task work is compared for the groups

who were given the extrinsic reward to those that were not given the extrinsic reward. This method of

operationalizing intrinsic reward measures one's free-choice options and is an observable, quantifiable

measure.

Others have operationalized intrinsic motivation through the use of various task measures of

performance (Wiersma, 1992). This type of experiment seeks to elicit intrinsic motivation through

having participants engage in an interesting task and then measure their performance on that task (e.g.,

how many puzzles are completed, the time it took to complete a puzzle, or the quality of the work done)when an external reward is introduced and compared to the free time performance. This method allows

for a quantifiable measure but it is harder to factor out the impact of the extrinsic reward effect from an

increase in intrinsic motivation (Deci, Koestner, & Ryan, 1999).

Another way of operationalizing intrinsic motivation is to ask people how they feel about doing

the activity itself, their task enjoyment (i.e., the attitude they have regarding the activity) or asking them

the likelihood of them doing the activity again for no extrinsic reward. This self-report attitudinal

approach to measuring intrinsic motivation is often used in conjunction with other types of measures

(Cameron & Pierce, 1994).

Extrinsic Motivation

Extrinsic motivation is attributed to an outside source and is defined as engaging in activity

because one is influenced by an external variable such as a reward or punishment (Brehm, Kassin, &

Fein, 2005; Cameron & Pierce, 1994). Extrinsic motivation has been shown to have a significant impact

on behavior. Numerous studies by behaviorists have shown that reinforcing a behavior by introducing

an extrinsic reward following that behavior can lead to an increase in that behavior when the reward is

present. Behaviorism and reinforcement theory is all about the use of extrinsic rewards to modify and

condition behavior (Franken, 2002).

One aspect of extrinsic reward is that while many behaviors seem to occur without the use of animmediate extrinsic motivator, the behavior might indeed still be motivated by the perception that

there will be a future reward for the activity (Bandura, 1997). Thus a person might be doing an activity

that on the surface appears to be intrinsically motivated but in fact is motivated by the ideas that doing

the activity will be rewarded later (i.e., working late without pay but hoping that will help get a

promotion).


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Businesses use extrinsic reward all of the time to try to increase employee motivation and

performance. At the most basic level a sales person's salary is a form of extrinsic reward they are being

rewarded for the work that they do. In addition, there are a number of other extrinsic reward vehicles

that organizations use to try to influence behavior and motivation, some of these include: (a) incentive

or variable pay (including performance bonuses and commissions), (b) non-cash tangible rewards (such

as trips and merchandise), (c) stock options, (d) recognition (both verbal and tangible), (e) benefits

(health insurance, vacation, pensions, and other services) and (f) symbolic rewards (i.e., title, office)

(Brehm, Kassin, & Fein, 2005; Franken, 2002).

The Debate on Extrinsic Rewards Effect on Intrinsic Motivation

The extrinsic-intrinsic debate is centered on Deci's et al. (1999) claim that, "in general, tangible

rewards had a significant negative effect on intrinsic motivation for interesting tasks" (p. 653)and

Eisenberger and Cameron's (1996) belief that "the detrimental effects of reward are greatly restricted in

kind as well as durability" (p. 1163). Understanding the validity of both lines of research is an important

aspect for sales organizations as they tend to use extrinsic rewards (e.g., commissions, bonuses, non-

cash incentives) to try to motivate higher performance by their sales personnel. If extrinsic reward has a

general negative impact on intrinsic motivation, the long-term effects of the use of these rewards might

be detrimental to the overall performance of the organization. Indeed, some researchers have argued

that all forms of incentive pay should be removed from organizations or limited in its use to reduce this

detrimental effect on intrinsic motivation (Kohn, 1993a). If on the other hand, extrinsic rewards have a

neutral effect or even a positive effect based on their design, then it is vital for organizations to utilize

this information to design the appropriate structure for rewarding their sales people.

Deci's (1972a) early experiments found that individuals who were paid to do an interesting

activity spent less time with the activity in the non-reward time than the non-paid control group did

albeit with the significance value ofp


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Each of these structures has been explored in the research to discern how they affect intrinsic

motivation. This research has been mixed, however, the detrimental effect on intrinsic motivation is

more likely and stronger in experiments that focused on completion-contingent rewards (Deci, 1972a;

Lepper et al., 1973; Lepper & Greene, 1975; Rummel & Feinberg, 1988). This has been labeled the

overjustification effect which suggests that the person attributes the reason that they are doing the

activity to the external reward instead of their internal motivation (Lepper et al., 1973). However, when

the activity is task-contingent and to some degree engagement-contingent, the detrimental effect on

intrinsic motivation is not as apparent (Cameron & Pierce, 1994; Wiersma, 1992). And findings have

been very mixed in performance-contingent structures with some finding that they typically decrease

intrinsic motivation (Deci et al., 1999; Deci & Ryan, 1985) and others finding that they can actually

increase intrinsic motivation (Eisenberger & Cameron, 1996; Eisenberger, Rhoades, & Cameron, 1999;

Wiersma, 1992). In a significant study conducted by Pierce, Cameron, Banko, and So (2003) they found

that intrinsic motivation for a task increased (as measured by time spent on the task in a non-reward

setting) when the reward for the task was awarded only when participants met increasingly strict

contingent-based performance standards over time (e.g., for this study, they had three trials to put

together a number of puzzles a reward was earned in the first trial by completing one puzzle, in the

second trial for completing three puzzles, and in the third trial for completing five puzzles).

Cognitive Evaluation Theory Merits

Deci and Ryan (1985) attempt to explain extrinsic rewards influence on intrinsic motivation

through their development of cognitive evaluation theory and the concept of self-determination.

Cognitive evaluation theory (CET) theorizes that an individual's perceived feeling of autonomy and

competence are determinants of that individual's level of intrinsic motivation. Rewards can be

interpreted either as controlling or as recognition of competence. If rewards are seen as controlling they

tend to decrease one's sense of autonomy and the locus of control is perceived to be outside of self andthe behavior is attributed to the extrinsic reward (i.e., "I only did that because I was paid to"). The

outside locus of control reduces the perception of autonomy and thus decreases the likelihood that they

will do that same activity again without a reward. In contrast, if a reward is seen as contributing to one's

sense of competence, then the extrinsic reward increases an individual's sense of competence and

intrinsic motivation is increased. In other words, if being paid creates a sense of accomplishment and

recognition then self esteem is increased and thus increases the likelihood of the activity being

repeated.

CET states that rewards often create both a controlling and a competency effect. That this has a

conflicting affect on intrinsic motivation and depends on the strength of each effect to determine if the

extrinsic reward will have detrimental or positive effect on intrinsic motivation. Much of this strength

revolves around the "interpersonal context" of the reward which can impact the reward recipient's

perception of control (Deci & Ryan, 1985). This interpersonal context refers to the personal and social

aspects of where and how the reward is received and to what extent they factor into the individual's

locus of control over the behavior associated with the reward. When the interpersonal style or setting of

administrating performance-contingent rewards is perceived as pressuring, they predict that rewards

will be experienced as more controlling and therefore lead to diminished intrinsic motivation.


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The implication is that the more controlling the reward is perceived to be, the larger the

decrease in intrinsic motivation. More controlling rewards lead to a perceived causality that is outside of

the individual and therefore undermining the future likelihood that the behavior will be repeated.

However they also postulate that rewards can provide information on competence and that this

information is seen to enhance intrinsic motivation (Deci et al., 1999). CET postulates that different

reward contingencies are perceived differently in terms of control and information. Task-noncontingent

rewards which require someone just to show up and not even do the task should have little or no effect

on one's sense of control or competence, thus it should have little or no effect on intrinsic motivation.

Engagement-contingent rewards, those that require at least a modicum of engagement in the task, are

more likely to be perceived as controlling without any competency information, and therefore would be

more likely to reduce intrinsic motivation. Completion-contingent rewards are given when the task is

completed, but there is no quality control, thus it doesn't matter how well one did on the task, just that

it is done. This type of reward offers little in competency information that would offset the controlling

nature of this type of reward. The prediction is that the controlling aspect would significantly outweigh

the competency aspect thus decreasing one's sense of autonomy and therefore detrimental to one's

intrinsic motivation. According to CET theory, performance-contingent rewards are the most complex

and thought to be perceived as the most controlling as individuals have to meet specific requirements

for the reward to be given however they are also thought to convey the most information on

competency. The competing influence on one's intrinsic motivation is influenced by the salience of both

the control and the competency information for the individual. Thus CET predicts in this reward

contingency that the intrinsic motivation outcome could be negative, neutral or positive.

In general CET postulates that rewards are seen by "recipients primarily as controllers of their

behavior" (Deci et al., 1999, p. 628) and thus would have a detrimental effect on their intrinsic

motivation. The implication is that extrinsic rewards, in most instances, will have a negative effect on

intrinsic motivation and only in very limited instances, when the competence or informational value ofthe reward is greater than the control factor of the reward, will the extrinsic reward have any positive

effects on intrinsic motivation.

Alternative View Merits

A number of researchers have come to a different conclusion regarding the effect of extrinsic

reward on intrinsic motivation. The main points of view for this are expressed by Eisenberger and

Cameron (1996) in which they state that "detrimental effects of reward occur under highly restricted,

easily avoidable conditions" (p. 1154). While they agree with CET that if a reward is expected and given

after the task for just completing the task the typical response is a decrease in free-choice activity for

that task, they also note that this is the only structure that consistently has a detrimental effect.

Cameron and Pierce (1994) note that of the 61 studies that they reviewed 34 showed a decrease in free-

choice task engagement, 22 showed an increase, one had no effect, and four did not calculate the

results. On the other hand, the effect of performance-contingent rewards often has a neutral or even

positive effect on intrinsic motivation. The implied element is that performance-contingent rewards

provide more competency information than what CET accounts for particularly if they are designed

appropriately to enhance this affect.


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Wiersma (1992) noted that the manner in which intrinsic motivation has been operationalized

also has a significant effect on this outcome. He notes that most of the detrimental effect findings are

based on free-choice measures while if one looks at the findings on attitudinal or performance

measures, the findings are more favorable to a neutral or positive extrinsic reward effect. Again,

Cameron and Pierce (1994) found in a review of 64 studies, 31 had a positive impact on attitude toward

the task while only 15 had a negative impact, one was neutral, and 17 didn't have enough information to

determine. The value of this concept is in understanding that the manner in which intrinsic motivation is

measured impacts the effect that an extrinsic reward has on that intrinsic motivation. It is similar to

trying to determine the effort runners exert by measuring how much liquid they drink during a race -

however that amount would be different if they were drinking water as opposed to a performance

drink; thus determining effort based on just the amount of l iquid would not provide any relevant

information.

Eisenberger and Cameron (1996) indicate that if the reward contingency is based on a quality-

dependent rating (i.e., the work had to meet a certain standard before getting the reward) as opposed

to just task-dependent (i.e., getting a reward for just doing the task) there was an increase in expressedinterest in the task. Thus, the structure of how the award is given influences the impact that it has on

intrinsic motivation. They postulate that because the extrinsic reward is received only after increased

quality, that individuals have an increased feeling of self-esteem and a gain in self-efficacy. Thus

individuals actually feel more in control since it is their effort that correlates to whether they receive a

reward or not. Bandura's (1997) theory of self-efficacy is in alignment with this rationale and offers an

alternative construct to the CET position.

In addition, Eisenberger and Rhoades (2001) concluded that "how" the extrinsic reward is

perceived by the participants has a significant impact on the effect it has on motivation. If the reward is

received where there was a prior positive relationship between the reward and the activity, then thereward would not decrease the intrinsic motivation and should be perceived as increasing self-

determination. Learned industriousness theory (Eisenberger, 1992) indicates that activities that involve

a learning component can be strengthened with the addition of a reward mechanism for increased

performance success. The theory suggests that one's the expectancy of a reward for a particular level or

type of performance can actually enhance motivation. This effect is thought to occur even when the task

itself provides no information regarding competency as people generalize from their past experiences in

similar tasks. For instance, if following APA format quality is rewarded in one paper there will be an

increase in that behavior in subsequent papers, even when there is no reward offered for achieving this

standard in the subsequent papers.

Overall evaluation

The main issue in this debate focuses around the general impact that extrinsic reward has on

intrinsic motivation. Both sides of the debate admit that in certain circumstances extrinsic rewards can

either have a detrimental or positive impact on intrinsic motivation. A key element in this debate is on

how intrinsic motivation is operationalized. If one looks at it as only being measured by free-choice

engagement, then the evidence is slightly more positive for CET. However, if one operationalizes


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intrinsic motivation as including more qualitative measures such as self-report attitudes and outcome

performance, then CET might not have the same level of support in the literature.

Interestingly, much of the focus on both sides of the argument has used meta-analysis to

provide evidence for their viewpoint. Both sides of the debate can point to various meta-analysis that

support their positions (see Cameron & Pierce, 1994; Deci et al., 1999; Eisenberger & Cameron, 1996;Wiersma, 1992). This reliance on meta-analysis can lead to issues as pointed out by Lepper, Henderlong,

and Gingras (1999) in that the analysis can result in different results based on the studies included, how

singularities are handled, how results are collapsed across opposed effects, and effect size. Thus the

quantitative nature of the meta-analysis can be subjectively impacted by how these variances are

handled. Again, one of the key elements is in the operationalization of intrinsic motivation. As always

the research should be subject to a critical review.

Application to Sales Organizations

The implications from these findings are significant for sales organizations but vary greatly based

on which side of the debate one leans towards. If one tends to lean towards CET and believe that in

general extrinsic rewards are a detriment to intrinsic reward then one would logically reduce the

amount of extrinsic rewards utilized for intrinsically rewarding activities. Indeed, Kohn (1993b) states,

"any incentive or pay-for-performance system tends to make people less enthusiastic about their work

and therefore less likely to approach it with a commitment to excellence" (p. 62). The belief is that the

best way to remunerate for the job is to pay a fair base salary that would act, to a certain degree, as a

task-noncontingent reward and not impact intrinsic motivation, thus leading to increased quality and

commitment.

This concept however presupposes that all sales activities are all intrinsically rewarding which

is a large assumption to make. Indeed the use of extrinsic rewards by organizations is often to motivateindividuals to undertake those tasks that are required but are not well liked or pleasurable (Eisenberger,

Rhoades, & Cameron, 1999). It is also difficult to generalize across all salespeople as various personality

factors play into what one deems to be intrinsically motivating (i.e., one salesperson might be

intrinsically motivated to do analysis on competitive products while another might find that laborious).

This leads to difficulties with this approach.

Additionally, the short-term benefit of contingent extrinsic rewards on increasing performance

has been shown to be very effective across a number of studies both in the laboratory and in the field

(Churchill et al., 1985; Hiam, 1999). Stajkovic and Luthans' (2003) meta-analysis of 72 contingent based

behavior programs found that money incentives increased performance by 23%, social recognitionincreased performance by 17%, and feedback increased performance by 10%. This short-term impact on

performance is often vital for a company's success and is used as a management tool to stay

competitive. Understanding that extrinsic rewards are going to be utilized in organizations then the

opportunity is to maximize their effectiveness and limit their detriment.

This perspective is more in agreement with the alternative to the CET view that believes that

extrinsic rewards, if structured correctly, can lead to an increase in intrinsic motivation. The


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recommended structure would be one in which rewards are given in a performance-contingent basis so

that sales people need to meet certain performance goals before receiving a reward. This is typical of

many of the sales incentive plans that are utilized by organizations today.

Conclusion

Salespeople who are engaged in their roles, are motivated to succeed, and who's goals

are aligned with the organizational goals have been shown to help an organization succeed (Badovick,

Hadaway, & Kaminski, 1992). Successful organizations understand this and try to keep their sales

employees motivated and engaged through a variety of motivational methods mostly involving extrinsic

rewards. While the literature has conflicting information regarding this detrimental effect of extrinsic

rewards on intrinsic motivation, there is l ittle conflict on the short-term impact that extrinsic rewards

can have. The short-term benefit of extrinsic rewards assures that they will be used in business as such

the optimization of how these rewards are implemented is a must.

Understanding the predictions of the two theories provides practioners with a very clear

framework for designing extrinsic reward programs in order to maximize their effectiveness. Based on

the research, the use of performance-contingent rewards would be preferred over other types of

reward contingencies. Providing a clear value to the rewards is also preferable so that the feedback

provided by them is clear. For instance, a sales organization would benefit from an incentive plan that

provided various levels of earnings based on a qualitative assessment of performance (e.g., sales

revenue, profit, or customer retention). Additionally, that sales organization would want to clearly

outline how the rewards are viewed as demonstrating superior performance.

The impact that this insight can have on the bottom line for an organization is significant. More

research needs to be done to obtain a more accurate picture of how various performa

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