Benchmark for Business – Dan Pink and Marcus Buckingham Unleashing your strengths: the power of potential Tuesday 14 September 2010, Hilton Hotel, Manchester, Deansgate

Dan Pink – Session 1 What drives us to succeed, where does our motivation come from? That was the central question of the morning session, which saw Pink attempt to move beyond obvious biological and reward-punishment drivers to examine a third more sophisticated driver that he argues is key to high performance. Drawing on a wide range of research he looked first at a cognitive performance test known as The Candle Problem. Hailed as a landmark social psychology experiment it asks participants to fix a lighted candle on a wall so that wax will not drip on the table below. They must do this equipped only with a box of matches and a box of drawing pins. The correct approach is to realise that the box holding the drawing pins has a second function and can be used as a platform to hold the candle on the wall. Psychologists used this test to see how much faster people would work under incentives. Unusually so, tests revealed that a group operating under incentives competing against another group that was not incentivised actually performed the task slower. This, he argues, reveals the limits of incentivisation as a driver of performance. When the task called for rudimentary cognitive skills then a larger reward led to poorer performance. It’s worth noting that the Federal Reserve Bank sponsored the research. It found that once you get to things that are more sophisticated, more complex then using traditional incentive levers just doesn’t work that well. If you’re turning the same screw on an assembly line up adding up figures in columns then it’s a good driver of performance. But all too often when we see these characteristic motivators demonstrably fail before our eyes our response is to say it looks like we need bigger carrots and sharper sticks – and this is wrong. We need a different approach. To further illustrate why this is needed Pink then referred to additional research carried out by Harvard Business School on a group of artists. Looking at their 10 most recent artworks it compared the standard of work to their 10 most recently commissioned artworks. Using a panel of art experts to evaluate the works the results were quite startling. The commissioned works were rated as being significantly less creative than the non-commissioned works but they were not technically inferior.

Many business people will find this result staggering. Surely you would think that when an artist is being paid handsomely he or she should be operating at the top of their game? Evidently not. Sticks and punishments If incentives can act as a barrier to high performance then how reliant is that other basic motivator: the fear of punishment? Pink examined a field study of an Israeli day care centre to illustrate similar problems. At this centre children were expected to be picked up by parents by 4pm. However, a number of parents continually turned up late so the centre decided to introduce a fixed charge to penalize lateness. They had hoped this would eradicate the problem but, on the contrary, it saw a gradual increase in parents coming late. The rate finally settled at a level that was almost twice as large as the number of parents that had been coming late before the charge was introduced. Why? Because they replaced a personal contract with a commercial contract and used a blunt instrument to try and deliver a co-operative change. The day care centre ended up pulling the plug on the fine system. But by then it had done permanent damage and high levels of lateness persisted. Moving on to a series of striking business examples, Pink noted the case of Redgate Software Company in Cambridge who introduced a radical change to their sales force team. Previously the team had been working on a commission basis and many had learned to game the sales system causing considerable problems in the Company. Every time the Company made the sales system more complex the sales team managed to find a way to get round it to put their own interests ahead of the company’s. So the CEO came up with the radical idea of eradicating commissions, paying a higher base salary and giving members of the team a share of the profits at the end of the year. Much to his surprise it was accepted across the team with the view that it would make the sales force operate in a more collaborative way and reduce tensions. One called the previous reward-based commission system a “gigantic, complex and medieval spirograph centred on an assumption that wasn’t true”. Dangerous assumptions Managers often make dangerous assumptions about how to get the best performance out of staff. Here’s one: that human beings are machines. The thinking that humans are sophisticated robots and if you press the right levers in the right way they will do what you want is far too prevalent and is not true. We have machine like attributes but we have a lot more. The second assumption is even more insidious and even more prevalent. It thinks that human beings are blobs.

Pink noted: “People say to me, ‘I hear what you’re saying but I deal with these people and if you don’t entice them with sticks and carrots they won’t do anything’. This is the wrong theory of human nature. Two year olds are not passive and inert – you can see that this is not human nature.” If you begin with the assumption that human beings are blobs then you will eventually get blobs. It’s a fact that money is a motivator – but it’s not the only one. For high performance work Pink advises to pay people enough so that they are focused on their work not the money. The best use of money as a motivator is to take the issue of money off the table. Money can generate activity but it doesn’t necessarily generate creativity. Motivating people beyond rewards Pay people enough but beyond that there are three elements that are important to motivating staff. These are: Autonomy Mastery Purpose

1. Autonomy. Management did not emanate from nature or God. It’s something that was invented. Management is a technology for organizing people in productive capacities. It’s only been going since the 1850s and is not a sacrosanct or natural force. It’s just a technology to get compliance. The problem is with some types of work that you don’t want compromise so much anymore. You want engagement. So we have this technology that’s designed to get us compliant but doesn’t work that well in getting engagement. We didn’t sand off the rough edges – it doesn’t work that well. What people need are large amounts of autonomy. When people have autonomy they perform well. When people don’t have autonomy they don’t engage they merely comply. A good example is the Australian software company, Atlassian. Once a quarter they say to their software workers ‘go and work on whatever you want’. These are called ‘FedEx days’ because you have to deliver something overnight. This one day of intense activity has led to a lot of new ideas for software. This kind of thinking has upped the ante and other companies have introduced 20 per cent time where staff can spend 20 per cent of their time working on whatever they want. The Post-it note came out of this process, as it was a 15 per cent time product at 3M. Google has 20 per cent time and Google news and Gmail are unofficial products that emerged this way. ROWE – or “results only work environment” is a model that more and more companies are adopting. One Silicon Valley Company, Netflix, no longer has a holiday policy, for example. Staff can go on holiday for as long as they want, as long as they get their work done.

Another business that Pink highlighted was Zappos, a shoe company operating in the Nebraska desert. Amazon recently bought them for around a billion dollars. Zappos has a very strong record in customer service, particularly in running call centres. They have a grown up approach, simply telling workers to solve customers’ problems. There’s no script, no monitoring and no hamster like cubicles. The end result is that they have customer service ratings that rival that of the Four Seasons Hotel. But despite the success of these examples, Pink warned that giving workers the autonomy of, say, 20 per cent time is a bad idea for 98 per cent of organisations. People have a need for what scholars have called ‘scaffolding’. He suggests that organisations wishing to experiment with this approach should find a group of people that are really cohesive and start with 10 per cent time. Try this – or a FedEx day – for three months. When companies pilot this I’ve generally found that the first time is usually ok but the second time it “really rocks”. Other ways in which companies can try to generate creativity, collaboration and boost morale by making everyone feel like their contributions are valued is by introducing peer to peer rewards. This works by allowing an employee to nominate another employee who they feel has done something really good for a reward of, say, $50. Google do this with a $175 employee reward. This makes people really in tune with their organization and has a strong cohesive effect. It’s one of a few small steps to giving people greater autonomy as a pathway to accountability.

2. Mastery. Human beings like to get better at stuff. The guy playing the bassoon at the weekend at his home in Manchester doesn’t do it to satisfy biological needs. He doesn’t get paid for it either. He does it because he likes it, it’s interesting and he wants to get better at it. Research carried out by Teresa Amabille at Harvard University asked a large sample of people working for large organisations to keep a diary of what motivated them at work. People in the study rarely mentioned incentives. The key to motivation does not depend on elaborate incentive systems. It usually relies on people making progress at something they enjoy. The open source movement is a case in point. Wikipedia – the largest encyclopedia on the planet – defies the laws of economics. People all over the world carry out highly skilled work for free and give it away for free. This is very peculiar behaviour in that many, many people are moonlighting for free. What drives this behaviour? It’s an intrinsic enjoyment based motivation. There are three laws of mastery.

Mastery is a mindset You can have two theories of intelligence; entity theory is that it exists in a finite supply and growth theory is that intelligence can expand through work. If you have an entity theory of intelligence every encounter is a measure of that entity and you will be shown just how intelligent you are. But if you have a growth theory of intelligence every encounter is a chance to grow that intelligence. This initial belief determines how far we go. If you want mastery you have to believe in growth theory. Too many people have an entity theory about talent and intelligence and it’s the wrong theory. Mastery is a pain Mastery is really, really hard. Grit is defined as perseverance and is important for long-term goals. The US army has an academy called West Point where it trains the elite army officers. It’s very, very difficult and they have a summer session that they call ‘beast barracks’. The best predictor of who is going to get through beast barracks is a willingness to persevere for a long-term goal. Mastery is an asymptote. This is a geometric term meaning you can reach the line but never quite get there. You can get close to it but never quite achieve it. It’s equally frustrating and alluring. That’s the asymptotic nature of mastery. Putting people in a position where they can achieve mastery is very important. Mastery depends on feedback Workplaces are the most feedback-deprived places on the planet. An annual performance review is a mechanistic and anachronistic approach. There is no way you can get better at something if you only get feedback once a year.

Entrepreneurs often undertake DIY performance reviews with regular meetings with a small group coming together to set their goals and self assess. We are not encouraging our kids to do this. We shouldn’t be outsourcing all the feedback delivery to an authority figure but monitoring our own goals. Look at Olympic athletes, they keep meticulous training records. Their day-to-day ethic of self-assessment is very important.

3. Purpose. Too many workplaces are not only feedback deprived but also context deprived. Contextual impoverishment is incredibly demotivating. If you don’t know how what you’re doing matters then what’s the point?

We’ve spent the last 10-years trying not to enter the 21st century, clinging to the 20th century hoping that we don’t have to do things differently. If we don’t realise the limits of the profit motive then we will not do things differently and end up reliving Japan’s lost decade. The profit motive is a very good thing – but it’s not the only thing. People don’t jump out of bed in the morning to push up the share value. If you look at the companies that are performing at a higher level they pair the profit motive with the purpose motive. When the profit motive becomes unmoored from the purpose motive bad things happen. I don’t think the profit motive is sufficient on its own but when you pair the two extraordinary things can happen. Mats Lederhausen puts it this way: Today you need a purpose bigger than your product. An example of this is Toms shoe company. When you buy a pair of shoes by Toms they give a pair of shoes to the developing world. It’s an attractive proposition. The CEO says, ‘we try and turn our customers into benefactors’. There is a lot of category disruption going on at the moment. We tend to think for middle class people there are three stages: education, work and retirement. For boomers it’s now education, work, encore careers, retirement. This could have a real significance on the future of business. Whose purpose is it anyway? Take a bunch of 3x5 index cards and get your team to hand them out. Ask them what the purpose of your organization is and ask them to write it down anonymously. This is a cheap, actionable diagnostic for purpose that can be painful – but very useful. Also, don’t try and over-complicate your purpose. Someone once criticized JF Kennedy for doing this, saying that a great leader can be described in a sentence. His kind of leadership was a paragraph. He was trying to do too many things at once. What’s your sentence? Use that as your north star.

Marcus Buckingham – session 1 After lunch Marcus Buckingham took to the stage to discuss strength-based workplaces. This is where organisations focus on what they’re good at and try and capitalize on their strengths. Expanding on his research at Gallup he examined why companies vary enormously in terms of

performance. The biggest story in business, he argues, is why do we have such variation in performance between two teams doing exactly the same thing? Engaging with the audience throughout the session, he asked delegates to draw up a list of who would appear on their own personal (not company) board of directors. Then he went round the delegates asking for a profile of who had been appointed. Among those who didn’t get on to the board were doctors and teachers – but managers were common. Around 85% of people in the room had put a manager on the board. At Gallup, he explained, we asked, ‘what gets people on to boards?’ Managers were respected because they have the power to make work enjoyable. The three needs he identified from this research were: Are my co-workers committed to quality work? Do I know what is expected of me at work? At work do I have a chance to do what I do best everyday? If a manager was able to fulfill these needs then they would get on to boards of directors. There are many levers we can pull that lead to positive business outcomes but, in essence, this is what the modern workforce demands: Know me, focus me and surround me with likeable people. The 18th century economist David Ricardo said that the best countries find their comparative advantage and leverage it. That’s what managers have to do with people: find their edge and use it. Yet most people don’t believe that. At Gallup he asked many, many people the question of whether - in order to be successful - they should be focusing on their strengths or improving their weaknesses and the results show that we live in a “remedial” world. In 2000 Gallup found that 41% of people in the US focused on their strengths while 59% focused on improving their weaknesses. A lot has changed since then. There’s a whole new branch of psychology called positive psychology. It’s a departure from the branch that focuses too much on neurotic people. You learn nothing from how marriage works by just studying divorced people. And you learn nothing about business by just studying disengaged customers. For too long the whole approach to business has been to study failure and positive psychology turns this on its head. Change follows the focus of your attention. You’ll never solve a problem on its own terms. You’ve got to reframe it. There is now a strength-based approach to peace, health, development etc and it’s growing as a school of thought. The Millennial generation – or Generation Ys as they’re known – are not as jaundiced or disillusioned as us. They’re used to getting a prize for coming 7th on sports day. They are slowly changing the workplace. Gallup asked the question about focusing on strengths or improving weaknesses in China and the

results were markedly different to anywhere in the West. In China 73% said they should focus on their strengths compared to 27% who focused on improving their weaknesses. China has a whole different culture and has completely changed the way it uses its capital. The State is just focusing on performance. As any entrepreneur knows, you can’t be an entrepreneur by fixing weakness. If you fix weakness you don’t lose. If you focus on strengths you win. This is a whole country that thinks really differently to how it did nine years ago. What percentage of people spends most of the day playing to their strengths? All around the world it’s far too low. Organisations are not very good at deploying human capital. They think human nature is uniform. The best managers have worked out the differences and know how to use them well. There are, however, a number of obstacles that stand in the way of people being able to play to their strengths. Some people do not think it’s noble to play to your strengths. ‘There’s no I in team,’ they say. You put your strengths aside. Our research shows that women aged between 35-55 feel this way the most. There is a big gender difference where people in the UK are asked which approach do you feel will make you most successful: focusing on strengths or fixing weaknesses. Sacrificing strengths for the sake of the team is a short-term survival strategy. If you want to win as a team you have to think of a way of continually bringing something unique and valuable to your team. We are far more frightened of our weaknesses than we admire our strengths. Your strengths are your area of opportunity. Your weaknesses are areas where you will develop the least. Most conversations around the dinner table in this country are around a child’s failings. Try running a professional sports team in this manner – constantly focus on weaknesses and you will constantly lose. It’s easier to offer advice that is either cautionary or additive. The best management advice is creative. How do you take your strengths and apply them to being productive? That’s the question you need to ask of people. Too many of you are so close to your own strengths that you don’t see them anymore. Fifty per cent of a child’s identity is created at birth. The remaining 50% will be created by chance, peers and how they’re raised – but their personality isn’t. But he cautions that strengths are value neutral – in other words they can be used for good or ill. You have to be able to get people to name, claim and own their strengths. A strength is a multiplier. You will get exponential growth by working on a strength.

The best leaders are not well-rounded people. They’re sharp – and blunt. Trust can come from consistency. The strengths philosophy is a tough philosophy. But it’s about getting into the performance business. Learning your strengths and weaknesses Most of us are vague and unhelpful to our managers about what our strengths and weaknesses are. That’s why people come up with bland answers at interviews such as ‘I’m good with people’ when asked what our strengths are. A weakness is anything that drains you when you’re doing it, even if you’re good at it. A strength is an activity that makes us feel strong. Here’s a general guide to helping you identify strength activities. S = success. When you do it you feel effective I = Instinct. Before you do it you actively look forward to it G = Growth. While doing it you feel inquisitive and focused N = Needs. After you’ve done it you feel fulfilled and authentic In order to own and understand our strengths, Buckingham advised delegates to write a strength statement about a recent activity. The example he offered from his own statement was about interviewing a colleague for a job. He wrote: ‘I feel strong when I interview a person who excels at his job to explore why he excels.’ If you’re going to follow a strengths path then you have to take yourself seriously and not be knocked off track. The airlines say a lot of daft stuff but one of the things they say that’s right is, ‘put your own oxygen mask on first before you help anyone else’. In identifying a moment when he felt weak through an activity Buckingham gave the example – through his own weakness statement – of going to a VIP event for a company. He wrote: ‘I feel weak when I have to mingle with a large group of people at any kind of gathering’. He suggests that you own your weaknesses – and offers the following guide to dealing with them. S – Stop doing this activity T – Team up with others who are strengthened by this activity O – Offer up a strength and steer your job toward it P – Perceive your weakness through the lens of a strength – from a different perspective As an example of how he has used his strengths to combat a weakness, Buckingham told delegates that he now goes through the process of ‘interviewing people’ when he has to attend a function that

involves mingling with crowds. Leadership – a whole different skill set The responsibility of a manager is to turn one person’s personality into performance. To find out what is unique and capitalize on it. The responsibility of a leader is to rally people to a better future. Leaders find what is universal and capitalize on it. But leaders make mistakes as well. Marcus cited the example of Ebay overpaying for Skype. Clarity is the antidote to anxiety If you want to get better as a leader get more vivid. Why are we in such a mess in Afghanistan? Because we can’t see victory. We don’t know what it looks like so we’re anxious. Sir Terry Leahy became successful because he knew who his customer was. When he was asked this he said, ‘the harried housewife’. Elaborating, he said that people like his mum never got the respect she deserved when shopping and that’s why he dramatically increased the number of checkouts. To respect people’s time. What is your core strength? You should have one or maybe two core strengths. We hear CEOS saying things likes, ‘we’re customer focused, creative, innovative, passionate’. This is nonsense. You need to be much more sharply defined. Mark Zuckerberg, the CEO of Facebook, is a good example of someone who is clear on this. Their strength, he says, is their engineers. In other words, they get the best engineers and their whole culture is geared towards this. No one has a desk; the whole place is designed for engineers. All they do is ship code. What actions can you take right now? This is something all leaders need to consider. Rudy Giuliani, the former Mayor of New York, for example, decided straight away to get rid of the car window washers who would appear at traffic lights by having them arrested for jaywalking. He got rid of graffiti and he made cab drivers wear a collared shirt – not a T-shirt. If you want to lead then you need to be a great speaker. Practice the words you want to use, and practice them again. Probably the most famous speech ever is the Martin Luther King ‘I have a dream’ speech. And yet he didn’t plan to make this speech, he had another one prepared. But 11 minutes into his prepared speech he realized he was losing his audience, so he launched into another

speech that he had used in churches all around the country. He was prepared. You have got to have phrases that you use again and again. Always have a few powerful vignettes. Use them the moment people start to get bored. Do that well and you can take people with you and lead them where you want. Session summary compiled by Matt Baker, Editor of Transforming Management www.tm.mbs.ac.uk