Editor's Note: As we strive to create the conditions for organizational renewal and reinvention on the heels of a very tough year, this Classic lesson about motivation from Stephanie Thomas is very timely.
Autonomy - whether actual or perceived - may be the key to realizing the full benefits of performance pay for your R&D employees.
In this recent post, I talked about the tensions between intrinsic and extrinsic motivation. As many have pointed out, people will do what they love for free, but as soon as we compensate them for it, there is a tendency for tasks become "cheapened" by these monetary rewards, dampening intrinsic motivation.
I think this explanation is a bit too simplistic. It's not that the compensation itself dampens intrinsic motivation, it's what the compensation represents: a restriction on autonomy.
Typically, we think of a pay for performance system as having well-defined edges. Expectations are clear (and clearly communicated!) and based on SMART goals. Within R&D, these edges may need to be a bit more ragged because we need to incorporate some tolerance for failure. Coming up with a revolutionary idea, creating the next "iThing" and solving the biggest challenges are really hard. The first idea or prototype usually is not the winner, but it can lead to a winning solution.
An inflexible performance pay system with no tolerance for failure can feel like a prescribed recipe. No game-changers ever come from adhering to a recipe.
To do their best work, your R&D folks need to feel autonomous in what they choose to think about, who they choose to interact with, what they work on, and with whom they work.
With this kind of autonomy, monetary incentives reinforce intrinsic motivation. Even competitive incentives awarded on a discretionary basis have this reinforcing effect. With autonomy, tournament-style incentives can spur friendly competition, pushing everyone forward to bigger and better ideas. Incentives are not viewed as an instrument of control. They are perceived as an acknowledgement of group effort.
Autonomy is a necessary condition for intrinsic motivation to flourish. This doesn't mean providing a wild-west-style free-for-all. Guidance to ensure that the choices being made are consistent with the long term strategic goals of the organization is needed. But so is some plasticity, freedom to color outside of the lines, and reassurance from the organization that failures are okay as long as they are productive failures, leading to successes in future.
Stephanie Thomas, Ph.D., is a Lecturer in the Department of Economics at Cornell University. She teaches undergraduate and graduate courses on economic theory and labor economics in the College of Arts and Sciences and in Cornell’s School of Industrial and Labor Relations. Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. She frequently provides expert commentary in media outlets such as The New York Times, CBC, and NPR, and has published papers in a variety of journals.
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