The Bonus You Use As An Incentive Makes Your Team Perform Worse

In 1949 Harry Harlow, a professor of psychology, carried out a series of experiments observing rhesus monkeys solving a puzzle which looked similar to the latch on a door with a pin securing it. At the start of the period of experiments he placed the puzzle in the cage with the monkey and waited for them to get used to their new set of surroundings. What happened next caught him completely by surprise.

Without any inducement at all the monkeys set to work trying to solve the puzzles. They worked with what seemed like diligence and looked to be enjoying the task. As the days went by the monkeys became more adept and quick at solving the puzzles until they were opening the latch-like mechanism in no time at all.

This went against the grain of what was known about what powered behaviour. Harlow knew that there were two main motivators in life – the biological and the external. The first is present in all animals, the need for survival – to eat, drink and copulate to produce offspring. The second drive, he knew was an external one, that of reward or punishment from the environment based on our actions. In the case of the puzzle solving monkeys, neither of these could have been motivators for them as ‘the solution did not lead to food, water or sex gratification’, nor was there a reward for solving or punishment for not solving the puzzle.

Harlow realised that there must be a third drive taking hold of these monkeys, compelling them to solve the puzzles provided them. ‘The performance of the task provided intrinsic reward’, he wrote. The monkeys seemed to be solving the puzzles because they found it gratifying, they enjoyed the challenge of doing so. He called this Intrinsic Motivation.

In one of his final experiments in this series, he decided to test the strength of this new third drive as surely it must have been subordinate to the biological and extrinsic motivators. So, he experimented with rewarding the monkeys with raisins whenever they solved the puzzles, what could be more gratifying for a monkey than to receive food for doing good work. However, what occurred shocked Harlow even more. The monkeys actually got WORSE at solving the puzzles, making more errors and completing them less frequently. It seemed that providing an external inducement decreased performance. (1)

Who decided that paying a performance bonus was a good idea anyway?

In 1900, Henry Winslow Taylor demonstrated his ‘Scientific Management’ method of producing more, faster with less material at the Exposition Universelle in Paris. Having turned down a place at Harvard to go to work in a steel factory he had become fascinated by how such a revolutionary technology such as the day’s finest industrial machinery could be utilised in such a haphazard, unscientific way by the people working there. Methods of carrying out processes in the factory were a hangover from the days of artisans, knowledge was passed down through the team and instructions were given using approximations at best. He felt that there must be something to be done to improve the way work was performed.

By applying reductionist thinking and using a stop watch to measure his results, he broke down the actions of the factory workers into their constituent parts and set about devising methods of reducing the amount of time it took to complete them. The small reductions in the time it took to perform each task in his new method of working, meant that the finished product was formed in a vastly reduced time overall.

The usual rate of manufacture employed in factories like Taylor’s cut nine feet of steel per minute. His new method cut fifty feet, it was nearly 6 times faster. The Marginal Gains much trumpeted by Team Sky and David Brailsford are not a new concept.

At the exposition in Paris, his demonstration caused a storm. People queued for hours to catch a glimpse of his operation. Once news spread, they travelled across Europe to see for themselves this miraculous way of churning out product. Prominent Industrialists of the time wrote ‘Nobody quite believed at first in the prodigious result..but we had to accept the evidence of our eyes’, the process was ‘a landmark in the history of mankind’ and likened the breakthrough to the invention of the electric lightbulb.

Taylor’s Scientific Management was so popular that people devoted their lives to his vision. It moved from factory to factory, industry to industry, always improving what had gone before. It meant that workers became cogs in a machine built for efficiency. It also meant that what was once skilled work became simple steps that could be executed by anyone once trained. What once were seen as complex tasks only to be performed by an educated worker could now be carried out at a more efficient rate by someone unskilled, uneducated and cheaper. To ensure these unskilled and uneducated workers worked in the right way, at the right time, producing as much as the system could achieve; methods of reward and punishment were brought in to have more of the behaviour that was required and less of the behaviour that was not. Eventually, this settled on a monetary incentive to work. If a worked produced what the system said they could they were paid accordingly, if they over achieved this target they would be paid more. Thus was born the Bonus Scheme.

This premise of industry, to reward the good work and punish the bad, has remained in our everyday lives since that demonstration in the 1900 Parisian display. It has worked well. Very well. It has helped us transform our work from blue collar to white collar – there has been a best way to insert paper into a typewriter, the quickest way of clipping paper together and scripts for handling sales calls. Scientific Management and the financial incentive has built our economy to where we are today. However, what has worked before has now to all intents and purposes become a hindrance.

Heuristic work

As economic progress has shifted from blue collar to white, Taylor’s reductionist methods could be applied to reduce tasks to scripts, formulas and step-by-step processes. Scientific Management is in effect today with, what was once high skilled, highly educated white collar work carried out in the Developed World of North America, Western Europe, Japan, South Korea and Australia moving off-shore to where it can be completed cheaper.

Whilst outsourcing the routine work has become more and more prevalent and efficient to do, the type of work the Western World produces is becoming more complex. The work that North America, Europe, Japan etc have begun to produce is that of problem solving, learning and discovery, what Daniel Kahneman, the author of Thinking Fast and Slow, has termed Heuristic Work. McKinsey & Co have estimated that 70% of job growth in the United States is that of heuristic work (2).

Kahneman says that work can now be divided into two categories – algorithmic and heuristic – the former meaning process oriented, the latter artistic and non-routine.

Algorithmic work can be outsourced and automated – technology can now perform tasks that only a few years ago relied on a human to carry out, for example tax preparation software and automatic retail checkouts. In fact a recent study by PwC warned that 10 million jobs in the UK are set to be replaced by technology in the next 15 years (3). Heuristic work cannot be outsourced or automated.

Whereas the old methods of reward and punishment work to a certain extent in the world of algorithmic work, findings say that they hinder the production of heuristic work upon which Western economies now rely.

Studies show that rewards hinder performance

Harvard Business School’s Teresa Amabile has found that creative heuristic work relies heavily on Harlow’s third drive, intrinsic motivation (4). Subsequent experiments into rewarding heuristic tasks conducted by Edward Deci and colleagues found that there was a ‘hidden cost of rewards’. They observed a group of pre-school children who enjoyed spending their free play time drawing and devised and experiment to test what effect providing a reward had on this activity, which the children clearly enjoyed. The children were divided into three groups – those given no reward for drawing, those given an unexpected reward for drawing and those told that if they spent time drawing they would receive a reward. A few weeks later, when the researchers visited the pre-school again they could clearly see that children who were in the no rewards and un-expected reward group drew with the same enjoyment and relish as before. However, the children that had expected a reward for drawing showed much less interest and drew less than previously. They were experiencing a fact which we all know, that once enjoyable work can become a drudge. However, only those that were expecting a reward for drawing were impacted by this. Those that did not expect a reward yet received one for drawing still had the same verve for the task as before.

Their conclusion was that ‘if-then’ rewards, if a task was performed then a reward would be give, affected the performance of heuristic tasks. The reason they gave was that these ‘if-then’ rewards asked people to forfeit some their autonomy. They varied this experiment over and over with different groups of people and still found the same. Extrinsic rewards, especially ‘if-then’ rewards in over 100 experiments were shown to have a negative impact on intrinsic motivation of heuristic tasks (5).

‘I don’t need my team to be intrinsically motivated’, I hear you say. ‘I pay people for performance of their tasks at work. When they perform well, they get paid more’. But this has been proven to have the reverse effect.

In a 2005 study performed by economists from MIT, Carnegie Mellon and the University of Chicago for the Federal Reserve Bank of Boston, high pay was shown to be detrimental to high performance. In their study of 87 participants in India, they set a series of tasks from unscrambling anagrams to recalling a string of numbers, all requiring creativity, concentration and some requiring motor skill. Again, divided into three groups the participants were to earn a reward. Group 1 would earn 4 rupees (at the time worth around a day’s pay) for hitting their performance target, Group 2 would earn 40 rupees (about two week’s pay) and group 3 would earn 400 rupees (nearly 5 months pay).

It turned out that the medium level of reward had no affect over the level of performance produced by participants than the low level of reward. However, the high level of reward made participants perform worse than the other two groups on nearly every task. ‘In eight of the nine tasks we examined across the three experiments, higher incentives led to worse performance’, they concluded (6).

Another study carried out by the London School of Economics in 2009 analysed 51 studies of corporate pay for performance plans. The conclusion was that financial incentives have ‘a negative impact on overall performance’ (7).

As economists in the previous study in India wrote in their report ‘one cannot assume that introducing or raising incentives always improve performance’. They also stated that using bonus structures in the corporate world may be ‘a losing proposition’.

Controversy

As these experiments clearly show, extrinsic rewards given in the usual if-then way, such as a pay-for-performance bonus, can have a negative effect on your team. These findings were so controversial that the researchers were forced to re-analyse almost 3 decades of data from their experiments. Still they came to the same conclusion ‘when institutions – families, schools, businesses and athletic programmes, for example – focus on the short-term and opt for controlling people’s behaviour’ they do so to the detriment of long-term performance (8).

Notes

  1. Harlow et al., “Learning Motivated by Manipulation Drive” , Journal of Experimental Psychology 40, 1950
  2. Bradford et al., “The Next Revolution in Interaction”, McKinsey Quarterly 4, 2005
  3. Hawksworth et al., “UK Economic Outlook July 2017”, PwC
  4. Teresa Amabile, “Creativity in Context”, 1996
  5. Mark Lepper, David Greene and Robert Nisbett, “Undermining Children’s Intrinsic Interest with Extrinsic Rewards”, Journal of Personality and Social Psychology 28, 1973
  6. Ariely et al., “Large Stakes and Big Mistakes”, Federal Reserve Bank of Boston Working Paper No 05-11, July 2005
  7. “LSE: When Performance-Related Pay Backfires”, Financial June, 2009
  8. Deci at al., “A Meta-Analytic Review of Experiements Examining the Effects of Extrinsic Rewards on Intrinsic Motivatioin”, Psychological Bulletin 125, 1999
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Culture is Key

In order to be a Top Flight Team, the team’s players must be motivated. Science tells us that to be motivated an individual must first have purpose, a reason why, a cultural imperative.

Before we delve into the science, let us look at the worlds of sports and business to where purpose and culture has provided the backbone for high performance.

Bill Walsh was a legend. When he took over coaching the San Francisco 49ers they were an under-performing bunch of also-rans in the American NFL. From 1979 to 1989, he turned them into one of the greatest sporting dynasties in the history of the sport. His belief was that to build a successful team that team had to have character. He has been quoted as saying ‘You get nowhere without character. Character is essential to individuals, and their cumulative character is the backbone of your winning team’. His ethos was that in order to build character, you had to have the right culture in place. His philosophy was that he was a teacher first and a leader second. He taught his players to be characterful. As the title of this book proclaims, The Score Takes Care of Itself. Rather than focusing on results, it was more important to work on the team and make sure it had the right culture to build character and succeed.

Vince Lombardi, another legendary American Football coach, said that ‘The challenge of every team is to build a feeling of oneness, of dependence on one another. Because the question is usually not how well each person performs, but how well they work together.’ Again, the ‘feeling of oneness’ is a shared cultural imperative.

More recently, culture has formed the central theme of another team with roughly the same shaped ball as the world of Walsh and Lombardi, but a completely different set of rules. Rugby Union’s All Blacks are the National Team of New Zealand and they have been the most successful team in history, winning more games back to back than any other nation and being the first to win successive World Cups in 2011 and 2015.

Unusually for a sports team, it isn’t just supreme skill, star players and genius coaches, that make the All Blacks so successful, it is the overall culture of the team that is the bedrock of its success. What it meant to be an All Black and to be a New Zealander is baked into the heart of the team.

Following a period of abject underperformance during the 2004 Tri-Nations tournament, when the All Blacks finished last behind Australia and South Africa, the new coach Graham Henry and his team reviewed the situation and realised that they needed to ‘create an environment that would stimulate the players and make them want to take part in it’. They came up with six words – Better People Make Better All Blacks.

Once they had struck upon this purpose, they had the reason to create a cultural imperative around it. In addition to this, they allowed the players to take ownership of creating that culture. As Wayne Smith, a member of the All Black coaching team, says ‘We had to put forward stuff that inspired us and that inspired the players’. Adding, ‘If you are going to set goals the players have got to set goals. If you are going to be vision-driven and values-based, they have got to be a huge part of that’.

Management Consultant Owen Eastwood states that ‘The emotional glue of any culture – religion, nation or team – is its sense of identity and purpose’. What drives the formation of culture with the All Blacks is the connection of personal meaning to public purpose. This is the way in which we connect ourselves to a wider purpose. If our sense of personal meaning aligns with the values of an organisation, that sense will impel us to work hard and achieve success.

In order to embed this as their cultural bedrock, the All Blacks have an ongoing interrogative process as a central theme, they question eveything. This, known at the Socratic Method, is employed as a method of hypothesis elimination and helps them find self-knowledge. The coaches employed this method, rather than instruction so that their charges could make their own judgement of situations, set internal benchmarks and form their own culture.

As I have found in my own coaching, this form of leadership creates adaptive problem-solving with individuals taking ownership of their situation and continuous improvement as a result. Having the humility to tell athletes or mentees that you don’t have all the answers, questioning the status quo through ongoing interrogation helps individuals connect to a value-driven and purpose driven culture and leads to vast improvement.

In 1962, when President John F Kennedy gave his enthusiastic speech about sending a spaceship to land on the moon, leaders at NASA had profound misgivings about the feat being possible. Only two years beforehand their first attempt to send an unmanned test craft to orbit the Earth had been a damp squid, lifting only four inches before settling back down and jettisoning its escape rocket which instantly deployed its landing parachutes which then fell into the sea. This was all whilst the US was losing the Space Race against the Soviet Union, who had already achieved the first Earth orbit, first animal in orbit, the first images of the far side of the moon and would very soon put the first man into space.

NASA was originally conceived as a research institution, with independent teams of specialists working on their own projects. The problem in its lagging achievement was that whilst these independent specialists were very comfortable with working on their own projects, they were not good at integrating efforts into a single project. This was essential for a project such as landing on the moon, which would require a team of 300,000 individuals working for 20,000 contractors and 200 universities in 80 countries.

In 1963 all this would change with the appointment of George Mueller to build the managerial foundation of the Apollo program, that of taking a man to the moon. Mueller’s vision was to create ‘joint cognition’ between all the teams within NASA and around the world working on the project. For this to be possible he needed cultural change. This change came in requiring all those involved to align behind one purpose, landing a man on the moon, and the communication structures needed in order to realise this.

Whereas before Mueller’s involvement NASA HQ would collect data from various field centres each month and have a few managers check for inconsistencies, he insisted on daily analysis and quick exchange of data. All data was continually on display in a Central Control Room and this received updates from teams and contractors on a constant basis. This has been likened to the Internet over 20 years before the Internet was created. The organisation also built a ‘teleservices network’ to connect teams and project control rooms together, providing the ability to hear in real time the problems and issues each was facing and how they would be solved.

By today’s standards of interconnected life, this seems trivial, but in the mid 1960s this was revolutionary and a huge cultural shift for an organisation that had previously been very silo orientated in its operation. To begin with this caused huge ructions with staff as they learned the new cultural imperative of the project. However, once they saw the utility of the information sharing, more and more of the initial opposition came around.

Another cultural change that NASA had to make at the time was that of dealing with outside contractors. Previously NASA had done everything in-house, however, this was a project so huge that NASA simply did’t have the capacity or expertise to do everything in-house. But the complex interaction of parts involved in this project meant that those provided by sub-contractors not privy to the full context were likely to create problems. The solution was to bring the contractors in-house and they needed to have a handle on the whole picture. That way they could continue to be specialists in their field but knew the wider implications of their output.

Of course, we know the story has a happy ending. The cultural oneness that was fostered in Mueller’s vision of ‘joint cognition’ proved to be the main reason for NASA’s success. So successful in fact that this is still used today and has been essential in projects such as the International Space Station and Boeing’s 777.

What science says

A study by behavioural scientists Edward Deci and Richard Ryan in 2000 gave us their Self-Determination Theory (SDT), which argues that humans have three innate psychological needs – competence, autonomy and relatedness. When these needs are satisfied, we are motivated. When these needs are denied us, our motivation and happiness plummet. Of the three pillars of SDT, autonomy is the strongest. Autonomous motivation involves behaving with a full sense of volition and choice (purpose), whereas controlled motivation involves behaving with the experience of pressure and demand toward specific outcomes that comes from forces perceived to be external to the self (1).

Recent studies have shown that autonomous motivation promotes greater conceptual understanding, better grades, enhanced persistence at school and in sporting activities, higher productivity, less burn-out and greater levels of psychological wellbeing (2). Researchers at Cornell University studied over 300 hundred businesses, half of which had a strong culture of autonomy for their employees and half of which had a culture of top-down direction. The businesses with an autonomous culture grew at four times the rate of the control-oriented businesses and had one third of the staff turnover (3).

Baby Boomers are now the largest demographic cohort in the majority of the Western World. During 2006 the earliest Boomers hit their 60th birthday, at this time in the United States alone one hundred Baby Boomers reached this landmark every thirteen minutes. As is human nature, with every landmark comes reflection. With this reflection, they soon realise that they still have upwards of 25 years left on this planet and start wondering when they will do something that really matters and make a difference in the world. During their twenties, thirties and forties the world was in an unprecedented economic boom. Yet their reflection tells them that they still have unmet dreams. They are still seeking purpose.

Sylvia Hewlett, an economist at Cambridge University, has researched purpose in different generations of human society. Her findings show that the Baby Boomer and Millenial generations now have the same view of purpose in their lives. She says that both these generations ‘are redefining success [and] are willing to accept a radically “remixed” set of rewards’. Far from rating monetary compensation from being the most important, they choose a range on non-monetary factors such as ‘a great team’ or ‘the ability to give back to society through work’ (4). In other words they crave purpose and cultural imperative more than financial rewards in their life.

What does this mean for me, you and our teams?

From various successful business projects, sporting exploits and scientific research, we can see that purpose and culture are necessary to get our teams to perform. In order to create this, we need to have a Socratic Method of asking ‘why’? Why are we doing things? Why do we want others to follow? Why do we need their help?

As Simon Sinek says, ‘People don’t buy what you do, they buy why you do it’. He argues that what we feel matters more than what we think, because the area of the brain which handles feelings, the limbic, is buried deep within its pre-linguistic core. This means that, given a choice, we follow our gut. He says that asking ‘why’ creates a biological imperative, it drives us and inspires us.

Not only do we need to simply ask questions, but we need to form better questions to ask to draw better answers from those around us.

We also need to create an environment where our team can be autonomous in what they do and how they do it. By asking the questions and seeking why we build stronger bonds and attain higher achievements.

That way we can all align behind a purpose and build a culture of success.

Notes

  1. Richard Ryan and Edward Deci, “Self Determination Theory and the Facilitation of Intrinsic Motivation, Social Development and Well-Being” American Psychologist 55 (Jan 2000)
  2. Ryana and Deci, “Facilitating Optimal Motivation and Psychological Well-Being Across Life’s Domains”, citing many other studies
  3. Paul Baard, Edward Deci and Richard Ryan, “Intrinsic Need Satisfaction: A Motivational Basis of Performance and Well-Being in Two Work Settings” Journal of Applied Social Psychology
  4. Sylvia Hewlett, “The ‘Me’ Generation Gives Way to the ‘We’ Generation” Financial Times, June 19 2009

Also credits go to Drive by Daniel Pink, Legacy by James Kerr and Team of Teams by General Stanley McChrystal.

Introduction

I’ve always been fascinated by the way teams work. Early in my life I always wanted to be part of a team, working with others to achieve a goal. This was especially true with sports.

When I was quite young I was captured by the magic of sailing. I learnt to sail a single handed boat, which I loved, but I enjoyed crew boats even more. I adored racing and would prefer to crew for someone, trying with them, to extract the most out of the boat in order to beat our opponents. Working in harmony with my crew mate to use the equipment and wind to its fullest. Learning my crew mate’s strengths and weaknesses. How they read the situation and having input into that to make us as fast as we could on the water.

As a got a little older, my attention turned to rowing. This is the ultimate team sport. A rowing crew is only as strong as its weakest link. If one member of a crew is inefficient with their rowing stroke or not as fit or strong as the others, the boat will only go as fast as this member will allow. He or she will be the limiting factor in ability. In other team sports such as rugby or football with many players on the pitch, a team can still achieve a win on the strength of one or two star players. Individual skill can win a hockey, Aussie Rules or basketball team the game. In a crew rowing boat, this is simply not possible. All crew members must work in unison to propel the boat as fast as they are able. If one of the crew is slightly out of time, underpowered or not as physically fit, it limits the possibilities. It is this that I find fascinating about the sport of rowing. So much so that I have now coached Elite rowing for over 10 years.

I was a very average rower myself. However, I have had success as a coach. My crews have competed and won at International regattas. I have had athletes go through my programme who have competed for their country, such as Australia, New Zealand, Great Britain, Tonga and Estonia, at World Cup and World Championship regattas. Some of my club women’s crews were only beaten by the Great British National Team during their season for two years on the trot. One of my crews beat a crew full of Olympians.

I have found during my years coaching rowing that the crews which performed the best were those that worked together as a team, extracting the most out of one another as well as themselves. I have had crews that have competed and beaten opposition that were, on paper, superior to them, simply because they worked together as a crew better.

In my other life, I have worked in the business world for nearly 20 years. This began in a startup before the term had been coined, it was simply a small technology business distributing bleeding edge IT products from Silicon Valley and Israel to the UK. I subsequently moved in to my Family’s Business in the Property Sector, where I spent 9 years and grew the business twice over. The second time after we lost the majority of our customer base following the financial crisis when my team and I doubled turnover from £3 million to over £6 million in the space of 18 months by creating and launching an innovative product.

As someone who always wants to improve on a situation, call me competitive, I have a deep interest in new ways of doing things. My fascination has only increased after, having left my Family’s Business to pursue other opportunities in 2011, I became a helpless bystander as the company was forced to close due to being unable to change its core business when it badly needed to.

Over the years of reading and research into how to improve performance in sport as well as in business, I have come to realise that it is the team which is one of, if not the most important aspect. In business, it is the Rock Star Entrepreneur who grabs the headlines, but scratch the surface and you will find that his or her exploits would not have been possible without the team around them.

Steve Jobs needed Steve Wozniak, Jonathan Ives and the rest of the Apple team to realise his vision of the tech industry. Mark Zuckerberg needed Dustin Moskovitz, Eduardo Saverin and others to start what became Facebook whilst at Harvard. Jonny Wilkinson won the 2005 rugby world cup for England with one kick to score. However, he couldn’t have been in the position to score without his team mates who went through several phases of play, inching their way towards the opposition’s line. Ben Ainslie is largely credited for overturning the huge deficit that Team Oracle had against Team Emirates New Zealand in the 2013 America’s Cup. However, whilst he gave the calls on tactics, he still had to rely on those sailing the boat – helm and crew – to enact on his word.

Very rarely do you hear about the team, whether the subject is about Lewis Hamilton, Roger Federer, Tim Ferriss or Elon Musk. All these household names have a team of unsung heroes behind them, working furiously towards success.

From my own experience of coaching high performance teams in rowing and the business world, I believe that although innovation, entrepreneurism, inspiring leaders and collaborative workspaces are some of today’s in vogue topics, they would all be for naught if it were not for the team which make a vision real.

I think that sports, academia and business can all learn from each other and parallels can be drawn from each. I want to learn more about the subject of building top flight teams and using them to perform at their peak to achieve their goal. I want to bring what I learn to you, as I feel that it is essential to take these lessons on board if we are to deal with tomorrow’s challenges.

I hope you enjoy sharing my journey into what makes and sustains a Top Flight Team.

Thank you