Incentives
By
March 2007

It occurred to me recently that the most meaningful, rewarding and impactful work I do is frequently free of charge. It's not that I don't enjoy the paid projects. In fact, I very much appreciate the fact that most of my clients pay me, and I am blessed to truly like the work I do for them.

Whether I'm consulting to a church organization or giving a talk to a non-profit, the pro bono projects are usually among my favorites. Beyond the dilemma this poses for the CFO of our little firm, I think this is a phenomenon worth pondering.

The first explanation that comes to mind is a relatively obvious one: I already have a passion for these organizations, and so it stands to reason that I would derive a greater sense of satisfaction from my work. But I think there's more to it than that, and it has to do with something I learned in a social psychology class during college.

Researchers did an experiment in which they asked people on the street to provide some sort of assistance to a stranger. As it turned out, a high percentage of those who were asked agreed to help. Then the experimenters changed the stakes and added a nominal financial incentive to the subjects request, and found that a much smaller percentage of people agreed to help.

The point of the experiment was that people are more enthusiastic about doing something when they believe it is right or good, than when they calculate their economic self-interest. What is more, offering more money to someone who is already committed can actually decrease their incentive to work harder, as it makes them feel bought rather than appreciated. I'm thinking that there's a lesson here for most organizations, non-profits and for profits alike.
Money vs. Passion

Before I go any further, let me make it clear that compensation is a very real and important part of most jobs. Everyone needs money to live, and everyone wants to be compensated fairly.

However, some people don't really work for money. Once they get enough - and yes, that varies from person to person - they lose much of their financial motivation for working harder. The truth is, money has definite limits as a motivator, and thus, is referred to as a "satisfier."

Passion for a cause, on the other hand, has few limits. People who believe in what they're doing are going to continue to give more and more even when there is no additional financial benefit. That is true whether the person is doing altruistic work at a church or a non-profit, crunching numbers at a bank, doing research for a pharmaceutical company or playing basketball for an NBA team.

And yet, we continue to focus so much of our management attention on money, for two likely reasons. First, no one ever turns down a raise, so we mistakenly assume that money is the primary motivator. Second, money is easier to measure than passion or meaning.

Ironically, by offering more money to someone who is really lacking a sense of connection to their work, not only are we getting diminishing marginal returns for our compensation dollars, we may actually be getting negative ones.
The John Stockton Effect

Consider an example from the world of sports. It is common for a player in the last year of his contract to give extra effort on the field or the court, knowing that a statistical improvement will enhance his negotiation position and net him and his agent a bigger contract. Unfortunately for many teams who agree to those contracts, that player often chooses to coast as soon as the ink is dry, at least until he's in the final year of that contract. The list of players who fit this description is long.

Then consider John Stockton, the all-time assist leader in the NBA. That's right. He had more assists than Magic Johnson or Bob Cousy or Jason Kidd, and is considered one of the fifty best players in the history of the game.

John Stockton did not have an agent, but instead chose to negotiate his own contracts. He didn't get paid quite as much as other players of similar or lesser talent, because he was already making more money than he could ever need. But because he felt so connected to his team, the Utah Jazz, and such an important part of Salt Lake City, Stockton played harder than virtually any other player in the league, and stayed his entire career in Utah.

Is Stockton an anomaly? Maybe, but not as much as cynics would think. I honestly believe there are plenty of other players in the league (Tim Duncan comes to mind) and employees in your organization, who are like him. They might not come right out and say it, but what they're looking for more than money is a sense of belonging and purpose and passion.

And so we have a choice. We can either focus our efforts on finding a way to give employees passion and purpose, and watch their productivity soar. Or we can pay them more money and hope that their performance doesn't tank as a result.

Here's another way to think about this, one that I heard at a recent conference during a conversation with the Chief Operating Officer of Taco Bell. He may have summarized my point here best of all when he said, "We need to treat all of our employees, regardless of what kind of organization we work in, as volunteers." Sometimes the most ridiculous sounding things make the most sense.

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