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Do Incentives Really Motivate People? Or Are They Just a Quick Fix?

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The dining car was crowded and noisy. Some travelers, packed into the booths, were engaged in lively conversations as they ate. Other more solitary passengers were reading newspapers or tapping the keys of their laptop computers as they dined quietly at the tables.

In the near corner was a tall, overweight man in an expensive-looking suit talking on his cell phone through the earpiece attachment. Chomping on an unlit cigar, he spoke loudly enough for the entire car to hear his end of the conversation. “I don’t care what they prefer!” shouted the man in a mocking tone. “Ship them what we’ve got in stock. Besides, it’s near the end of the month, and we’ve got a quota to meet!” He muttered to himself, “I’m surrounded by whining idiots. Why can’t they think on their own? Do I have to tell them everything?”

Pete stopped and looked at the man. Inwardly he was embarrassed for both of them. What the man was saying was what Pete had often thought after he’d had a conversation with one of his people. Slowly he and Kip made their way past this man and down the length of the dining car. Waiters darted around them, taking orders and delivering food. The only two remaining seats were in a booth occupied by two women at the far end of the car. Kip and Pete walked over to the booth and asked if they could share the table.42

The first woman looked to be in her mid-thirties and introduced herself. “Hi, I’m Lucy Woo. I just sat down myself. Please, join us.”

The second woman, who looked to be in her early forties, had been silent up until now. Smiling, she said, “I’m Yolanda Worthington. This train was my only way out of Denver.” Kip smiled, and Pete extended his hand and introduced himself and Kip.

After settling into their seats, Pete said, “This is my first time on this train. Is the food any good?”

Lucy replied, “I enjoyed breakfast this morning, but lunch should be an adventure.” Everyone laughed politely. She went on, having scored some points with her audience. “I came into the dining car just a moment ago myself, and Yolanda was kind enough to allow me to sit with her. How about you two gentlemen—do you work together?”

“We’re sharing a compartment, but we met just a couple of hours ago,” answered Pete. “I’m the CEO of an optic systems company, and Kip is a retired CEO who helps organizations create what he calls a freedom-based work environment. Kip was telling me that creating a freedom-based work environment is the best way to get people to be accountable, and I had just asked him for proof.”

“Well, I certainly understand the importance of getting people to be accountable,” commented Yolanda. “As an incentive and compensation design specialist for a national organization out of Minneapolis, I’ve found that the best way to get people to be accountable is to structure compensation and incentive systems that motivate them. I’m not trying to drum up any business—” everyone laughed, “—but I really believe this, and I have lots of proof that incentives definitely work!”

Turning directly to Kip, Yolanda said, “I’m afraid I don’t know what you mean by a freedom-based work environment. In fact, freedom and accountability don’t seem to be in the same universe. Too much freedom can lead to anarchy. Accountability, on the other hand, means that you’re obliged to others to meet your commitments, something I strongly believe in. So if I’m right, how do you get these two ideas to fit together?”43

Pete was glad they had sat down at this table because he recognized that Yolanda was going to give Kip a run for his money. He sat back and waited for Kip’s response. He didn’t have to wait long.

“Let me see if I can explain,” smiled Kip, welcoming the question. “A freedom-based work environment is one that has abandoned the idea of controlling or manipulating people.” Kip took an especially long time drawing out the words ‘manipulating people’ so that Lucy, Pete, and Yolanda could read his conversational thrust. “Rather, a freedom-based environment trusts people to make good choices. Of course every operation needs standards.

“Take Southwest Airlines, considered the best-run and the most profitable major airline in this country. What is it that they have going for them? Good processes and systems, of course, but their competitive advantage is their people. Instead of controlling people, Southwest encourages their people to be creative and to own their jobs. They emphasize a freedom-based philosophy.”

“With all due respect, Kip,” broke in Lucy, “I completely disagree! I work in Chicago as an organizational development specialist with a large national consulting firm, and I believe it’s processes we should trust and the numbers they generate, not people. Not that people are evil or anything, just that they need help—guidance and supervision.”

“Boy,” thought Pete, “this is too good to be true. Lucy and Yolanda are going to tag-team poor old Kip just like they do in pro wrestling.” As much as he had taken an immediate liking to Kip, Pete realized this conversation would be valuable in two ways. First, these ladies weren’t going to just accept what Kip had to say without a fight. And it already appeared that their comments and questions would help Pete formulate his thinking. Second, if by some chance Pete embraced Kip’s philosophy, the younger man knew that there would be plenty of Lucys and Yolandas back at corporate, so this would be good hands-on practice identifying and fielding objections.

Lucy brought Pete’s wandering mind back to the conversation when she said, “Without good solid systems and controls in place, too many things can go wrong—and if something can go wrong, it will. My experience suggests that getting out of a fix takes a lot more energy than what it took to get into it in the first place.”44

Lucy realized that she was monopolizing the conversation and said, “I’d like to make one last point if I may.” The group nodded. “The problem, as I see it, is that managers too often chase after popular management fads that make big promises but don’t deliver. But good solid systems and procedures will always be needed even with freedom-based systems.” Pete appreciated Lucy’s argument. It was the argument that he had made to Kip earlier.

Kip replied, “You’re right, Lucy. One of the problems of human nature is that people tend to adopt popular ideas largely because others have already done so, and this couldn’t be truer than with popular management fads. Despite the absence of data to support a new fad, many conclude that if it’s popular, it must work!”

Yolanda wasn’t quite sure where this was all leading. Pete was sitting back, enjoying the discourse. But Lucy, fully engaged in her conversation with Kip, looked like a cat ready to pounce on her prey.

Lucy, quick to respond, said, “That’s precisely my point. That’s why I spend my time on systems and processes that can be measured rather than waste my time dealing with people issues. It’s bottom-line results I’m interested in, not hopes, promises, and soft, squishy guru stuff!” Yolanda continued to listen with interest because she was not sure whether Lucy would support her approach.

“I’m interested in results, too,” agreed Kip. “Organizations today continue to implement a dizzying array of management fads. Often, management gurus ride into town like old Wild West medicine pitchmen offering a cure-all from the back of their covered wagons. But the solutions they offer are the same old formulas wrapped in attractive new packages.

“Lucy, I think we’d all agree that appropriate systems and procedures make sense. What I’m saying is that you can’t ignore people, while focusing on systems and processes, and expect them to be accountable. Systems are only tools; like a seat belt, you have to be willing to wear it for it to do any good.”45

“You can say that again,” echoed Pete.

Yolanda interjected, “Kip, I still don’t quite understand what you’re pitching.”

Kip did not take offense at Yolanda’s rather caustic comment. “Let me see if I can make myself clear,” he continued. “Individuals are very special, perhaps unique, and as such, they’re not predictable, so one system doesn’t fit all situations. Yet human nature drives us all. Much of popular thinking about managing and motivating people is rooted in early twentieth-century theories of human behavior. And these early theories suggest that humans are capable of being programmed. I know lots of advertising guys who, on the one hand, believe a campaign is going to work because of the pretesting they’ve done, only to find a wildcat firefight on their hands from an unpredictable segment of the audience. As much as we’d like to believe we can control people’s behaviors, in truth we can’t.”

Kip’s audience was listening intently, even Yolanda, as he made his point clearer. “Harvard psychologist B. F. Skinner published a behaviorist theory of human motivation in 1938. His theory was based on what he called ‘operant conditioning.’B. F. Skinner, The Behavior of Organisms: An Experimental Analysis (En-glewood Cliffs, NJ: Prentice Hall, 1938; out of print). His work was so well received that his approach has remained in our consciousness even to this day. For many of us, his theories—and they are only theories—have become our belief system about how to control and motivate people.”

“I remember reading about him in my psychology classes at Penn,” said Lucy.

Kip went on. “Operant conditioning asserts that an action may be controlled by a stimulus that comes after it rather than before it. Skinner’s theories of human motivation have since been proven ineffective and even damaging to individuals and organizations. And yet people continue to try to apply his theories.” He knew that Yolanda would hit the roof on his last point, but he felt compelled to lay out the facts.

There was no smile on Yolanda’s face as she said, “You’re talking about my business. The basis of our work and credibility is on the excellent science that Dr. Skinner pioneered. You can’t be saying incentives don’t work!” She was visibly upset by this stranger’s assertions. “We’ve been helping companies encourage better individual performance for years, and we wouldn’t still be in business if this theory, as you call it, didn’t work! The incentive industry is a multibillion-dollar industry. That has to count for something!”46

Kip listened patiently, letting Yolanda make her case to the other parties at the table. “Yolanda, I mean you or your industry no disrespect, but let me finish my point. Skinner believed that when a reward, or ‘reinforcement,’ follows a behavior, that behavior is likely to be repeated. And because Skinner was able to influence the behavior of laboratory rats and pigeons by feeding them when their behavior was ‘correct,’ he concluded that human beings are motivated in the same way!”

“Wait a minute—are you comparing people to rats and pigeons?” challenged Yolanda.

From Pete’s corner of the table, he could see the fire darting out of Yolanda’s eyes and was glad that her wrath was pointed at Kip and not him. He thought, “I hope my folks don’t go nuclear on me if I bring these ideas back to them!” Then he turned toward Kip to fully catch his response.

Kip responded in a measured tone. “I’m not comparing people to rats—but our friend Skinner did.” Lucy, enjoying the exchange, gave out a little laugh at Kip’s last comment. If she was keeping score in her mind, it was one point for the old guy and goose egg for the incentive specialist.

He went on slowly and purposefully. “Most of what is commonly believed about human motivation and human nature is influenced, if not shaped, by his theories of nearly sixty-five years ago. Skinner’s fingerprints can be seen literally everywhere in American society—in the business community, in our schools, in our churches, and even in our families. It’s not these institutions, but behaviorist theory that is failing us.”

Yolanda knew she was on the defensive, but she’d be darned if she would give an inch. “When I studied behaviorism in college, I accepted it as a fact, not a theory. And I don’t remember anyone disputing his experiments or methodology.”47

“I, too, accepted his theories as fact,” continued Kip, “and I went to school a long time before you did. This idea of offering rewards to motivate behavior became the bedrock of twentieth-century American management systems, and while I was a CEO, I used his approach all the time, not only at work but at home. Yet I now recognize that Skinner was mistaken. Contemporary researchers—those of the last thirty years—consider Skinner’s work to be narrow in perspective and biased. But, Yolanda, they haven’t gotten the publicity that Skinner has.

“Skinner made a contribution, but his work was just a single step in understanding human behavior, not the final word, as many would have us believe. Yolanda, it comes down to whether you believe that human behavior can be equated to that of pigeons and rats and can then make the leap to a belief that humans can be conditioned using Skinner’s techniques.”

Yolanda was silent. She crossed her arms and shook her head in disbelief. This stranger was attacking her basic beliefs. As the silence built, she racked her brain for a way to tell him he was wrong. She would’ve loved to have had her boss sitting at the table to argue her points more forcefully.

Pete offered a compromise position, trying to support Yolanda’s argument. “So, if what you’re telling us is true, why are incentives still so popular?”

“They’re popular,” replied Kip, “because offering incentives provides an easy answer to the problem of motivating people.

“I think that the North American culture, as opposed to our Asian and European counterparts, is steeped in behaviorism. From the time children enter the American public school system, they’re indoctrinated in behaviorist thinking. Rather than appealing to the intrinsic learning motivators—the pure internal joy of learning, for example—students are offered stickers, stars, certificates, awards, trophies, and, most of all, grades as inducements to learn and to achieve.”48

Pete added enthusiastically, “Oh, boy, how true. But, you know, my wife and I tried to use stickers with our daughter, but she wouldn’t have any part of it.” He smiled to himself. “In fact, when she was in the third grade, my wife tried to make a deal with our daughter and said, ‘If you make your bed, I’ll put a gold star on the refrigerator.’ And do you know what my daughter said? ‘Mommy, if you want the gold star, you make my bed!’” Kip and Lucy laughed; Yolanda pursed her lips, looking uncomfortable and a little embarrassed. Pete realized that he had just scored some more points for Kip and felt badly for Yolanda, who seemed more out in the cold than ever.

“The incentive business,” said Kip, “an entire industry based on the concept of rewards, is very much alive and well in America. Yolanda’s industry is evidence of that fact. Most people are unaware, however, that behaviorist theory does not acknowledge such basic intrinsic motivators as personal accomplishment, thoughts, or feelings.” Kip was trying to be as diplomatic as he could.

“That’s not true!” shot back Yolanda, her voice rising. “Our incentive programs are designed specifically to appeal to an employee’s sense of accomplishment. And there’s nothing like additional cash in your pocket or a gift to reinforce that sense of accomplishment.”

Kip responded calmly and in a low voice, “Everyone likes more money, Yolanda, but offering incentives allows management to ignore the real reasons behind poor performance. Rather than going through the hard work of finding the cause of low achievement, offering an incentive takes the easier road to inducing the behaviors the organization desires.”

“Personally, I’ve never believed in incentives,” interjected Lucy in an almost dismissive tone. It was apparent from her comment that she wasn’t interested in being diplomatic or in pulling her punches and that she welcomed this conversation, even if it was getting a little uncomfortable for Yolanda. “As I said, I think you need to concentrate on the processes, not the people, if you want to see results. At best, incentives are the icing and not the cake.”49

“Looking at processes is certainly part of the answer, Lucy,” responded Kip, trying to save the situation for Yo-landa. “But without the enthusiastic involvement of the people using the processes, nothing positive happens on a sustainable basis.”

“That’s precisely why incentives help,” interjected Yolanda. “Yeah, they might be the icing, but don’t most people eat the cake for the icing?” She sat back in her seat, confident that she’d made an important point.

“It would seem so at one level,” smiled Kip, “but I would suggest that there’s a mountain of evidence that catalogues the disastrous long-term effects of reward systems as a primary driver of behavior as would a diet of straight sugar.”

Pete broke in with a wry smile. “Maybe too much icing spoils the experience of eating the cake!” He raised his eyebrows quizzically, his eyes darting toward Lucy’s. As she glanced back, their eyes connected briefly in conspiratorial amusement.

“Highly regarded incentive systems,” continued Kip, as gently as he could, “such as pay-for-performance and merit pay—in short, any and all motivational systems that seek to manipulate the behavior of others through extrinsic motivators—are born of Skinner’s theories. Each of these strategies puts into practice the belief that motivation is something that gets done to others.”

“My experience tells me that you can motivate people with incentives,” countered Yolanda defensively. “Most of the executives I work with find that offering the right incentives, if they are structured properly, encourages their people to conquer challenges and meet goals. That’s where our company can help them and why we are so successful.”

Kip paused and spoke in a lower tone of voice. “But modern researchers conclude that following this path has extracted a heavy toll.”

Lucy could see that Kip was whispering into the wind with Yolanda, yet Kip continued with great patience. “Now, here’s my point. If the incentives don’t work, most executives assume their people are to blame. It never occurs to them that the manipulative nature of incentive plans is really to blame. And, with all due respect, that’s where our greatest disagreement is centered.”50

Yolanda, clearly upset, spoke slowly in a controlled tone. “Kip, you’re making a lot of claims without offering any evidence to back them up. Unless you can prove what you’re saying, I’ve heard quite enough.”

“I’d be glad to show you proof. Give me a moment to get my briefcase from my compartment, and I’ll share the proof with you all.”

Just then, the waiter appeared. “What can I get you for lunch today? Have you had enough time to look over the menu?”

They each quickly glanced at the menu and ordered, and then Kip excused himself to retrieve his briefcase. As he moved away from the table, he couldn’t help noticing that the big man in the corner with the unlit cigar in his mouth was again giving someone the worst of his temper on his cell phone.

Kip shook his head and opened the dining car door.