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In the early 1960’s, a psychologist named Sam Glucksberg conducted an experiment testing the effects of extrinsic rewards on creativity. He divided his subjects into two groups and gave them a puzzle to solve that required identifying a new function for a common object (in this case a box with tacks in it). Half the group was told that they were being timed to determine a benchmark for how long it took to solve the puzzle. The other half was told that they would receive a cash award if they finished in the top 25% of the group and a higher cash award if they finished first. Which group do you think finished the puzzle faster?

If you guessed the group with the cash incentive, you guessed wrong. It took them an average of 3 ½ minutes longer to get the puzzle. Yes, that’s right. 3 ½ minutes longer. Why? Because extrinsic rewards tend to narrow our focus. We look toward the goal, which makes it more difficult to see the wider implications. Solving the problem in the experiment required a wide focus, an openness to new solutions.

Other psychologists have done similar studies that have tested this effect on creativity. What they have found is radically changing our idea of what motivates exceptional performance. It is not, according to Daniel Pink in his new book, Drive: The Surprising Truth About What Motivates Us, (http://www.danpink.com/) the cash bonuses, the commissions, the high salaries, the pay for performance many companies use to incent employees. He says these types of rewards work fine if the task follows a set of guidelines or rules and is repetitive. But for creative work, for solving problems that haven’t been solved before, for dealing with complex issues where guidelines don’t work, science is showing us that rewards and punishments not only don’t work, they sometimes actually do harm by lowering performance or incenting unethical behavior.

In a second experiment cited by Pink, economists Uri Gneezy and Aldo Rustichini studied the effects of punishment on parents whose children attended 20 day care centers in Haifa, Israel. The closing time for the centers was 4:00 p.m. If parents were late, a teacher would have to stay with the child until the parents arrived. Gneezy and Rustichini began the study by recording the number of times parents were late picking up their children. At the end of four weeks, the researchers were allowed to charge a fine for late parents. Because a punishment had been imposed, the researchers expected the number of late parents to decrease, but to their astonishment, the opposite happened. After the fine was imposed, the number of late parents actually increased, eventually climbing to a level twice as high as the pre-fine level. What Pink concluded is that the threat of punishment crowded out the motivation parents once had to treat their children’s teacher fairly. “The fine,” he says, “shifted the parents’ decision from a partly moral obligation (be fair to my kids’ teacher), to a pure transaction (I can buy extra time). There wasn’t room for both. The punishment didn’t promote good behavior; it crowded it out.”

Pink says our organizations, for the most part, still operate under the assumption that the way to increase desirable behavior is to reward it and the way to decrease undesirable behavior is to punish it. Our pay systems are built on this foundation. But science is telling us that there’s a cost, and the cost is diminished performance, less creativity, lowered intrinsic reward, more short-term thinking, and organizations where good behavior can get crowded out and shortcuts, even cheating, are encouraged. This doesn't mean that equitable pay is unimportant. Unequal or unfair pay creates a distraction. But for creative work, extrinsic rewards often backfire.

Plum Cluverius, PCC is an executive coach with over 30 years experience in leadership development. She lives and works in Richmond, Virginia.

Labels: Leadership Development

Click for more information on executive coaching with Vedere Consulting. You can also follow Plum on Twitter.