Of the first group, 52 percent of the women decided to go ahead and donate blood. They were altruistic citizens apparently, willing to do a good deed for their fellow Swedes even in the absence of compensation.
And the second group? Motivation 2.0 would suggest that this group might be a bit more motivated to donate. They’d shown up, which indicated intrinsic motivation. Getting a few kronor on top might give that impulse a boost. But—as you might have guessed by now—that’s not what happened. In this group, only 30 percent of the women decided to give blood. Instead of increasing the number of blood donors, offering to pay people decreased the number by nearly half.
Meanwhile, the third group—which had the option of donating the fee directly to charity—responded much the same as the first group. Fifty-three percent became blood donors.b
Titmuss’s hunch might have been right, after all. Adding a monetary incentive didn’t lead to more of the desired behavior. It led to less. The reason: It tainted an altruistic act and “crowded out” the intrinsic desire to do something good.13 Doing good is what blood donation is all about. It provides what the American Red Cross brochures say is “a feeling that money can’t buy.” That’s why voluntary blood donations invariably increase during natural disasters and other calamities.14 But if governments were to pay people to help their neighbors during these crises, donations might decline.
That said, in the Swedish example, the reward itself wasn’t inherently destructive. The immediate option to donate the 50-kronor payment rather than pocket it seemed to negate the effect. This, too, is extremely important. It’s not that all rewards at all times are bad. For instance, when the Italian government gave blood donors paid time off work, donations increased.15 The law removed an obstacle to altruism. So while a few advocates would have you believe in the basic evil of extrinsic incentives, that’s just not empirically true. What is true is that mixing rewards with inherently interesting, creative, or noble tasks—deploying them without understanding the peculiar science of motivation—is a very dangerous game. When used in these situations, “if-then” rewards usually do more harm than good. By neglecting the ingredients of genuine motivation—autonomy, mastery, and purpose—they limit what each of us can achieve.
MORE OF WHAT WE DON’T WANT
In the upside-down universe of the third drive, rewards can often produce less of the very things they’re trying to encourage. But that’s not the end of the story. When used improperly, extrinsic motivators can have another unintended collateral consequence: They can give us more of what we don’t want. Here, again, what business does hasn’t caught up with what science knows. And what science is revealing is that carrots and sticks can promote bad behavior, create addiction, and encourage short-term thinking at the expense of the long view.
Unethical Behavior
What could be more valuable than having a goal? From our earliest days, teachers, coaches, and parents advise us to set goals and to work mightily to achieve them—and with good reason. Goals work. The academic literature shows that by helping us tune out distractions, goals can get us to try harder, work longer, and achieve more.
But recently a group of scholars from the Harvard Business School, Northwestern University’s Kellogg School of Management, the University of Arizona’s Eller College of Management, and the University of Pennsylvania’s Wharton School questioned the efficacy of this broad prescription. “Rather than being offered as an ‘over-the-counter’ salve for boosting performance, goal setting should be prescribed selectively, presented with a warning label, and closely monitored,” they wrote.16 Goals that people set for themselves and that are devoted to attaining mastery are usually healthy. But goals imposed by others—sales targets, quarterly returns, standardized test scores, and so on—can sometimes have dangerous side effects.
Like all extrinsic motivators, goals narrow our focus. That’s one reason they can be effective; they concentrate the mind. But as we’ve seen, a narrowed focus exacts a cost. For complex or conceptual tasks, offering a reward can blinker the wide-ranging thinking necessary to come up with an innovative solution. Likewise, when an extrinsic goal is paramount—particularly a short-term, measurable one whose achievement delivers a big payoff—its presence can restrict our view of the broader dimensions of our behavior. As the cadre of business school professors write, “Substantial evidence demonstrates that in addition to motivating constructive effort, goal setting can induce unethical behavior.”
The examples are legion, the researchers note. Sears imposes a sales quota on its auto repair staff—and workers respond by overcharging customers and completing unnecessary repairs. Enron sets lofty revenue goals—and the race to meet them by any means possible catalyzes the company’s collapse. Ford is so intent on producing a certain car at a certain weight at a certain price by a certain date that it omits safety checks and unleashes the dangerous Ford Pinto.
The problem with making an extrinsic reward the only destination that matters is that some people will choose the quickest route there, even if it means taking the low road.
Indeed, most of the scandals and misbehavior that have seemed endemic to modern life involve shortcuts. Executives game their quarterly earnings so they can snag a performance bonus. Secondary school counselors doctor student transcripts so their seniors can get into college.17 Athletes inject themselves with steroids to post better numbers and trigger lucrative performance bonuses.
Contrast that approach with behavior sparked by intrinsic motivation. When the reward is the activity itself—deepening learning, delighting customers, doing one’s best—there are no shortcuts. The only route to the destination is the high road. In some sense, it’s impossible to act unethically because the person who’s disadvantaged isn’t a competitor but yourself.
Of course, all goals are not created equal. And—let me emphasize this point—goals and extrinsic rewards aren’t inherently corrupting. But goals are more toxic than Motivation 2.0 recognizes. In fact, the business school professors suggest they should come with their own warning label: Goals may cause systematic problems for organizations due to narrowed focus, unethical behavior, increased risk taking, decreased cooperation, and decreased intrinsic motivation. Use care when applying goals in your organization.
If carrots-as-goals sometimes encourage unworthy behavior, then sticks-as-punishment should be able to halt it, right? Not so fast. The third drive is less mechanistic and more surprising than that, as two Israeli economists discovered at some day care centers.
In 2000, economists Uri Gneezy and Aldo Rustichini studied a group of child care facilities in Haifa, Israel, for twenty weeks.18 The centers opened at 7:30 A.M. and closed at 4:00 P.M. Parents had to retrieve their children by the closing time or a teacher would have to stay late.
During the first four weeks of the experiment, the economists recorded how many parents arrived late each week. Then, before the fifth week, with the permission of the day care centers, they posted the following sign:ANNOUNCEMENT: FINE FOR COMING LATE
As you all know, the official closing time of the day care center is 1600 every day. Since some parents have been coming late, we (with the approval of the Authority for Private Day-Care Centers in Israel) have decided to impose a fine on parents who come late to pick up their children.
As of next Sunday a fine of NS 10c will be charged every time a child is collected after 1610. This fine will be calculated monthly, it is to be paid together with the regular monthly payment.
Sincerely,
The manager of the day-care center
The theory underlying the fine, said Gneezy and Rustichini, was straightforward: “When negative consequences are imposed on a behavior, they will produce a reduction of that particular response.” In other words, thwack the parents with a fine, and they’ll stop showing up late.
But that’s not what happened. “After the introduction of the fine we observed a steady increase in the number of parents coming late,” the economists wrote. “The
rate finally settled, at a level that was higher, and almost twice as large as the initial one.”19 And in language reminiscent of Harry Harlow’s head scratching, they write that the existing literature didn’t account for such a result. Indeed, the “possibility of an increase in the behavior being punished was not even considered.”
Up pops another bug in Motivation 2.0. One reason most parents showed up on time is that they had a relationship with the teachers—who, after all, were caring for their precious sons and daughters—and wanted to treat them fairly. Parents had an intrinsic desire to be scrupulous about punctuality. But the threat of a fine—like the promise of the kronor in the blood experiment—edged aside that third drive. The fine shifted the parents’ decision from a partly moral obligation (be fair to my kids’ teachers) 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.
Addiction
If some scientists believe that “if-then” motivators and other extrinsic rewards resemble prescription drugs that carry potentially dangerous side effects, others believe they’re more like illegal drugs that foster a deeper and more pernicious dependency. According to these scholars, cash rewards and shiny trophies can provide a delicious jolt of pleasure at first, but the feeling soon dissipates—and to keep it alive, the recipient requires ever larger and more frequent doses.
The Russian economist Anton Suvorov has constructed an elaborate econometric model to demonstrate this effect, configured around what’s called “principal-agent theory.” Think of the principal as the motivator—the employer, the teacher, the parent. Think of the agent as the motivatee—the employee, the student, the child. A principal essentially tries to get the agent to do what the principal wants, while the agent balances his own interests with whatever the principal is offering. Using a blizzard of complicated equations that test a variety of scenarios between principal and agent, Suvorov has reached conclusions that make intuitive sense to any parent who’s tried to get her kids to empty the garbage.
By offering a reward, a principal signals to the agent that the task is undesirable. (If the task were desirable, the agent wouldn’t need a prod.) But that initial signal, and the reward that goes with it, forces the principal onto a path that’s difficult to leave. Offer too small a reward and the agent won’t comply. But offer a reward that’s enticing enough to get the agent to act the first time, and the principal “is doomed to give it again in the second.” There’s no going back. Pay your son to take out the trash—and you’ve pretty much guaranteed the kid will never do it again for free. What’s more, once the initial money buzz tapers off, you’ll likely have to increase the payment to continue compliance.
As Suvorov explains, “Rewards are addictive in that once offered, a contingent reward makes an agent expect it whenever a similar task is faced, which in turn compels the principal to use rewards over and over again.” And before long, the existing reward may no longer suffice. It will quickly feel less like a bonus and more like the status quo—which then forces the principal to offer larger rewards to achieve the same effect.20
This addictive pattern is not merely blackboard theory. Brian Knutson, then a neuroscientist at the National Institute on Alcohol Abuse and Alcoholism, demonstrated as much in an experiment using the brain scanning technique known as functional magnetic resonance imaging (fMRI). He placed healthy volunteers into a giant scanner to watch how their brains responded during a game that involved the prospect of either winning or losing money. When participants knew they had a chance to win cash, activation occurred in the part of the brain called the nucleus accumbens. That is, when the participants anticipated getting a reward (but not when they anticipated losing one), a burst of the brain chemical dopamine surged to this part of the brain. Knutson, who is now at Stanford University, has found similar results in subsequent studies where people anticipated rewards. What makes this response interesting for our purposes is that the same basic physiological process—this particular brain chemical surging to this particular part of the brain—is what happens in addiction. The mechanism of most addictive drugs is to send a fusillade of dopamine to the nucleus accumbens. The feeling delights, then dissipates, then demands another dose. In other words, if we watch how people’s brains respond, promising them monetary rewards and giving them cocaine, nicotine, or amphetamines look disturbingly similar.21 This could be one reason that paying people to stop smoking often works in the short run. It replaces one (dangerous) addiction with another (more benign) one.
Rewards’ addictive qualities can also distort decision-making. Knutson has found that activation in the nucleus accumbens seems to predict “both risky choices and risk-seeking mistakes.” Get people fired up with the prospect of rewards, and instead of making better decisions, as Motivation 2.0 hopes, they can actually make worse ones. As Knutson writes, “This may explain why casinos surround their guests with reward cues (e.g., inexpensive food, free liquor, surprise gifts, potential jackpot prizes)—anticipation of rewards activates the [nucleus accumbens], which may lead to an increase in the likelihood of individuals switching from risk-averse to risk-seeking behavior.”22
In short, while that dangled carrot isn’t all bad in all circumstances, in some instances it operates similar to a rock of crack cocaine and can induce behavior similar to that found around the craps table or roulette wheel—not exactly what we hope to achieve when we “motivate” our teammates and coworkers.
Short-Term Thinking
Think back to the candle problem again. The incentivized participants performed worse than their counterparts because they were so focused on the prize that they failed to glimpse a novel solution on the periphery. Rewards, we’ve seen, can limit the breadth of our thinking. But extrinsic motivators—especially tangible, “if-then” ones—can also reduce the depth of our thinking. They can focus our sights on only what’s immediately before us rather than what’s off in the distance.
Many times a concentrated focus makes sense. If your office building is on fire, you want to find an exit immediately rather than ponder how to rewrite the zoning regulations. But in less dramatic circumstances, fixating on an immediate reward can damage performance over time. Indeed, what our earlier examples—unethical actions and addictive behavior—have in common, perhaps more than anything else, is that they’re entirely short-term. Addicts want the quick fix regardless of the eventual harm. Cheaters want the quick win—regardless of the lasting consequences.
Yet even when the behavior doesn’t devolve into shortcuts or addiction, the near-term allure of rewards can be harmful in the long run. Consider publicly held companies. Many such companies have existed for decades and hope to exist for decades more. But much of what their executives and middle managers do each day is aimed single-mindedly at the corporation’s performance over the next three months. At these companies, quarterly earnings are an obsession. Executives devote substantial resources to making sure the earnings come out just right. And they spend considerable time and brain-power offering guidance to stock analysts so that the market knows what to expect and therefore responds favorably. This laser focus on a narrow, near-term slice of corporate performance is understandable. It’s a rational response to stock markets that reward or punish tiny blips in those numbers, which, in turn, affect executives’ compensation.
But companies pay a steep price for not extending their gaze beyond the next quarter. Several researchers have found that companies that spend the most time offering guidance on quarterly earnings deliver significantly lower long-term growth rates than companies that offer guidance less frequently. (One reason: The earnings-obsessed companies typically invest less in research and development.)23 They successfully achieve their short-term goals, but threaten the health of the company two or three years hence. As the scholars who warned about goals gone wild put it, “The very presence of goals may lead employees to focus myopically on short-term gains and to lose sight of the potential deva
stating long-term effects on the organization.”24
Perhaps nowhere is this clearer than in the economic calamity that gripped the world economy in 2008 and 2009. Each player in the system focused only on the short-term reward—the buyer who wanted a house, the mortgage broker who wanted a commission, the Wall Street trader who wanted new securities to sell, the politician who wanted a buoyant economy during reelection—and ignored the long-term effects of their actions on themselves or others. When the music stopped, the entire system nearly collapsed. This is the nature of economic bubbles: What seems to be irrational exuberance is ultimately a bad case of extrinsically motivated myopia.
By contrast, the elements of genuine motivation that we’ll explore later, by their very nature, defy a short-term view. Take mastery. The objective itself is inherently long-term because complete mastery, in a sense, is unattainable. Even Roger Federer, for instance, will never fully “master” the game of tennis. But introducing an “if-then” reward to help develop mastery usually backfires. That’s why schoolchildren who are paid to solve problems typically choose easier problems and therefore learn less.25 The short-term prize crowds out the l ong-term learning.
In environments where extrinsic rewards are most salient, many people work only to the point that triggers the reward—and no further. So if students get a prize for reading three books, many won’t pick up a fourth, let alone embark on a lifetime of reading—just as executives who hit their quarterly numbers often won’t boost earnings a penny more, let alone contemplate the long-term health of their company. Likewise, several studies show that paying people to exercise, stop smoking, or take their medicines produces terrific results at first—but the healthy behavior disappears once the incentives are removed. However, when contingent rewards aren’t involved, or when incentives are used with the proper deftness, performance improves and understanding deepens. Greatness and nearsightedness are incompatible. Meaningful achievement depends on lifting one’s sights and pushing toward the horizon.