I wanna make a case for rethinking how we run our businesses.
Take a look at this.
This is called the candle problem and here's how it works.
I bring you into a room, I give you a candle, some thumbtacks, and some matches and I say
to you: Your job is to attach the candle to the wall so the wax doesn't drip on the table.
And eventually after 5 or 10 minutes, most people figure out the solution which you can
see here.
The key is to overcome what is called functional fixedness.
You look at that box and you see it only as a receptacle for the tacks, but it can also
have this other function as a platform for the candle.
Now, I wanna tell you about an experiment using the candle problem, done by a scientist
named Sam Glucksberg - he gathered his participants and he says I'm gonna time you, how quickly
you can solve this problem.
He offered rewards, he said if you're in the top 25% of the fastest times, you get 5 dollars.
If you're the fastest of everyone we're testing here today, you get 20 dollars.
How much faster did this group solve the problem?
Answer: It took them on average 3 and a half minutes... longer.
Three and a half minutes longer, now this makes no sense, right?
If you want people to perform better, you reward them, right?
Bonuses, commissions, their own reality show, incentivize them.
You've got an incentive designed to sharpen thinking and accelerate creativity and it
does just the opposite.
These contingent motivators: If you do this then you get that work in some circumstances
but for a lot of tasks, they actually either don't work or often they do harm.
Think about your own work: Are the problems that you face or even the problems we've been
talking about here, are those kinds of problems - do they have a clear set of rules and a
single solution?
No!
Those if - then rewards DON'T WORK!
Economists at LSE looked at 51 studies of pay for performance plans inside of companies.
Here's what the economists there said: "We find that financial incentives can result
in a negative impact on overall performance."
There's a mismatch between what science knows and what business does.
Here's what science knows: 1.
Those 20th century rewards, those motivators we think are the natural part of business
do work but only in a surprisingly narrow band of circumstances.
2.
Those if then rewards often destroy creativity.
3.
The secret to high performance isn't rewards and punishments but that unseen intrinsic
drive, the drive to do things for their own sake, the drive to do things because they
matter.
I rest my case.