I need to make a confession, at the outset here.
A little over twenty years ago, I did something that I regret
Something that i'm not particularly proud of
Something that, in many ways, I wish no one would ever know.
but that here, I feel kind of obliged to reveal
In the late 1980's
In a moment of youthful indiscretion
I went to law school.
Now, In America
law is a professional degree. You get your University degree and then you go on to law school.
And when I got to Law School, I didn't do very well
to put it mildly, I didn't do very well.
I, in fact, graduated in the part of my law school class
that made the top 90%, possible. (laughter)
Thank you.
I never practiced law a day in my life.
I pretty much wasn't allowed to. (laughter)
But today, against my better judgement,
against the advice of my own wife,
I want to try to dust off some of those legal skills, or what's left of those legal skills.
I don't want to tell you a story, I want to make a case.
I want to make a hard-headed, evidence-based, dare I say, lawyer-ly case
for rethinking how we run our businesses
So, ladies and gentlemen of the jury
Take a look at this.
This is called the "Candle Problem". Some of you might have seen it before.
I was created in 1945 by a scientist named Karl Duncker
Duncker created this experiement that's used in a whole variety of experiements in behavioral science,
and here's how it works.
Suppose I am the experimentor. I bring you into a room.
I give you a candle, some thumb tacks, and matches, and I say to you, "Your job...
"... is to attach the candle to the wall so the wax doesn't drip onto the table."
So what would you do?
Now many people will begin trying to thumbtack the candle to the wall, it doesn't work
Some people, and I saw someone kind of make the motion over here, have this
great idea where they light the match
melt the side of the candle. Try to adhere it to the wall.
It's an awesome idea. Doesn't work.
And eventually after 5-10 min, most people figure out the solution, which you can see here.
The key is to overcome what's called, functional fixedness
You look at that box and you see it only as a receptical for the tacks
But, it can also have this other function
as a platform for the candle
Now,I want to tell you about an experiement using the Candle Problem.
by a scientist named Sam Glucksberg, who is now at Princton University in the US
This shows the Power of Incentives
Here's what he did, He gathered his participants and said
I'm going to time you. How quickly can you solve this problem?
To one group he said, "I'm going to time you to establish norms for how long it typically takes
someone to solve this sort of problem."
To the second group, he offered rewards.
He said if you are in the top 20%
of the fastest times, you get 5 dollars.
If you are the fastest of everyone we are testing here today...
you get 20 dollars. Now this is several years ago, adjusted for inflation
it's a decent sum of money for a few minutes of work, it's a nice motivator.
Question. How much faster did this group...
Solve the problem? Answer. It took them...
on average, three and a half minutes longer
Now this makes no sense, right?
I mean, I'm an American. I believe in free markets. That's not how...
it's supposed to work, right? If you want people to...
perform better, you reward them. Bonuses...
commissions, their own reality show, incentivise them.
That's how business works. But that's not happening here.
You've got an incentive designed to sharpen thinking and...
excellerate creativity and it does just the opposite.
It dulls creativity and blocks thinking. And what's interesting about...
this experiement, is that it's not an aberration
it's been replicated over and over and over again for nearly forty years.
These contingent motivators. If you do this...
Then you get that. Work in some circumstances but, if you do ...
a lot of taks, they actually don't work. Or often ...
They do harm. This is one of the most robust...
findings in social science...
and also one of the most ignored. I spent the last couple of years...
looking at the science of human motivation. Particularly the dynamics of extrinsic...
motivators and intrinsic motivators. and i'm telling ya, it's not even close.
if you look at the science, there is a mismatch between what science knows
and what buisness does. and what's alarming here
is that our business operating system. Thinks with a set of assumptions and protocalls
beneath our businesses. How we motivate people. How we apply our...
human resources. It's built entirely around
these extrinsic motivators. Around carrots and sticks. That's actually fine...
for many kinds of twentith century tasks. but for, many...
21st century tasks, that mechanistic, reward and punishment...
approach doesn't work , often doesn't work...
and often does harm. Let me show you what I mean. So Glucksberg...
did another experiement similar to this where he presented the problem in a slightly different
way. like this up here.
Attach the candle to the wall so the wax doesn't drip onto the table. Same Deal. You, we're timing for...
norms. You, we're incentivising. What happened ...
this time? This time the incentivised group...
kicked the other group's butt.
Why?
Because when the tacks are out of the box.
It's pretty easy, isn't it?
(laughter) If, then rewards work...
really well for those sorts of tasks. Where there is a...
simple set of rules and a clear desination to go to.
Rewards by their very nature, narrow our focus. Concentrate our...
minds. That's why they work in so many cases. So in tasks like this...
a narrow focus where you just see the goal right there ...
zoom in straight ahead to it, they work really well. But for the real ...
Candle Problem, you don't want to be looking like this. The solution is not over here.
The solution is on the periphery. You want to be looking around. That reward...
actually narrows our focus and restricts our possibilities. Let me tell you why this...
is so important. In Western Europe...
In many parts of Asia. In North America ...
In Australia, white collar workers are doing less of this kind of work
and more of this kind of work.
That routine, rule-based, left brain work...
certain kinds of accounting, certain types of financial analysis, certain kinds of computer programing...
has become fairly easy to outsource and fairly easy to automate.
Software can do it faster. Low cost providers around the world can ...
do it cheaper. So What really matters is...
more right brain, creative, conceptual kinds of ...
abilities. Think about your own work.
Are the problems that you face...
or even the problems we've been talking about here, are those the kinds of problems ...
that have a clear set of rules and a single solution? No!
The rules are mystifying. The solution, if it exists at all...
Is surprising, and non-obvious. Everybody ...
in this room is dealing with their own version of
the Candle Problem. And for Candle Problems of any kind...
in any field, Those if, then rewards,
those things we use in so many of our businesses, DON'T WORK.
Now, it makes me crazy.
Here's the thing. This is not a feeling.
Okay, I'm a lawyer. I don't believe in feelings.
This is not a philosophy. I'm an American. I don't believe in Philosophy.
This is ...
a FACT
Or as they say in my hometown of Washington, D.C.
a TRUE fact.
(Laughter)
Let me give you an example of what I mean. Let me marshal the evidence.
Because I'm not telling you a story, I'm making a case ladies and gentlemen of the jury.
Let me show you some evidence. Dan Realy, one of the great economists of our time.
He and three colleauges did a study of some MIT students.
They gave these MIT students a bunch of games. Games that involved...
creativity and motor skills and concentration. And they offered them ...
for performance, three levels of reward. Small rewards.
Medium Reward. Large Reward. Okay?
Do really well you get the large reward, and then on down.
What happened? (shown above)
(shown above)
Then they said, "Okay let's see ...
if there's any cultural bias. Let's go to India and test this.
Where the standard of living is lower, in India. A reward that is considered medium by ...
American standards is more meaningful there. Same Deal.
A bunch of games. Three levels of rewards. What happened ?
People offered the Medium level of rewards
Did no better that those offered the small reward.
And those that were offered the highest rewards, they did worst of all
(shown above)
Is this some ....
kind of touchy feely socialist conspiracy going on here?
No, these are economists from MIT.
From Carnige Melon, from the University of Chicago. And do you know what...
funded this research? The Federal Reserve Bank of the United States.
That's the American Experience.
That crossed the pond to the London School of Economics
alma mater of 11 Nobel Laureates
trainning ground for great economic thinkers like...
Geroge Soros, Freidrick Hayek, and Mick Jagger.
(laughter) Last month,
economist at LSE looked at 51 case studies
that had pay-for-performance plans inside companies. Here's what they found.
(Shown above)
(Shown Above)
There is a mismatch between what science knows, and ...
what business does. And what worries me as we stand here in the rubble ...
of the economic collapse is that too many organizations ...
are making their descisions, their policies about talent and people...
based on assuptions that are outdated...
unexamined and rooted more in folk lore
than in science. and if we really want to get out of this economic mess.
and if we really want high performance on those definitional tasks of the ...
21st century. The solution is not to do more...
of the wrong things. To entice people
with a sweeter carrot or threaten them with a sharper stick
we need a whole new approach. the good news about all this is that scientists studying ...
motivation have given us this new approach. It's an approach ...
built much more around intrinsic motivation. Around the desire to do things...
because they matter, because they like it, because they are interesting, because they are important...
and to my mind, that new operating system for a ...
businesses revolves around 3 elements: AUTONOMY, MASTERY, AND...
PURPOSE. Autonomy, the urge to run your own lives
Mastery, the desire to get better and better at something that matters
And Purpose, the yearning to do what we do, in the...
service of something larger than ourselves. These are the building blocks...
of an entirely new operating system...
for our businesses. I want to talk today only about autonomy.
In the 20th Century, we came up with ...
the idea of management. Management did not eminate from nature. Management...
is not a tree, it's a televison set. Somebody invented it.
and it doesn't mean it's going to work forever.
management is great and traditional notions of management are great if you want...
compliance. But if you want engagement, self-direction works...
better. Let me give you some examples of some radical notions of ...
self-direction. What this means, and you don't see a lot of it.
The first stirings of something really interesting going on. because what it means is...
paying people adequately and fairly, absolutely. Getting the issue of ...
money off the table and then giving people lots of autonomy. let me give you an example.
How many of you have herad of the company 'Atlassian' ?
Okay, looks like less that half. (laughter)
Atlassian is an Austrailian
software company. and they do something incredibly cool. A few...
times a year they tell their engineers, "Go for the next...
24 hours and work on anything you want. As long as it's...
not part of your regular job." So the engineers use this time ...
to come up with a cool patch of code, to come up with an elegant hack...
then they present all of the stuff that they develop to their...
teammates, to the rest of the company, in this wild and willy all-hands meeting...
at the end of the day. And then, being Austrailians everybody...
has a beer. They call them FEDEX DAYS.
Why? Because you have...
to deliver something over night. (laughter) it's not bad.
It's a huge trademark violation, but it's pretty clever.
That one day of intense autonomy has produced a whole array of software ...
fixes that might never had existed. and it's worked so well the Atlassian...
has taken it to the next level with 20%time, done famously at ...
Google. Where engineers can spend 20% of their time working on anything they want.
They have autonomy over their time, their task, their team...
their technique. Radical amounts of autonomy. and at Google ...
as many of you know, about half of the new...
products in a typical year are birthed during that 20% time ...
Things like G-Mail, Orchid, Google news. Let me give you and even more...
radical example of it. Something called the RESULTS ONLY WORK ENVIRONMENT
The ROWE. Created by two American consultants in place at...
about a dozen companies around North America.
In a ROWE people don't have schedules.
They show up when they want. They don't have to be in the office...
at a certain time or any time. They just have to get...
their work done. How they do it, Where they do it, When they do it...
is totally up to them. Meetings in these kinds of environments are...
optional. What happens?
Almost across the board. Productivity goes up. Worker ...
engagement goes up. Worker statisfaction goes up. Turnover goes ...
down. AUTONOMY, MASTERY AND PURPOSE these are the building blocks...
of a new way of doing things. Now, some of you might look at this and say...
"Hmm, That sounds nice but, it's utopian." and I say...
"Nope. I have proof."
In the mid 1990's, Microsoft started an encyclopedia called 'Encarta'.
They had deployed all the right incentives.
They paid professionals to write and edit thousands of articles.
Well compensated managers oversaw the whole thing to make sure it came in on budget, and on time.
A few years later another encyclopedia...
got started. Different model.
Do it for fun. No one gets paid a cent, or a Euro, or a Yen.
Do it because you like to do it.
Now if you had, just 10 years ago, gone to an economist, anywhere, and said...
"Hey, I've got these two different models for creating an encyclopedia" If they...
went head to head, who would win? 10 years ago you could not have found...
a single, sober economist anywhere...
on planet earth (laughter) that would have predicted the Wikipedia Model
This is the Titanic battle between these two approaches. This is the...
Ali v. Fraiser of motivation. This is the Thrilla in Manilla.
Intrinsic Motivators vs. Extrinsic Motivators
AUTONOMY, MASTERY and PURPOSE vs. Carrots and Sticks. Who wins?
Intrinsic Motivation. AUTONOMY, MASTERY and PURPOSE in a knockout.
Okay, let me wrap up. There is a mismatch between ...
what science knows and what business does. and here's what science knows. ONE.
Those 20th century rewards, those motivatiors we think are the natural part of...
business, do work. But only in a surprisingly narrow band of circumstances.
TWO. Those IF, THEN rewards often
destroy creativity. THREE. The secret to high performance isn't ...
rewards and punishments but, those unseen intrinsic...
drives. The drive to do things for their own sake. The drive to do things...
because they matter. And here's the best part. We already know this.
The science confirms what we know in our hearts. So, if...
we repair this mismatch between what science knows and what business does. If we...
bring our notions of motivation into the 21st century.
If we get past this lazy, dangerous...
ideology of carrots and sticks
we can strengthen our businesses. We can solve a lot of those Candle Problems.
and maybe, maybe, maybe
we can change the world. I rest my case.