In his recent book: Building Social Business, Muhammad Yunus advises us to launch enterprises where investors only break even and all profits are kept as retained earnings. No one the outside the enterprise can get extrinsically rewarded through passive income with this approach. This wisely avoids the problems that Dan Pink has alerted us to in his recent book: Drive. Here that list of what Dan Pink tells us may go wrong when we rely upon performance-contingent extrinsic rewards (with my additions in parentheses):
- Extinguish intrinsic motivation (that was already yielding lots of "unrewarded" initiative and cooperation)
- Diminish performance (that was getting rewarded to increase it)
- Crush creativity (that could otherwise solve problems more efficiently, ingeniously or synergistically)
- Crowd out good behavior (with schemes to exploit loopholes, moods to rip off others and urges to act greedy)
- Encourage cheating, shortcuts and unethical behavior (because the reward system sees that it pays those who bend the rules)
- Becomes addictive (as if more extrinsic rewards can compensate for the endless lack of meaning, purpose and fulfillment in life)
- Foster short term thinking (in order to maximize rewards and minimize risk)
I find Yunus's approach contradicts his own advice when he then addresses the hiring, compensating and promoting employees. He says he wants to create sustainable enterprises and then he appears (by error of omission) to trash the renewable source of motivation. He wants employees to get creative, take a long view and care for others but treats them to industry-commensurate pay scales. It's as if he carefully conceived of how to grow organic produce and then prepares it with MSG, saturated fats and white sugar. Perhaps this occurred because he was not consciously avoiding these listed problems with extrinsic rewards. He was simply avoiding familiar interference with an enterprise from investors, stockholders and security analysts who typically profit from their self-interested involvements.
It's far more difficult to apply the same wisdom about extrinsic rewards to internal operations. We cannot eliminate paychecks, bonuses, promotions or pay increases like we can delete earnings on investments. Here's some of what we need to consider:
- Converting business relationships (how much is this going to cost me?) to social relationships (how are feeling about this?)
- Replacing distance, disrespect and objectivity with dignity, trust and validation in each relationship.
- Characterizing jobs to get done only in terms of results while leaving the process up to each performer's individual judgment
- Taking suggestion boxes up a level to a dialogue about ideas worth pursuing and project assignments to pull that off
- Supporting the evolution of communities of practice, support groups and peer coaching where each can give and receive in return
- Approaching changes in strategy and/or structure as a design challenge needing lots of input, varied viewpoints and playfulness
- Attending to employment experience as a prototype of customer experience that both need fine tuning to get it right
Each of these considerations amp up intrinsic rewards and while getting the carrots off the table. They alleviate that entire list of fallout from the misuse of performance-contingent extrinsic rewards. In short, they do the do the right for the enterprise and all those people inside and out.