Performance needs Purpose
We've all met the eye-rollers. The leaders who say ‘business-is-business’ and ‘people work to get paid’. The ones who leave pastoral care to the HR team down the hallway. Because there's work to do and money to be made…
When it comes to productivity and motivation, they’ve got a frustratingly clear view: that when you pay for performance you're firmly in the driver's seat. So, while concepts like ‘engagement’ and ‘purpose’ are heard in their boardroom, the investment and energy they attract pales in comparison to the worship of remuneration strategy. Because really, these leaders just think everyone is looking out for number one.
It's time for a tougher pitch.
The pay-for-performance practices that have come to dominate the corporate world are built on a foundation of standard economic theory. People act in their own interests, so they’ll work harder if there’s money on the table. The competition that’s fostered between employees scrapping for a limited bonus pot will serve to push the business forward. Those at the bottom can be left behind.
Just as behavioural economics has shown standard theory to be terrible at predicting human behaviour, there’s little connection between pay-for-performance and the volumes of academic research on motivation and goal setting. One of our most pernicious systems, forced distribution ranking, is an almost perfect asymmetry of the evidence; it’s like we studied human behaviour and flipped the findings on their heads in multiple ways:
- By labelling over half our employees' average or below by design.
- By driving a competitive wedge between teams and fostering mistrust between people and their managers.
- By enforcing a process that removed any sense of independence and control.
Perhaps in retrospect, we shouldn’t need academia to tell us this would end badly. Most will relate to a question Dan Ariely, Professor of Behavioral Economics at Duke University, says people will soon begin to ask themselves: ‘Really? That’s it? That’s the reason I’m here?’.
We can do better with Self-Determination Theory and Purposeful Work
Self-determination theory is a macro-theory of human motivation. It studies how our behaviour and performance changes according to what drives us…
Inside-out — pleasure, values or the satisfaction of psychological needs.
Outside-in — the punishments and rewards of an outside entity.
Inside-out holds great promise for increases in productivity and wellbeing. But it requires us to feel good about the contribution we’re making (competence); have control over our work (autonomy) and feel positively connected to our peers (relatedness). When we’re in this state, we’re not acting for reward or avoiding outside disapproval – we’re acting for ourselves.
It’s a win-win because we bring heightened levels of excitement and confidence, better task performance and improved creativity to our work. We’re also happier as a result; the pillars connect directly to a critical component of our well-being academics have called ‘eudemonic’ – we reach for personal meaning and purpose.
Unfortunately, the two forms of motivation don’t always play nicely. Pay-for-performance doesn’t just fail to promote our three pillars, it bullies them away with a brash reminder that ‘we’re doing it for the money’. Purposeful work isn’t about avoiding a good and fair basic salary, mind; it’s just moving away from the illusion that performance will differ based on the variability of the reward. For knowledge workers particularly, there’s scant evidence that’s the case.
So how do we help people 'self-determine' their performance?
Let’s work from relatedness, competence and autonomy - we need to feel connected to one another, so how about a shared purpose that’s powerful enough to bring people together? It needs to be more than annual profits, rising share price and innovation for innovation’s sake, but it can’t leave commercial growth by the wayside. It needs to find the value we bring to the world and put it at the core of our business strategy. If you want a blueprint for success, look to Unilever’s Sustainable Living Plan. It’s a long-term model that connects employees, shareholders and customers under a shared vision of social impact and growth.
An integrated ‘corporate purpose’ is a great starting point but it’s not likely to improve employee performance on its own. We need to take that abstract vision and democratise it – help people understand the important part they play; give them time and space to interpret it personally; and encourage them to take ownership of the impact they make. Now that’s easier said than done, but it’s an approach based on firm empirical ground. It deserves attention, resource and exploration.
In the modern economy, we can’t simply pay people to perform. Those who cling to this view are not ‘rational’ or ‘hard’ or ‘commercial’, they are wrong. The future of performance needs us making connections not just writing cheques.
Performance needs purpose.
This article was originally featured in the London School of Economics Business Review, and republished in the Purpose Edition of Misc Magazine in March 2018.