The power of prosocial motivation

“Incentive pay” can backfire, according to some new research. Margaret Lee and Ye Li at Columbia University got people to find as many words as they could in four minutes from the letters “a d e r s t w”. Some solvers were not paid at all. Others were paid per word they found. And others were told that their performance would determine the pay of the next participant.

They found that when people were paid per word, they actually found fewer words than people who weren’t paid: an average of 25.6 compared to 29. This confirms Daniel Pink’s argument that extrinsic rewards can actually crowd out intrinsic motivation.

However, people whose performance determined the pay of the next participant actually found more words than either - an average of 30. Prosocial motivations, then, can be more powerful than selfish ones.

In another experiment, Li and Lee discovered why. It is not because people are purely altruistic, but rather because they are conditional reciprocators. They‘ll work hard for others as long as they expect others to work hard in turn. If this expectation is not fulfilled, prosocial motivation doesn’t work any better than flat-rate pay.

In a third experiment, Li and Lee found that such reciprocity was especially powerful if people expected to be accountable for their actions. They got random pairs of people to type the letters F and J alternatively for 15 minutes, with payment if more than 400 pairs were typed. Some were paid for their own performance, and some for their partners. They found that people working for their partner typed almost 10% more letters if they knew they would meet their partner afterwards than if they didn’t. Such people also typed slightly more letters than those paid for their own performance.

This result might generalize. Most of us see our co-workers every day. If we know their pay depends on our efforts and vice versa, we might therefore be pressurized into working harder. And such pro-social pay gives workers an incentive to monitor each other and so reduce shirking.

Now, it doesn’t follow from this that all firms should adopt “payment for others” - type incentives. I suspect that the power of prosocial motivations depends a lot upon detailed context.

What this research does do, though, is further undermine the notion that high-powered selfish incentives are the best way of motivating people. This belief probably rests more upon a desire to justify inequality than it does upon a basis of empirical evidence.

Comments

[Rob]

I think a lot would depend here on how big the incentives are. If you earn 10p for your colleague per word found, you'd probably put in a decent effort if only to avoid earning them the paltry sum of 20p, whereas if you were earning pennies for yourself you might well not bother. If you're paid £100 for each word found, I imagine that the motivation for the self-paying group might be higher than the pro-social group.

In other words, we might favour being pro-social when the stakes are low, and the gain to our reputation (as clever, hard-working and sociable!) matters more to us than the relevant pecuniary gain. Up the financial rewards, and we might tend towards becoming utter bastards (call it the Goodwin-Tevez hypothesis, I guess).

It's worth bearing in mind that the people putting in the effort for their colleagues are not necessarily being selfless. They're accumulating the admiration and gratitude from their colleagues, and people who focus on accumulating those things to the exclusion of all else can be just as annoying and disruptive as the money-grubbers.

[Churm Rincewind]

I don't think anyone seriously believes that high pay motivates people to work more effectively, unless there's evidence I've overlooked. Rather, high pay both denotes status and increases the universe of applicants which in turn increases an employer's ability to select the best qualified and most effective employees.

This is not to say that incentivised payments don't work. Here I part company with Rob, as all the research I've seen concludes that (after salary) people are incentivised by the approval or otherwise of those whose judgement they value, which may be their boss but could also be their colleagues or even their customers. That approval can be institutionalised either by recognition (hence the stars on a name badge in fast food joint, or "employee of the month" schemes), or by financial reward, provided that such rewards are made public.

In short, the efficacy of incentive pay entirely depends on how you do it.

[The Thought Gang]

Part of what I do for a living involves finding way to incentivise people in an industry where individual commissions are the standard. We've had a good amount of success with team-based schemes.. particularly where the teams have been small (2-5 people).

The problem comes when the team achievement is lower than some members deem it should be. Where that is the case it can be due to failings of one or more members, but more often.. out there in commercial-world.. it's external factors. The number of words that can be made from a set of letters, or the number of times a pair of letters can be typed, do not vary according to client demands, availability of resources, competitor activity etc.

When a team underachieves it can be due to these factors as well as the constituent individuals. The tendency of the members, however, can be to look closest to home to place the blame.. maybe someone didn't work hard enough, or someone didn't prioritise things the best. This creates resentment and biases people against those kinds of incentives. This can negatively impact the behaviour of people who think that their efforts will bear no fruit. This is, perhaps, why it works best in smaller teams, where the levels of co-operation and understanding of roles are better understood and appreciated by all members.

I'd be interested in whether the results of the experiments would change if competition was somehow factored in.

[MrWH]

A more general question: is there much research on whether people's calculations involving winning small sums of money are the same as those for large sums? If it's a matter of a few pounds, that's not going to change your life; if it's thousands, then that really could. Is there any evidence that scaling results obtained with pence to the sums involved in banking bonuses, for example, is legitimate?

[Chris]

Forty-five years ago, I started out my working life on a production line. Strangely, even though you rarely talked to people further down the line (because it was a long line and noisy), you felt compelled to do your best because everyone's bonus depended on every link in a very long (and noisy!) chain.

[richardarnatt]

I work at a UK site for a large German corporation, and for a few years now our bonus scheme has been based on the whole site's profitability, with a flat bonus for every permanent staff member. I've always liked the idea of a flat bonus as it gives the lowest paid members of staff the biggest incentive, rather than disproportionately rewarding managers for the labour of their hires.

I've often thought that, further to this, I'd be happy to sacrifice a good proportion of my basic pay (say, 20%) if I could have twice that amount as a discretionary bonus. If my team and I all knew that our efforts would affect each other's pay to that extent, I think it would serve as one hell of a motivator! Maybe I just trust people too much?