Economists & Psychologists Duke It Out… The Final Word On Employee Motivation

Economists are always talking about incentives. Psychologists are always pushing social cognition, including studies of personality and perception. Meanwhile, law firm managers—the pragmatists—realize it’s only the combination of both sciences that help determine the equilibrium of quality and efficacy in work place.

What is the correct combination of salary and responsibility to motivate your employees to work hard?

For economists, incentives matter.

First, law firms must find out what price coordinates to high-quality work product. For example, “If your business objectives aren’t linked to employee compensation, it sends a strong message that they aren’t a real priority, and motivation is adversely affected,” explains Scott Keller, a director at McKinsey & Company and contributor to the Harvard Business Review Blog.

“The flip-side, however, isn’t true. When business objectives are linked to compensation, motivation to drive for results is rarely meaningfully enhanced.”

Wait, what? Money isn’t always enough incentive?

Nope, motivation is an aspect of the mind. And, so, we should now consult the psychologists who research the processes of decisionmaking and social interaction.

Psychologists would look to other types of motivation, such as guilt, vengeance, pride, reputation, or social norms. Consider the following example from the HBR about the rate at which attorneys value their time:

“The American Association of Retired Persons once asked some lawyers if they would offer their services to needy retirees at a cut-rate price of around $30 an hour. The lawyers declined. Then the AARP asked if they would offer their services for free. Most of the lawyers agreed. When compensation was mentioned, the lawyers applied market norms and found the offer lacking. When no compensation was mentioned, they used social norms and were willing to volunteer their time.”

This is an issue of framing. Language matters when it comes to motivation.

There’s a difference between advertising firm litigation as majority wins, versus firm litigation with a minority loss. People respond better to positivity than to negativity, even of the latter is statistically irrelevant.

And, speaking of human responses, economic and psychological studies also discuss production within teams.

As early as 1913, a researcher named Ringelmann presented evidence that people working together in groups did not perform as high as when they had worked on the same task individually. This idea eventually became known as “social loafing” (Latane et al 1979).

When individual responsibility is taken away and the onus placed on the team as a whole, it turns out that employees feel less motivated to produce efficiently.

Instead, they rely on others to either (1) take the blame for failure or (2) set the sails for success.

One thing that both economists and psychologists can agree on, however, is that people behave differently—in how they process and react to information—alone than when they are in mass.

In mass, according to another study, group composition and diversity affects the productivity, as well.

For example, minority members (e.g., women in predominantly male groups) attract more attention from others, and are more aware of the characteristics that distinguish them from others (Cota & Dion 1986; McGuire & Padawer-Singer 1976; see also Frable et all 1990) than do majority members (Levine & Resnick, 1993, 586-612).

In the end, this overt and distracting visibility of team members in “token” races, genders, etc., detracts from overall performance (Lord & Saenz 1985).

Identifying the defining personality traits of your employees and then incentivizing them based on intrinsic (or monetary) incentives to work together is, clearly, a difficult game to play.

So, in the meantime, leverage another Freudian discovery: the human ego.

“Perhaps the most simple application is to not forget that words can be the most persuasive motivators of all. As Sam Walton, founder of Walmart, put it, ‘Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free—and worth a fortune.’”

In the pragmatic work of running a business, like a law firm, maybe it’s time to amend the famous words of Ben Franklin, “Nothing is certain but death and taxes…” and the motivational power of flattery.

-WB

References are taken from:

  • Levine, John M. and Lauren B. Resnick, “Social Foundations of Cognition.” Annual Review of Psychology, 1993; 44:586-612.

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