The Bros. Heath Explain Incentive Pay Structures

E. Forrest Christian Managing, Motivation Leave a Comment

This post has been one of my most popular since I wrote it. If you’re coming to this site for the first time, let me know what you thought in a comment below.

In January, I scored a copy of the Bros. Heath’sMade to Stick: Why Some Ideas Survive and Others Die as I was working with an Australian start-up. I commend their book in its entirety — very useful, and it explains in clear language (that I wish I had come up with) why I write case studies for other consultants like I do — but today I’d like to focus on a single short point that they make about “Maslow’s Basement” and a brief crack about how it explains incentive pay.

And why it doesn’t work.

The Bros. Heath ask you to consider a corporation that decides to offer a $1,000 performance bonus. It’s a usual thing in companies, of course. And each company’s HR has to decide how to market the bonus to employees.

There are three different ways of presenting the bonus to employees:

  1. Think of what that $1,000 means: a down payment on a new car or that new home improvement you’ve been wanting to make.
  2. Think of the increased security of having that $1,000 in your bank account for a rainy day.
  3. Think of what the $1,000 means: the company recognizes how important you are to its overall performance. It doesn’t spend money for nothing.

When people are asked which positioning would appeal to them personally, most of them say No. 3. It’s good for the self-esteem &emdash; and, as for No. 1 and No. 2, isn’t it kind of obvious that $1,000 can be spent or saved? Most of us have no trouble visualizing ourselves spending $1,000. (It’s a bit less common to find people who like to visualize themselves saving.)

Here’s the twist, though: When people are asked which is the best positioning for other people (not them), they rank No. 1 most fulfilling, followed by No. 2. That is, we are motivated by self-esteem, but others are motivated by down payments. This single insight explains almost everything about the way incentives are structured in most large organizations.

….

In other words, a lot of us think everyone else is living in Maslow’s basement &emdash; we may have a penthouse apartment, but everyone else is living below.

[184-185]

Abraham Maslow created Maslow’s hierarchy of needs, an ordering of needs fulfillment. You can’t fulfill higher-order needs if your lower order needs go unmet. (See chart below.)

Maslow's hierarchy of needs. After Maslow. GNU Free Documentation License, v. 1.2
Maslow’s Hierarchy of Needs

It’s a stunning thought: our incentive systems are created around us believing that everyone else must be coerced into working. We, of course, are motivated by “good” desires, such as being a participating member of my group, doing a job well done, or just because I like working. Everyone else is motivated by base desires.

In motivation theory, we all think that although we are motivated best by internal motivation, everyone else has to be motivated externally.

But I think that the Bros. Heath miss out why HR professionals and others think that this is true. It goes back to something that PeopleFit has found in their extensive work with companies and the levels of work: Only 20% of folks in large companies are working in jobs that fit them. This creates the feeling that the work really isn’t that interesting, even though I’m doing it.

Add to that something Dr. Elliott Jaques wrote about in his introduction toRequisite Organization: HR professionals look at work that they would find boring and believe that the jobs are intrinsically demeaning. The real issue is that the jobs are too small for them (or simply in a different “Zone of Work”), not that the jobs themselves lack dignity, Because HR has the idea that they are demeaning, anyone who works in them must be motivated externally.

I’ve said this before, and I’ll say it again: just because you don’t want to do the job doesn’t mean that it isn’t fulfilling for others. Even self-actualizing.

Because just like you, they’re the killer app.

About the Author

Forrest Christian

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E. Forrest Christian is a consultant, coach, author, trainer and speaker at The Manasclerk Company who helps managers and experts find insight and solutions to what seem like insolvable problems. Cited for his "unique ability and insight" by his clients, Forrest has worked with people from almost every background, from artists to programmers to executives to global consultants. Forrest lives and works plain view of North Carolina's Mount Baker.  [contact]

Comments 0

  1. Hi Forrest,

    Great post. It’s interesting that we think ourselves “more evolved” than others.

    In reality, 35% of employees are working in roles that do not match their current capability. 20% are underutilized, 15% are over their heads – systemically disabled. It’s incredible that we get anything done.

    Regards,

    Michelle

  2. The relationship here is entirely relevant. Human need is the basis from which Requisite applies. In my earlier publication I referred to the interrelationships among human need, human capability and human behavior (and also cited Maslow). Your postulation is correct insofar as you have defined that
    a) incentive systems are irrelevant and most usually counterproductive;
    b) that human beings long for self expression in their work;
    c) That in order to self actualize human beings need to be working at or be engaged in full locomotion toward their full potential capability and as a consequence unless their deficit needs are already being met there is no prospect for satisfying being needs, highlighting the significance od fair remuneration, a safe workplace, a sense of belonging and the opportunity for recognition and self esteem.

    I would add that human behaviors are a correlate of both the satisfaction of human need and the ability for one to apply his or her full potential capability. This interrelationship is significant. The stratified systems approach, complete with functional managerial practices at an abstract level need to appreciate the significance of satisfying human need as its fundamental purpose.

    I went as far as defining the implicit employment contract that satisfied this:

    ” The implied nature of the employment contract is one in which each employee agrees freely and willingly to deliver his or her best effort in exchange for the opportunity to derive full satisfaction and expression at work. He or she is offered the conditions which allow for being all that one can be, and the prospect of applying his or her full potential capability.” (A. Gorman “Dream Catcher and Mythmaker” 2004, page 37.)

  3. Post
    Author

    Michelle corrects my numbers — so pay attention! I should have done so to begin with, and I’ll make a correction in the post.

    Al has written extensively on the issue of incentive plans. There’s a link to his shorter article, “Incentive Systems Promote Corporate Corruption”, in the sidebar to the right. His final quotation is from his book. I’ll try to entice him to put up a post with more details on “Dream Catcher and Mythmaker”.

Tell Forrest how wrong he is: