What fuels innovation in a company? Is it the promise of a bonus, the thrill of solving a tough challenge, or something else entirely?
Researchers Richard Ryan and Edward Deci toppled the dominant belief that the best way to motivate humans to perform tasks is to reinforce their behavior with rewards or punishment.
Psychologist B.F. Skinner and his behaviorism theories popularized the notion of rewards and punishment (often referred to as carrots and sticks). These became known as extrinsic motivators because they arise from a source outside the person, such as pay for performance incentives. Ryan and Deci, on the other hand, discovered that there are natural motivators for people that are endogenous or internal to the individual. These became known as intrinsic motivators.
The Science of Intrinsic Motivation
At its core, the debate between intrinsic and extrinsic motivation concerns human behavior. Why do we do what we do? Ryan and Deci’s Self-Determination Theory determined that humans exhibit three natural motivators tied to their feelings about the work they do. To summarize, they are competence, autonomy, and relatedness.
- Competence. Also referred to as mastery, competence is about the feeling that comes from enjoying or achieving mastery of some work performed, as well as a sense of intellectual challenge and growth in competence.
- Autonomy. A certain sense of independence or ability to make decisions gives people a sense of control over their own actions.
- Relatedness. This refers to the motivation that comes from a social connectedness with individuals or a group.
To take it out of clinical terms, we observe competence as a strong motivator as people take pride in their work, want to do a good job, and want to continue to learn. We see autonomy as a motivator in organizational environments where members of the organization are empowered to make decisions within their realm of responsibility. We see relatedness being a major motivator when members of an organization do not want to let down their team or organization members.
In his popular book Drive, Daniel Pink added another intrinsic motivator: purpose. Pink goes on to say that purpose provides context for the other motivators. The ultimate motivation comes when people “hitch their desires to a cause larger than themselves.” This helps overcome resistance to change and other elements of organizational friction.
Extrinsic Motivation
In contrast to intrinsic motivation, extrinsic motivation is driven by external rewards or consequences. It’s effective for clear, short-term tasks, such as meeting deadlines or achieving specific metrics. However, research shows that over-reliance on extrinsic motivators can lead to a “crowding out” phenomenon, where intrinsic motivation diminishes or disappears because the focus shifts to external rewards.
We observe that this is truer the more a person is compensated for achieving a specific objective. Pay-for-performance motivators are used extensively in sales positions, where extrinsic motivators are usually commissions.
It is common for senior leaders of sales organizations to create compensation plans in which a high percentage of the compensation is in the form of commissions based on achieving high sales levels.
As part of that, we see them get frustrated when sales representatives focus on selling only those products that sell the easiest and fastest. In other words, they are maximizing their compensation. It is usually to the detriment of newer products in their portfolio that are not as well established and require more time and effort to sell.
We watch as leaders then try to develop more complex compensation schemes that partially reward the selling of new products. To make a long story short, we observe sales managers continually trying to adjust the compensation scheme to achieve the desired behaviors until it becomes so complex that it is difficult for the sales reps to fully comprehend. The scheme is then reverted back to the original scheme, and we observe the cycle starting all over again.
In the end, with extrinsic motivators, you get the behavior you incentivize. If you are only incentivizing a sales number, the sales representative will do what they need to maximize that number. As a result, they will not take the time to sell newer or more complex products, fully develop customer relationships, or increase customer satisfaction.
They are more likely to work harder with existing customers rather than make an effort to develop new ones. They will not help a rep in a different territory with a client referral from their territory, which diminishes teamwork. As the Harvard Business Review points out, these kinds of incentives are even worse because you begin to observe people game the system.
In the end, most extrinsic motivation schemes are about control. The more control specific managers want to exert over their subordinates, the greater the magnitude of the incentive. In most cases, magnitude is defined as the percentage of compensation that is made up of the incentive.
The common phrase for this is “the amount of compensation that is at risk.” However, we observe repeatedly that the greater the magnitude of the incentive, the more narrowly focused the behavior becomes around the single measurement that determines whether they receive the incentive.
In other words, the more the compensation system is weighted around the extrinsic incentive, the more focus there is on achieving that one objective, often at the detriment of the business as a whole. We have even seen a high-performance senior executive leave a company out of anger and frustration when they missed achieving an objective by 0.2%.
Motivation in Innovation
So, how does motivation impact innovation?
Numerous studies show that intrinsic motivation increases creativity within an organization, and creativity is, of course, the cornerstone of innovation. Likewise, those same studies show a significant decrease in creativity with extrinsic motivators.
For strategic innovation, which we define as major or breakthrough innovation, extrinsic motivators work against innovation in another way. Most pay-for-performance incentive systems are established on a one-year basis.
On the other hand, strategic innovation usually requires an initiative and an investment that lasts more than one year. It is common to observe managers pull resources from those longer-term initiatives and move them to shorter-term projects that will help them achieve this year’s goals and, ultimately, their bonus.
Compensation consultants are quick to say that studies show that extrinsic motivation increases efficiency. However, this indicates that extrinsic motivation is effective only in value-capture activities, not value-creation (innovation) activities.
Can extrinsic motivation play any role in innovation?
Researcher Teresa Amabile, who has contributed to several of these studies, explored this question in depth. This research goes back to the work by Ryan and Deci, who further defined extrinsic motivators into two types: informational versus controlling extrinsic motivators.
Amabile determined that controlling types of extrinsic motivators (or those perceived as controlling) are always detrimental to creativity and innovation. However, certain informational motivators can serve as synergistic contributors to intrinsic motivators in the overall creation and innovation process.
We have observed that these can include external motivators such as encouraging or positive feedback, guidance on how to advance an emerging innovation, information that leads to higher levels of competence and achievement, expressions of appreciation from the associated organization, and other related information contributors.
Innovation Motivation Through Leadership
Intrinsic and synergistic extrinsic motivation comes from the right kind of leadership. Leaders set the tone for how their companies perceive and leverage motivation and resulting innovation. Here’s how they can cultivate intrinsic motivation:
- Provide Autonomy. Autonomy doesn’t mean abandoning structure—it means giving employees ownership of their work. Autonomous individuals and teams are empowered to make decisions, experiment, and take intelligent risks.
- Encourage Mastery. It’s human nature for people to want to get better at what they do. Leaders can support this by offering opportunities for growth. This can include opportunities to explore new areas of potential innovation. As part of that, it can include the development of skills specific to innovation processes.
- Align Work with Purpose. Members of an organization who see the impact of their work advancing the organization are much more likely to engage deeply and think innovatively. When people understand how their contributions matter, they’re driven to find new and better ways to achieve the organization’s goals.
Extrinsic motivation is much trickier to use. If it is designed primarily for control, primarily to get members of an organization to do what you want them to do, that isn’t leadership; it is command and control management. If it is the informational type of extrinsic motivation and it is applied through skilled leadership, it can significantly avoid common pitfalls of innovation and ensure success.
Leaders who understand how to inspire both types of motivation create workplaces where innovation isn’t an obligation but an opportunity.