Ponder for a moment your behaviour and mine. Why do we do what we do?

Scientists have found, and our own experience confirms, that human beings have a mix of drives. One is the biological drive. We eat when we’re hungry, drink when we’re thirsty and have sex to satisfy our carnal urges. That first drive is part of what it is to be human. Few would dispute that. But equally, few would argue that the biological drive explains everything it is to be human (except perhaps in the case of young men between the ages of 15 and 18).

After all, we also have a second drive. You, I and the rest of our species often respond exquisitely to rewards and punishments in our environment. Promise us a pay rise or a bonus, and we’ll work harder. Threaten to dock us for showing up late or for incorrectly completing a form, and we’ll arrive on time and tick every box. This second drive – our reward-and-punishment drive – is part of who we are. But once again, it’s not all we are.

Because human beings also have a third drive. We do things even when they don’t satisfy our biological urges, win us a reward or help us avoid a punishment. We play musical instruments during the weekend simply to master something challenging. We quit high-paying jobs to take new jobs that are less lucrative but more meaningful. Human beings, says University of Rochester psychologist Edward Deci, have an “inherent tendency to seek out novelty and challenges, to extend and exercise their capacities, to explore and to learn”. Few would deny that this third drive is also part of what it is to be human.

In the business world, however, we too often stop at that second drive. We organise our enterprises around the belief that the way to improve performance is through an elaborate architecture of carrots and sticks. If we reward the behaviour we seek, and punish the behaviour we dislike, individuals will perform at a high level and their organisations will flourish. Or so the theory goes. In the 19th and 20th century, that approach – enacted in businesses large and small on both sides of the Atlantic – had a sturdy logic. Indeed, it works quite well when people are doing relatively simple, routine, rule-based work, whether this involves turning a screw on an assembly line or processing paper in an office.

Trouble is, that kind of work has largely disappeared in western Europe and North America. In the 21st century, most white-collar workers do jobs that require at least some non-routine, heuristic, creative, conceptual capabilities. And a half-century of research in behavioural science, carried out in laboratories and field experiments around the world, shows that for this sort of work, the approach we use with donkeys – carrots and sticks – is rarely effective and sometimes harmful.

For all the talk about interest rates, regulatory reform and other macroeconomic policies, the best way to escape from our début-de-siècle economic mess may be to listen to the science and rethink our outdated assumptions about motivation and performance.

Blast from the past

To understand what I mean, let’s think back to the days when John Major was prime minister and a blackberry was still just a fruit.

Imagine it’s 1995. You sit down with an economist – say, an accomplished strategy professor at the London Business School or Oxford University’s Said School. You say to her: “I’ve got a crystal ball here that can peer 15 years into the future. I’d like to test your forecasting powers.”

She’s sceptical, but she decides to humour you.

“I’m going to describe two new encyclopedias: one just out, the other to be launched in a few years. You have to predict which will be more successful in 2010.”

“Bring it on,” she says.

“The first encyclopedia comes from the American company Microsoft. As you know, Microsoft is already a large and profitable concern. And with this year’s introduction of Windows 95, it’s about to become an era-defining colossus. Microsoft will fund this encyclopedia. It will pay professional writers and editors to craft articles on thousands of topics. Well-compensated managers will oversee the project to ensure that it’s completed on budget and on time. Then Microsoft will sell the encyclopedia on CD-ROMs and, later, online.

“The second encyclopedia won’t come from a company. It will be created by tens of thousands of people who write and edit articles for fun. These hobbyists won’t need any special qualifications to participate. Nobody will be paid a pound, a franc or a yen to write or edit articles. Participants will have to contribute their labour – sometimes 20 and 30 hours a week – for free. The encyclopedia itself, which will exist online, will also be free to use.

“Now think forward 15 years,” you continue. “According to my crystal ball, in 2010, one of these encyclopedias will be the largest and most popular in the world and the other will be defunct. Which is which?”

In 1995, I doubt you could have a found a single sober economist in the UK or elsewhere who would not have picked that first model as the success. Sure, that ragtag band of volunteers might produce something. But there was no way its product could compete with an offering from a powerful, profit-driven company. The incentives were all wrong. Microsoft stood to gain from the success of its product. Everyone involved in the other project knew from the outset that success would earn them nothing. They weren’t even being paid! In fact, it probably cost them money each time they performed free work instead of remunerative labour. The question was such a no-brainer that our economist wouldn’t even have considered putting it on an exam for her MBA class.

A new era for business?

But you know how things turned out. On 31 October 2009, Microsoft pulled the plug on MSN Encarta, its disc and online encyclopedia, which had been on the market for 16 years. Meanwhile, Wikipedia – the second model – ended up becoming the largest and most popular encyclopedia in the world. Just eight years after its inception, it had more than 13 million articles in some 260 languages, including three million in English alone.

What happened? The conventional view of business motivation – the one that says it’s all about the second drive – has a very hard time explaining this result. But if we look at what happened with fresh eyes, the result seems explicable, if not inevitable.

Of course, not every business can – or should – follow the exact path of Wikipedia or other open source projects such as Linux, Apache and Ubuntu. Money remains an important motivator, though not in the way many of us believe. If people aren’t paid enough, are treated unfairly or can’t support their families, the very idea of tapping the third drive is a joke. But once people are paid sufficiently, science shows that additional units of money yield relatively few additional units of satisfaction or performance.

As the Wikipedia example demonstrates, other factors – those that draw on the third drive – offer a better route to enduring motivation and accomplishment. Indeed, one can distil three lessons from Wikipedia’s triumph – lessons that a few cutting-edge organisations around the world are beginning to heed.

1. Management leads to compliance, but only self-direction leads to engagement:

Business writers, myself included, have emptied many a toner cartridge opining on ‘management’. But rarely have we taken a step back to scrutinise the concept itself. We act as if it somehow emanated from nature or was delivered to us by God. In fact, management is something somebody invented. It is, as business thinker Gary Hamel says, a technology. And it’s a technology from the 1850s. British railways notwithstanding, there are very few technologies from the mid-19th century that we’re still using today.

Management is the ideal technology if you’re seeking compliance – getting people to do what you want them to do, the way you want them to do it. But in today’s workforce, which demands much more in the way of creative and conceptual capabilities, we don’t want compliance. We want engagement. And self-direction is a far better technology for engagement.

Consider the Australian software company Atlassian. Once a quarter, the company says to its software developers: “For the next 24 hours, work on anything you want, any way you want, with whomever you want.” The only thing the company asks is that developers show the rest of the company what they have created in a fun meeting at the end of the next day. These one-day bursts of intense, undiluted autonomy – which Atlassian calls ‘FedEx Days’ because employees have to deliver something overnight – have produced a whole array of ideas for new products and fixes for existing products that would never otherwise have emerged. That’s not a traditional ‘if-then’ motivator, as in: “If you come up with something innovative, then you’ll get a reward.” It’s autonomy and self-direction pure and simple – which is why it leads to engagement and, ultimately, innovation.

It’s the same with Wikipedia. Nobody manages the Wikipedians. Nobody sits around figuring out how to motivate them. That’s why Wikipedia works. Routine, uninteresting jobs require direction; non-routine, interesting work depends on self-direction.
 
2. Mastery is its own reward:

Why do people participate in open-source projects? That’s a question several behavioural scientists have explored, and they keep returning with versions of the same basic answer. For example, MIT management professor Karim Lakhani and Bob Wolf of Boston Consulting Group surveyed 684 open-source software developers, mostly in North America and Europe, about why they participated in these projects. Lakhani and Wolf uncovered a range of motives, but their principal finding was that “enjoyment-based intrinsic motivation – namely, how creative a person feels when working on the project – is the strongest and most pervasive driver”.

Consider that response from the employer’s perspective. People participating in open-source software development typically have the kind of sophisticated technical skills that companies want. Most of these people have paid jobs, where they spend at least half of their waking hours. Yet their desire for mastery is so great that they’re willing to spend part of their limited remaining discretionary time doing equally, if not more, technically sophisticated work for someone else – for free. Imagine if their employers chose to satisfy their yearning for mastery instead of plying them with carrots or threatening them with sticks.

Likewise, Harvard Business School professor Teresa Amabile recently studied worker motivation at a handful of companies over several years and reached similar conclusions about what motivates us. In January’s Harvard Business Review, she and colleague Steven J Kramer wrote: “The key to motivation [...] does not depend on elaborate incentive systems. In fact, the people in our study rarely mentioned incentives.” By far the biggest motivator, according to Amabile and Kramer, was “making progress in one’s work” – the simple satisfaction of getting better at something that matters.

3. We are purpose maximisers, not just profit maximisers:

Business depends on the profit motive. And in my view, the profit motive is good – both in the sense that it’s moral and that it’s efficient. It has created enormous wealth and raised the living standards of millions of people. But more and more, we are learning that the profit motive, potent though it is, can be an insufficient impetus for both individuals and organisations. An equally powerful source of energy, one that we’ve often neglected or dismissed as unrealistic, is what we might call the purpose motive. What motivates Wikipedians, as well as high-performing organisations of all kinds, is a sense of purpose. Businesses with a transcendent purpose – whether it’s Google’s aim to organise the world’s information and make it accessible or Apple’s desire to ‘put a dent in the universe’ – will, over the long haul, outperform those driven only by profit.

Indeed, when the profit motive comes unmoored from the purpose motive, good can turn to bad. And by bad, I mean not only unethical, but bad in the sense of mediocre. Raising quarterly earnings by two pennies a share is not the sort of clarion call that will get people leaping out of bed in the morning and racing to work to do amazing things.

This is one of the many aspects of our nature that separate us from donkeys. Yes, we do respond well to carrots and sticks in many circumstances. Yes, those second drive motivators are effective for certain tasks. But in the end, human beings are not simply smaller, slower, better-smelling donkeys. We have a third drive – the need to direct our own lives, to learn and create new things, and to do better by ourselves and our world. That’s what makes us human. And increasingly, it is our humanity that makes us effective.

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