A radical proposition about employee compensation

In a blog a few weeks back, I told you of my plans to read a new book — “Drive: The Surprising Truth About What Motivates Us” by Daniel H. Pink. Well, right now, I’m in the middle of it, and given that its premise is surprising and suggests we should radically change the way we compensate employees, I thought I’d share it.

In a blog a few weeks back, I told you of my plans to read a new book — “Drive: The Surprising Truth About What Motivates Us” by Daniel H. Pink.  Well, right now, I’m in the middle of it, and given that its premise is surprising and suggests we should radically change the way we compensate employees, I thought I’d share it.

It doesn’t take long for the book to make its central point. Employee incentives that promise rewards in return for meeting specific objectives may, in fact, have the opposite impact they were created to deliver over the long haul. That is, they can erode employees’ intrinsic motivation — “the drive to do something because it is interesting, challenging and absorbing.” The author makes a very specific delineation, however. They are “dangerous” only for right-brain undertakings, those “that demand flexible problem-solving, inventiveness or conceptual understanding.” Research has shown that intrinsic motivation is essential for a person to achieve high levels of creativity. And “if-then” motivators actually stifle that creativity and problem-solving ability.

If we accept this author’s theory, it represents a real change in thinking for our industry. Many of the leading dealers in the industry, for example, outperform their peers in terms of their focus on motivating their employees. But much of this focus takes the form of “if-then” rewards, intended to drive employees to reach new levels of performance.

The reasoning behind the author’s premise is basically that when we see the reward or carrot on the horizon, we tend to narrow our focus and race toward achieving the result rather than pausing to consider and explore all the options to discover the best one for the situation. As a result, those who are extrinsically motivated actually take more time to find a solution to a problem on average than those who rely purely on intrinsic motivation. In an age in which we’re trying desperately to increase our efficiency and productivity, the very strategies we’re embracing to reach those goals may be working against us, argues Pink.

To find the link to the long-term impact on intrinsic motivation, we have to go back to the philosophy behind “in-then” motivators. We create employee “pay for performance” programs because we as managers believe that they will allow us to better control the results we get from our employees. But in the book, Pink argues that most of the natural enjoyment and motivation people have for the tasks they perform are linked to their sense of autonomy in tackling them. By participating in such a program, an employee is giving up some of their autonomy and submitting to outside control, which takes away from the natural motivation they originally brought to the task. This end result has particularly devastating implications for our industry as we work to endure the current recession because, as Pink points out, “As organizations flatten, companies need more people who are self-motivated.”

The story is different for jobs that are relatively routine and don’t demand creativity and problem-solving, according to Pink.  And let’s face it, every workplace has those jobs, though Pink argues that the percentage of such jobs is on the decline in the U.S. Certainly, as we have downsized our boating businesses, we have asked more and more of our employees to tackle a wider range of tasks within our companies, meaning more are asked to problem solve throughout the organization than ever before. The performance of employees tasked with routine jobs actually can benefit from the “if-then” rewards that so many of us have become used to, states Pink. And the chances of success can be increased even more by ensuring that employees understand why the task is meaningful and allowing them to complete it in their own way.

Pink is clear that this book is not an excuse to pay employees poorly nor does it write-off all rewards. The research clearly shows that basic compensation and benefits must be adequate and fair for the employee to be motivated at all. And Pink admits that occasional, what he calls “now that” rewards can actually give creative employees’ performance a little boost, under the right conditions. That is, they must be unexpected and offered only after the task is complete. Perhaps best, he suggests, is to get in the habit of offering praise and positive, useful and specific feedback regarding the employee’s work.

Pink’s argument about the dangers of “if-then” rewards takes up only the first third of the book. The rest of the book discusses how exactly employers can create an environment that maximizes employees’ long-term performance. Once I finish the book, I’ll share the highlights of those final chapters, and we can discuss whether this premise has any value, and if so, what it might mean for our industry as we work through these challenging times. In the meantime, I’d love to hear your thoughts about employee motivation. If you’re a business owner or manager, what has been effective in your business, or if you’re an employee, what motivates you?


  1. Liz

    I agree with most of the authors opinions in that I feel that managers should be more motivated to focus on the bigger picture. I don’t believe that this is the case with technicians, salespeople, or parts personnel which is where we,as dealers make our money. We need technician efficiency motivation plans, salespeople motivation plan (based on gross profitability), and parts programs offering incentives on both GP and volume. Also lets not forget incentives for F&I.

  2. Wow….. This can be a long debate. Pink seems to have taken a radical position. What motivation “is” is different for each person. It is very difficult to make a general statement that “if-then” is not effective. Money is a motivator to some degree for everyone.

    If you are hungry, need clothes, live in a bad place, and have not fulfilled those physiological needs “if-then” can be very effective. Osborne’s response identifies some of those segments within the dealership where “if-then” can be effective. Keep in mind that “physiological needs” can be very different from person to person. Some people need a car to get to work. Some people need the BMW to get to work.

    Once you develop pay programs that answer those Safety, Security and Physiological needs you now must work on the other motivators. The problem is that you must start dealing with the other motivational needs at different pay levels for different people.

    Some people want to belong to a “good” company, they want to be socially accepted, and they want good relationships with their co-workers. Company parties, more time off, improved benefits, more training, belonging to a Top 100 company etc., etc. are a next level that you must be ready to address. Esteem, status, recognition then become more important to a person.

    Lastly, the self-actualization and fulfillment type motivational needs are for the few key staff that truly enjoy the success of the job more than reward. We all have a few of those. They are hard to recognize at times. The key is to keep them channeled to goals of the organization.

    Lately, a well-regarded consultant said that the pay plan for technicians should simply be pay for what they produce. A believe that is sort sighted. A pay plan should have a base pay to cover the most basic physiological needs; then a “If-then” for individual productivity; then a “if-then” for the total teams productivity; then recognition for advancement and success. He said that was to complicate to keep track of in the service areas. That’s fine. But as so as that technician finds a higher payee for what he can produce he will be gone.

    We want a well-paid, productive, team player that feels he is appreciated for his work
    and can still eat during the down times. If that person also has the desire and is self motivated to be a master technician, we will help him along the way. That individual will display is knowledge by helping the younger technicians learn.

    I sure can ramble on……..Hope I am still on the subject

  3. Liz:

    You ought to read Karl Marx next. No really. The problem with work for pay, according to Marx is that the boss wants more work for the same amount of pay. The employer expects employees to increase productivity in the course of their employment to compensate the employer for hiring them, providing a work place and security. It is not the employer’s purpose to make the employees feel better about themselves or their work, only to pay the agreed upon amount. I forget the term Marx used, but he proposed that it is unfair to insist on increased productivity without an incentive. In captialism, the incentive reduces profitability and, seen from the capitalists view point, works against both the bottom line and the managers’ fiduciary responsibility to investors and stock holders. In college I loaded ice cream trucks for 1.75 an hour. The boss urged us to work faster and we got to be able to load the three trucks in two hours rather than three hours. Our efficiency cost us an hour’s pay each day. When I pointed this out, he fired me and called me a communist.

  4. Employers and/or managers should focus more on discovering what their employees passion is, and fuel it. Individuals thrive on recognition and reward. IMO, businesses that are more employee based focused than employer focused are a much healthier business model. The bottom up rather than top down approach includes everyone, and allows employees to see and understand their value to the business. Having everyone share in the success (profit) of the dealership creates everyone working toward the same goal.
    I’m going to share with you why finding out, or helping find an employees passion is important.
    I discovered my passion about five years ago, and that was in the Internet sales end of a large multi-location RV dealership. During this time the dealership was bought by a large company. I had found out about the previous owner of the RV dealership starting a boat dealership. I went and spoke with him about being his Internet Manager, and he knew that the Internet part of the business was my passion. I told him I’d come work for him under one condition, and that was, he let me have total control over what I was doing. He agreed and I started a few months later after they received their dealer license. When I say that they just started, I mean there was no sales people, heck the computers weren’t even plugged in. We had a few boats, and a bunch on order. It was the winter month’s in western NY. I spent those months getting our dealership where it needed to be on the Internet. As agreed, the owner let me do my thing. I never was told to do anything when I was a work, heck most of the people had no clue about the Internet. There was never a day that felt like work, because I was doing something I loved, and was passionate about. Most managers/owners wouldn’t hire someone who essentially told them, “I’ll work for you, but you have to leave me alone and let me do my thing.” I did from time to time pop in his office to let him know things where on track. We get our inventory in, and Spring is upon us. Here’s what happened, April, May, and June I sold over $680K worth of inventory at an average of 10% gross. All the sales where done using a computer and a phone. I was selling so much that the sales department was very angry. The owner called me into his office and told me that I had a choice, either sales or the Internet “stuff”. He said, “As you know sales is where the money is.”, and I responded, “It’s not about money to me, it’s about passion, and sales isn’t my passion. The Internet “stuff” is. I stopped selling, and taught the sales department how to sell using the Internet. Even after I stopped selling, I still out sold and out grossed everyone that first year.
    Here’s my advice, when you hire or have an employee that is passionate about what they do. You need to fuel that, and keep it going, almost to the point where you put them on a different level. The reality is that they are operating on a different level than your “regular” employees. The “kiss of death” for you, is when they feel that they are being taken advantage of.

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