As part of the Product Management team for Rewarding solutions at SAP SuccessFactors, my colleagues and I tend to spend a lot of time thinking about how to build solutions that help our customers motivate their workforce.

Recently, I revisited the book Drive by Daniel Pink which talks about “Motivation 3.0” based on factors such as autonomy, purpose and mastery. He makes a case that carrot and stick rewards are no longer effective, especially for the creative or conceptual work that many of us engage in. He argues against the If-Then awards, and towards Now-That awards.

You can hear his 2009 TED Talk on the topic here –

Being a smart guy, he is quick to point out that first you need to “take the issue of money off the table” which basically means that these motivators – autonomy, mastery, purpose – only come into the picture once money is no longer a worry for employees. He refers to these kinds of rewards as “Baseline Rewards”.

Let’s try to understand the different types of rewards that he refers and how these can be aligned with your company’s Total Rewards Philosophy.

Baseline Rewards

These are the rewards that Dan Pink is referring to when he says, “take the issue of money off the table”. In the Total Rewards world, these are aligned with an employee’s base salary. To take the issue of money off the table means that employees are being paid sufficiently and fairly.  It means that the employee doesn’t have to worry about meeting the basic needs such as – food, rent, kids education etc. In addition, the employee feels that he or she is paid fairly compared to their peers and the market.

If-Then Rewards –

These awards are pre-defined; if you achieve x goal, then you will get y reward. In the Total Rewards world, these align with classic short term incentive payments. These are the kind of awards that Dan Pink argues against. These awards have also earned a bad name in recent times with an argument that they work well in the manufacturing world when employee output is easily measurable – produce x units, but with more conceptual and creative work these awards may actually have a detrimental effect.  Dan argues that instead of If-Then awards, employers should focus more on basic human motivators – autonomy, mastery and purpose.

This is where I disagree with Dan Pink (with all humility) and here’s why –

The goal of having “If-then Rewards” is not just to motivate employees to create more output. It is also to help everyone in the organization move in the same direction. Even though giving autonomy to employees is great for motivation, having too much autonomy can also be detrimental. Imagine everyone in the company making progress in a different direction. The company as-a-whole doesn’t make progress in any direction. The goal of If-then rewards to align people on the same goals. If the company does well, your bonus payout would be high, and within those constraints if your performance was high, your payout would be even higher.

Dan further qualifies that If-Then rewards can work well given that rewards offer a rationale on why the task is necessary and offer people autonomy on how to execute the task. I think this advice is what organizations can improve on, rather than abandoning the If-Then Rewards entirely.

Now-that rewards

What Dan suggests using instead of If-Then Rewards is Now-that rewards. In the Total Rewards world, these can be aligned to Spot-Awards/just-in-time recognition.

The difference between the two is that for the Now-that rewards there is no up-front expectation from the employees about receiving a reward. The task is not being done for the reward but for the joy of the task itself. The task is being done for the intrinsic motivation that comes from the activity.

Let me try to illustrate the difference with the help of an example – If I wanted to introduce piano to my daughter, I could ask her that complete this lesson or play 1 song and I will get you a gift. This would be an example of If-Then reward. You can imagine that she would learn the song for the reward but not for the joy of playing piano or learning music. Such motivation would be short-lived and it’ll be detrimental towards learning piano in the long-term. Alternatively, if she plays piano and completes a lesson by herself and then I give her a reward for completing a song and working hard towards it, that would be an example of Now-that reward. In this case, there is no detrimental impact on the intrinsic motivation to learn piano because she didn’t have to give up her autonomy in this case for the reward.

Such rewards are an example of Positive Reinforcement, which is among the most powerful and effective methods for shaping good habits and behavior.

Companies can use these rewards to encourage employees to display behaviors that align with company values and shape company culture.

What Dan suggests moving from If-Then rewards to Now-that rewards, is something I think has been happening in the industry as well. As the budgets for base salary increases or bonus payout has stayed flat, we see an increase in the adoption of Recognition (Spot-Award) programs.

We have you covered

I am proud to say that whichever combination of the different rewards types that our customers want to use, we’ve got you covered. As part of the SAP SuccessFactors Rewarding suite of solutions, we offer tools to manage all 3 types of rewards. You can manage your compensation planning (Baseline Rewards), Bonus Planning (If-then rewards), as well as Recognition programs (Now-that rewards) as part of one solution and one license. As far as I am aware, we are the only product to offer this range. Other solutions allow you to manage base and bonus, but require a third-party solution to manage recognition.

Hope you found this post useful, and would love to hear how you think rewards/incentives can be used to motivate people.  

Originally Published at – https://www.linkedin.com/pulse/how-rewards-motivation-play-together-ritesh-chopra/