Psychology 01

There exists a problem known as the Candle Problem, proposed by Gestalt psychologist Karl Duncker to measure cognitive performance. Recognizing the potential of the Candle Problem, Sam Glucksberg used it as a means to test incentive-driven motivation. This led to one of the most robust, and ignored, findings in social science.
In the Candle Problem, participants are given a box of nails and a candle. The objective of the Candle Problem is to attach the Candle to the wall in a way that the wax would not drip to the table.

Many would nail the candles to the wall, and the rest would attempt to attach the candle to the wall horizontally by dripping wax - The correct solution to this problem is to nail the box holding the nails to the wall, then placing the candle on it.

When two large groups of subjects were given this task - one promised a large monetary reward, and the other a small one - the group promised the larger reward took an average of four minutes longer to come up with the correct solution. This is the exact opposite of what one would expect monetary incentives to do.

The Candle Problem was then modified so that the participants were presented with nails already out of the box. With the same incentives given, the group with the larger incentive did significantly better!

There is a mismatch in which what science knows, and what business does. What incentive does is that it narrows the vision. It causes the mind to focus on the goal. In the modified Candle Problem, the incentive allowed the participants to perform very well because the goal was very direct - to nail the box to the wall, and place the candle on it. In other words, when incentives are given, the left brain tends to be more dominant over the right, and critical thinking is discouraged.

However, the original Candle Problem required a peripheral perspective instead of the directed focus. In situations where thinking out of the box is required, incentive only shrouds and blinds. Every single one of us are dealing with our own Candle Problem, and the solution to our Candle Problem is often mystifying and hidden. What we truly need is to do Right Brain thinking, and incentives fail to motivate that.

The Massachusetts Institute of Technology led a series of test in which groups are given incentives for doing a set of games. As long as the games involved purely mechanical skills, incentives did as expected. However, once the games involved even rudimentary cognitive skills, the larger reward led to poorer performance.

This concludes that incentives lead to a NEGATIVE impact on overall performance.

Too many organizations are making decisions based on assumptions that are outdated and rooted more in folklore than science. If we really want performance, the solution is not to entice people with more money, or point a larger gun at them.

Dan Pink, an urban socialist, proposed a new operating system:

Autonomy: The urge to direct our own lives.
Mastery: The desire to get better and better at something that matters.
Purpose: The yearning to do what we do in the service for something larger than ourselves.

Management is the ancient and conventional way of handling people. Management is great traditionally if we want compliance. If we want engagement, self-direction works better.

Atlassian, an Australia-based software company, applies this concept flawlessly. For a few days each year, employees have to comply to Fedex Days. On a Fedex Day, they are given free time off to work on anything other than their projects. A large portion of the company's breakthrough came from this autonomy.

This worked so well that Google adopted it. In the 20 Percent Time scheme, Engineers are given autonomy for 20% of the day over their time and tasks. Things like GMail, Orkut, Google News are all birthed during 20 Percent Time. More than half of the company's productivity comes from the 20 Percent Time.

An even more radical example is the ROWE. ROWE stands for the Results Only Work Environment. In ROWE, people don't have schedules. They show up when they want, and they don't need to show up at the office at all as long as they get their work done. Meetings are optional. In a ROWE environment, productivity goes up, engagement goes up, morale goes up and turnover goes down.

In the mid-1990s, Microsoft came up with an encyclopedia known as Encarta. In Microsoft's model, writers are paid very good money to write and edit thousands and thousands of articles.

A few years later, an open-source encyclopedia with a completely different model surfaced. In this new model, you write articles because it is fun and because you like it. You don't get paid a single cent.

An economist in the 20th century would think that the second model is insane, but this was how Wikipedia was born.

There are two types of motivation: Intrinsic, and Extrinsic. Incentive is part of Extrinsic motivation. Extrinsic motivation is materialistic and short-term. True success comes from Intrinsic motivation. If you want to succeed, you must be given Autonomy, you must be motivated towards true Mastery, and your goal must be driven by Purpose.