Dan Ariely’s Payoff: The Hidden Logic That Shapes Our Motivations

ArielyIf you have read Dan Ariely’s The Upside of Irrationality, there will be few surprises for you in his TED book Payoff: The Hidden Logic That Shapes Our Motivations. TED books are designed to be slightly longer explorations of topics from TED talks, but short enough to be read in one sitting. That makes it an easy, enjoyable, but not particularly deep read, with most of the results covered in The Upside. (Ariely’s TED talk can be viewed at the bottom of this post.)

The focus of Payoff is how we are motivated in the workplace, how easy it is to kill that motivation, and why we value the things we have made ourselves. It also touches on (in a slightly out-of-place and underdeveloped final chapter) how our actions are affected by what people will think about us after death.

Like The Upside of Irrationality, Ariely sways between interesting experimental results and not particularly convincing riffs on their application to the real world. Take the following example (the major experimental result that appears unique to Payoff). Workers in a semi-conductor plant in Israel were sent a message on day one of their four-day work stretch offering one of the following incentives if they met their target for the day:

  • A $30 bonus
  • A pizza voucher
  • A thank you text message from the boss
  • No message (the control group)

For people who were offered one of the three incentives, there was a boost to productivity on that day relative to the control: 4.9% for the cash group, 6.7% for the pizza group, and 6.6% for the thank you group.

The more interesting result was over the next three days. On day two, the group that had been incentivised with cash on day one had their productivity drop to 13.2% less than the control group. Absent the cash reward, they took their foot off the gas. On day three productivity was 6.2% worse. And on day four it was 2.9% worse. Over the four days, the productivity of the cash incentive group was 6.5% below that of the control. In contrast, the thank you group had no crash in productivity, with the pizza group somewhere in between. It seems the cash reward on day one, but not the other days, had sent a signal that day one was the only day when production mattered. Or the cash reward displaced some other form of motivation. What exactly is unclear.

Ariely turns the result into an attack on the idea that people work for pay and that more compensation will result in greater output. This is where Ariely’s riff and my take on the experimental results part.

I agree that there is more to work than merely the exchange of money for labour. Poorly designed incentives can backfire. You can crush motivation despite paying well. The way an incentive is designed can magnify or destroy its effect.

But Ariely sells the cash incentive short by making almost no comment on alternative designs. What if the bonus persisted, rather than being in place for only one day? How would a daily cash incentive perform against a canned thank you every day? What would productivity look like after a year?

I suspect Ariely is over-interpreting a narrow finding. The experiment was designed to demonstrate the poor structure of the existing incentive (the $30 bonus on day one) and to elicit an interesting effect, not to determine the best incentive structure. You only need to look at the overly creative ways people use to meet incentivised sales targets in financial services (e.g. Wells Fargo) to get a sense of how strongly people can be motivated by monetary bonuses. (Whether that is a good thing for the business is another matter. And to be honest, I haven’t actually checked that the Wells Fargo staff weren’t creating these fake accounts to receive more thank yous.)

So yes, think of motivation as being about more than money. Test whatever incentive systems you put in place. Test them over the long-term. But don’t start paying your staff in thank yous just yet.

Of those experiments reported in the Upside of Irrationality and repeated in Payoff, one of the more interesting is the destruction of motivation in a pointless task. People were paid to construct Lego Bionicles at a decreasing pay scale. After constructing one, they were then asked if they would like to construct another at a new lower rate. These people were grouped into two conditions. In one, their recently completed Bionicle would be placed to the side. In the other, the Bionicle would be destroyed in front of them and placed back into the box (the Sisyphic condition).

Those who saw their creations destroyed constructed less. Most notably, the decline in productivity in the Sisyphic group was strongest among those who liked making Bionicles, reducing their productivity to the level of those who couldn’t care less.

Other random thoughts on the book:

  • Ariely suggests that we value our food, gardens and houses less by getting others to take care of them for us, and suggests we should invest more ourselves (related to the IKEA effect). But what would the opportunity cost of this investment be?
  • Ariely takes a number of unfair pokes at Adam Smith and his story of the pin factory. Ariely suggests that specialisation and trade will destroy motivation as the person cannot see the whole (a la Marx), and that Smith’s idea is no longer relevant. I trust he makes his own pins.
  • One scenario where I felt the opposite inclination to Ariely was the following:

Imagine, for example, that you worked for me and I asked you to stay late three times over the next week to help complete a project ahead of deadline. At the end of the week, you will not have seen your family but will have come close to a caffeine overdose. As an expression of my gratitude I present you with one of two rewards. In option one, I tell you how much your extra hard work meant to me. I give you a warm and sincere hug and invite you and your family to dinner. In option two, I tell you that I have calculated your marginal contribution to the company’s bottom line, it totaled $27.800, and I tell you that I will give you a bonus of 5 percent of this amount ($1,390). Which scenario is more likely to maximise your goodwill toward the company and me, not just on that day, but moving forward? Which will inspire you to push extra hard to meet the next deadline?

One comment

  1. To that last hypothetical,

    Haha! Were I married, I would choose the reward that was most likely to raise my wife’s opinion of my status!

    If dinner would include the boss talking me up, then I’d choose that.

Comments welcome

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s