Why Financial Incentives Don’t Improve Performance

Posted March 10th, 2016 in Articles, Blogs by admin

Performance bonuses for individuals, particularly CEOs, has been the norm across all industries for decades. Yet, increasing evidence indicates this is not a smart practice, that may actually detract from individual and team productivity and motivation.

That may be changing. I’ve talked and worked with an increasing number of executives and professionals who are less motivated by financial rewards as they are with other intrinsic rewards.

John Cryan, the co-CEO of Deutsche Bank, raised eyebrows recently, when he said that bonuses do not encourage bankers to work any harder. The German lender’s boss was reported to have said that he had “no idea” why his contract included a bonus scheme.

What Does Most Research Tell Us?

A new study by researchers in the UK and Australia has found it makes better business sense to reward team performance rather than provide bonuses to the top-performing individuals.

Other new research, based on feedback from 1,091 managers and 1,018 employees conducted by the Institute of Leadership & Management (ILM), found that emotional factors such job enjoyment, getting along with colleagues and feeling fairly treated by managers are the most effective ways of motivating employees for better performance. Only 13% of those surveyed felt that the prospect of receiving a bonus or other financial incentive motivated them to work harder.

Most previous research has found little or no cause and effect between individual financial bonuses and performance. A study by two McKinsey consultants found that shareholder returns were no higher when management had incentive plans. Data from Equilar, a company that compiles data about executive compensation, found no correlation between executive compensation and firm performance. Rewarding executives based on firm wide metrics, such as earnings per share, also famously distorts their incentives, the study found. Research  by Boris Groysberg, at Harvard University, found that bonuses in the financial sector were often unrelated to performance.

Conventional wisdom says that people will work harder and smarter in order to earn more and more money. Turns out that conventional wisdom isn’t just dead wrong; it’s tragically wrong. According to author Dan Pink,  extensive research shows that paying creative people bonuses for good performance not only demotivates them, but almost guarantees they will fail.

As for productivity, at least two dozen studies over the last three decades have conclusively shown that people who expect to receive a reward for completing a task or for doing that task successfully simply do not perform as well as those who expect no reward at all. On Incentives

Rewards and Motivation

It is difficult to overstate the extent to which most managers and the people who advise them believe in the redemptive power of rewards. Certainly, the vast majority of U.S. and Canadian corporations use some sort of program intended to motivate employees by tying compensation to one index of performance or another. But more striking is the rarely examined belief that people will do a better job if they have been promised some sort of incentive.

Where Does the Rationale for Incentive Pay Come From?

We can blame previous psychological theories of behavior. Behaviorist theory—which originates actually from laboratory experiments with animals–was used to develop such practices as piece-work pay for factory workers, stock options for top executives, special privileges accorded to Employees of the Month, vacations, banquets, certificates and commissions for salespeople. And the careers and livelihoods of scores of management and HR consultants has long been based on creating endless varieties of formulas for computing bonuses. Even today I have regular conversations with well-meaning executives and management experts who advocate collaborative teamwork, participative management, continuous improvement, and other progressive ideas, who still believe that the use of financial rewards will cause personal or organizational change.

Here’s the essential question. Do rewards—financial or otherwise– work? Research suggests that rewards (or “the carrot”), like punishment (or “the stick”) only succeed at temporary compliance. However, neither rewards or punishment can produce lasting change in either attitudes or behavior. That’s because, once the reward or punishment stops, or they are not escalated, people will revert back to old behaviors. Financial incentives are extrinsic motivators and they have a limited effect. In organizational terms, they can’t create or sustain a long-term individual commitment.

Incentives Can Damage Relationships

Alfie Kohn, writing in the Harvard Business Review, argues “Everyone is pressuring the system for individual gain. No one is improving the system for collective gain. The system will inevitably crash.” The surest way to destroy cooperation and, therefore, organizational excellence, is to force people to compete for rewards or recognition or to rank them against each other as GE once did, and Amazon still does. Furthermore, when employees compete for a limited number of incentives, they will most likely begin to see each other as obstacles to their own success.

Employee Engagement and Productivity

Employee engagement is declining throughout the world, particularly in the U.S. Depending on the surveys from Gallup and other organizations, employee disengagement levels are somewhere between 50-70%. Yet the typical response to this problem often is to tinker with the employee compensation programs While executives themselves may be equally influenced by other things, they still think that bonuses are the dominant incentive for most people

Bonuses and stock options can lead to unethical behavior, fuel turnover and foster envy and discontent according to Wharton management professors Adam Grant and Jitendra Singh. Instead, they say, employers should pay greater attention to intrinsic motivation. That means designing jobs that provide opportunities to make choices, develop skills, do work that matters and build meaningful interpersonal connections.

In addition to encouraging unethical behavior, financial incentives can create pay inequality, which in turn can cause turnover and harm performance. Numerous studies have shown that people judge the fairness of their pay not in absolute terms, but rather in terms of how it compares with the pay earned by peers. As a result, pay inequality can lead to frustration, jealousy, envy, disappointment and resentment. This is because compensation does not only enable us to support ourselves and our families; it is also a signal of our value and status in an organization.

Notre Dame’s Matt Bloom has shown that companies with higher pay inequality suffer from greater manager and employee turnover. He found major league baseball teams with larger gaps between the highest-paid and lowest-paid players lose more games; they score fewer runs and let in more runs than teams with more compressed pay distributions. Similarly, Phyllis Siegel at Rutgers and Donald Hambrick at Penn State have shown that high-technology firms with greater pay inequality in their top management teams have lower average market-to-book value and shareholder returns.

Lindsay McGregor and Neel Doshi of McKinsey & Company surveyed o (link is external)ver 20,000 workers around the world, analyzing 50 major companies, conducting scores of experiments, and scouring the landscape of academic research in a range of disciplines, concluded that a high performing work culture that emphasized play, purpose and potential for its employees and minimized financial reward were the most motivational for employees.

Focusing on Intrinsic Motivation

We have decades of research to show that intrinsic motivation has a long-term effect both at the personal and organizational level. This issue doesn’t need to be studied more to demonstrate its validity. Intrinsic motivational approaches include job autonomy and mastery, recognition, bringing meaning to the job and many other approaches. And for Gen Y, working for organizations whose culture and values reflect work-life balance and contributions to environmental and social good have equal if not superior attraction for career choices. For example, one senior executive client of mine left his job at a banking firm to move to a very different industry where the firm’s culture was far more progressive, despite receiving financial compensation that was only 50% of what he made previously.

It’s time that senior executives and their consultants came out 20th century business practices, and stopped using financial incentives to motivate employees and improve performance. It’s time to come into the 21st century.Why

Why goal setting can do more harm than good

Posted November 3rd, 2014 in Articles, Blogs by admin

We have all heard this advice: Set goals if you want to accomplish anything substantial. That advice comes from personal coaches, self-help gurus, management consultants, managers and executives and is deeply imbedded in leadership practices.

In organizations, “stretch goals,” or “hairy audacious goals,” as a management motivational and performance strategy, is widely practiced. Yet, there is evidence that goal setting may actually be counter productive if not a waste of time.

Our society, at both the individual level and in organizations, has an obsession with goal setting, particularly “stretch” goals or “audacious goals.” We tie goals to accomplishment. In our culture, an individual or organizations cannot be considered successful unless goals are achieved. And the usual motivation method used by leaders to achieve these goals is the continual focus on “improvement,” “bigger and better,” through harder and harder work, and increased productivity. And the way to measure that success is to measure goal attainment.

The following is a typical template for goal setting:

  • Write down the goals;
  • Make goals specific and clear;
  • Indicate how you’ll measure goal accomplishment;
  • Have goal timelines and deadlines;
  • State goals in terms of specific outcomes or results;
  • Attach rewards, incentives for attainment and punishment for failure.

The support for setting goals has reportedly come from both academic/research sources and popular self-help sources. With the respect to the first, researchers reportedly surveyed the graduating seniors from the class of 1953 at Yale University. They asked if the class members had written goals for their future. Three percent did. The rest did not. Twenty years later, researchers were said to have gone back to the surviving members of the class. They discovered that those with written life goals had accumulated more wealth than all their classmates put together.

The only problem with this powerful finding is that there was no such study. Researchers at Yale and members of the class of 1953 all swear they never conducted or participated in any such study.

The second source of support has come from such self-help sources as The Secret, which encourages people to set ambitious goals through a process of visualization. There is no study that I am aware of that demonstrates a causal link between visualizing goals and their attainment.

Despite the popularity of goal setting, there is compelling evidence that regardless of good intentions and effort, people and organizations consistently fall short of achieving their goals. More often than not, the fault is attributed to the goal setter. But the real problem may be in the efficacy of goal setting itself.

What’s Wrong With Setting Ambitious Goals?

Aubrey Daniels, in his book, Oops! 13 Management Practices That Waste Time And Money, argues that stretch goals are an ineffective management practice. Daniels cites a study that shows when individuals repeatedly fail to reach stretch goals, their performance declines. Another study showed 10% of employees actually achieved stretch goals. Daniels argues that goals are motivating people only when they have received positive rewards and feedback from reaching them in the past.

The Center For Disease Control estimates that 34% of Americans are overweight and a further 34% are obese, which means almost 70% of the population are dangerously unhealthy. That’s a curious result, despite the proliferation of weight loss programs that usually focus on weight-loss goals. The easy explanation would be to attribute fault to individual for lack of will or effort. But the problem may be inherent in the validity of goal setting.

Sim Sitkin a Duke University business school professor, completed a study of stretch goals, and found they were most likely to be pursued by desperate, embattled companies that would have difficulty adapting if the goals failed. He says: “We conclude that stretch goals are, paradoxically, most seductive for organizations that can least afford the risks associated with them.”

L.A. King and C.M. Burton in an article entitled, The Hazards of Goal Pursuit, for the American Psychological Association, argue that goals should be used only in the narrowest of circumstances: “The optimally striving individual ought to endeavor to achieve and approach goals that only slightly implicate the self; that are only moderately important, fairly easy, and moderately abstract; that do not conflict with each other, and that concern the accomplishment of something other than financial gain.”

Adam Galinsky, a professor at Northwestern University’s Kellogg School of Management and one of the authors of a Harvard Business School report called Goals Gone Wild,” argues that “goal setting has been treated like an over-the-counter medication when it should really be treated with more care, as a prescription-strength mediation.” He argues that goal setting can focus attention too much or on the wrong things and can lead people to participate in extreme behaviors to achieve the goals.

The authors of Goals Gone Wild, have identified several specific negative side effects associated with goal setting: “An overly narrow focus that neglects non-goal areas; a rise in unethical behavior; distorted risk preferences; corrosion of organizational culture; and reduced intrinsic motivation.”

Maurice Schweitzer of the University of Pennsylvania and Lisa Ordonez of the University of Arizona, co-authors of Goals Gone Wild, have studied the psychology of goal attainment, and in several experiments have shown that when people self-report their achievement of goals, if they are not entirely successful, a significant percentage of them lie to make up the difference.

One inherent problem with goal setting is related to how the brain works. Recent neuroscience research shows the brain works in a protective way, resistant to change. Therefore, any goals that require substantial behavioral change, or thinking-pattern change, will automatically be resisted. The brain is wired to seek rewards and avoid pain or discomfort, including fear. When fear of failure creeps into the mind of the goal setter, it becomes a “demotivator,” with a desire to return to known, comfortable behavior and thought patterns.

Examples of Goal Setting Gone Wrong

In the early 2000’s , General Motors had set a goal to capture 29% of the American auto market. It even produced corporate pins for people to wear with the number 29 on them. Needless to say they never achieved that goal, and without a government bailout, GM may not have even survived.

In the early 1990s, Sears gave a sales quota of $147 per hour to its auto repair staff. Faced with this target, the staff overcharged for work and performed unnecessary repairs. Sears’ Chairman at the time, Ed Brennan, acknowledged that the stretch goal gave employees a powerful incentive to deceive customers.

Or take the Ford Pinto. Presented with a goal to build a car “under 2,000 pounds and under $2,000 by 1970, employees overlooked safety testing and designed a car where the gas tank was vulnerable to explosion from rear-end collisions. Fifty-three people died as a result.

In the late 1990s, specific, challenging goals fueled energy-trading company Enron’s rapid financial success. Dan Ackman, writing in Forbes compares Enron’s incentive system to “paying a salesman a commission based on the volume of sales and letting him set the price of goods sold.” Even during Enron’s final days, Enron executives were rewarded with large bonuses for meeting specific revenue goals. In sum, “Enron executives were meeting their goals, but they were the wrong goals,” according to employee compensation expert Solange Charas. By focusing on revenue rather than profit, Enron executives drove the company into the ground.

Max Bazerman, a Harvard Business School professor and co-author of Goals Gone Wild, argues the following in the study:

  • People can focus so much on reaching the stretch goal that they fail to realize how this has dumped other work on their co-workers.
  • With goals, people narrow their focus. This intense focus can blind people to important issues that appear unrelated to their goal;
  • A related problem occurs when employees pursue multiple goals at one time. Individuals with multiple goals are prone to concentrate on only one goal;
  • Overemphasis on short-term thinking. Goals that emphasize immediate performance (e.g., this quarter’s profits) prompt managers to engage in myopic, short-term behavior that harms the organization in the long run;
  • People motivated by specific, challenging goals adopt riskier strategies and choose riskier gambles than do those with less challenging or vague goals;
  • Goal setting can promote two different types of cheating behavior. First, when motivated by a goal, people may choose to use unethical methods to reach it; second, goal setting can motivate people to misrepresent their performance level—in other words, to report that they met a goal when in fact they fell short;
  • Goals create a culture of competition. Organizations that rely heavily on goal setting may erode the foundation of cooperation that holds groups together;
  • As goal setting increases extrinsic motivation, it can harm intrinsic motivation – engaging in a task for its own sake;

So What’s The Alternative?

In his classic article, “Small Wins,” psychologist Karl Weick argued that people often become overwhelmed and discouraged when faced with massive and complex problems. He advocated recasting larger problems into smaller, tractable challenges that produce visible results, and maintained that the strategy of “small wins” can often generate more action and more complete solutions to major problems because it enables people to make slow, steady progress.

In their recent book, The Progress Principle, Teresa Amabile and Steven Kramer build on the same argument and clearly demonstrate how even the smallest, most mundane steps forward — for example, achieving clear consensus in a meeting — can motivate and inspire workers. Ever wonder why people will so often write down an item they’ve already completed on theirto-do-list? It’s so that they can have the satisfaction of immediately crossing it off and experiencing the sense of progress.

Focusing on small wins in combination with process improvement will driveyourorganizationforward without the negative consequences of stretch goals. However, this approach requires a willingness to abandon the “ready, fire, aim” approach to problem solving. The heavy lifting has to be done at the outset — a deep understanding of the current condition is a prerequisite for true improvement. This approach also requires a subtle — but critical — shift in focus from improving outcome metrics to improving the process by which those outcomes are achieved.

If You Must Set Goals

If you must set goals, consider these questions to guide you, suggested by Max Bazerman:

  • Are the goals too specific? Narrow goals can blind people to important aspects of a problem. Be sure that goals are comprehensive and include all of the critical components for firm success (e.g., quantity and quality);
  • Are the goals too challenging? What will happen if goals are not met? How will individual employees and outcomes be evaluated? Will failure harm motivation and self-efficacy? Provide skills and training to enable employees to reach goals. Avoid harsh punishment for failure to reach a goal;
  • Who sets the goals? People will become more committed to goals they help to set. At the same time, people may be tempted to set easy to reach goals;
  • Is the time horizon appropriate? Be sure that short-term efforts to reach a goal do not harm investment in long-term outcomes. For example, consider eliminating quarterly reports as Coca-Cola did;
  • Consider how might goals influence risk taking? Be sure to articulate acceptable levels of risk;
  • Consider how might goals motivate unethical behavior? Goals narrow focus, such that employees may be less likely to recognize ethical issues. Goals also induce employees to rationalize their unethical behavior and can corrupt organizational cultures. Multiple safeguards may be necessary to ensure ethical behavior while attaining goals (e.g., leaders as exemplars of ethical behavior, making the costs of cheating far greater than the benefit, strong oversight);
  • Can goals be idiosyncratically tailored for individual abilities and circumstances while preserving fairness? Strive to set goals that use common standards and account for individual variation;
  • How will goals influence organizational culture? If cooperation is essential, consider setting team-based rather than individual goals;
  • Are individuals intrinsically motivated? Assess intrinsic motivation and recognize that goals can curtail intrinsic motivation;
  • Consider the ultimate goals of the organization and what type of goal (performance or learning) is most appropriate? In complex, changing environments learning goals may be more effective.

The Psychological Manifestations

Finally, there are psychological manifestations of not achieving goals that may be more damaging that not having any goals at all. The process sets up desires that are removed from everyday reality. Whenever we desire things that we don’t have, we set our brain’s nervous system to produce negative emotions. Second, highly aspirational goals require us to develop new competencies, some of which may be beyond current capabilities. As we develop these competencies, we are likely to experience failures, which then become de-motivational. Thirdly, goal setting sets up an either-or polarity of success. The only true measure can either be 100% attainment or perfection, or 99% and less, which is failure. We can then excessively focus on the missing or incomplete part of our efforts, ignoring the successful parts. Fourthly, goal setting doesn’t take into account random forces of chance. You can’t control all the environmental variables to guarantee 100% success.

The other problem is that goals are often cast in the image of the ideal or perfection, which activates the self-judging thinking of “I should be this way.” This counteracts the positive need for self-acceptance.

And if the goal is not attained, we can often engage in thinking we are failures, not good enough, not smart enough, not beautiful enough, etc. So the non-attainment of goals can create emotions of unworthiness.

We must also make a distinction between our intentions vs. goals. An intention is a direction we want to pursue, preferably with passion. My experience is that people are often confused, and unclear about the intentions of how they want to live and achieve, and therefore a focus on goals doesn’t assist them with clarifying their intentions.

When I work with people as their coach and mentor, they often tell me they’ve set goals such as “I want to be wealthy,” or “I want to be more beautiful/popular,” “I want a better relationship/ideal partner.” They don’t realize they’ve just described the symptoms or outcomes of the problems in their life. The cause of the problem, which many resist facing, is themselves. They don’t realize that for a change to occur, if one is desirable, they must change themselves. Once they make the personal changes, everything around them can alter, which may make the goal irrelevant.

There’s an old saying: “you don’t get what you want in life, you get in life what you are.”

 

“Carrot and stick” Motivation Revisited By New Research

Posted December 4th, 2013 in Articles, Blogs by admin

We continue to revisit the issue of motivation and specifically, the “carrot and stick” aspect.  New research seems to indicate that brain chemicals may control behavior and for people to learn and adapt in the world; therefore, both punishment and reward may be necessary. This conclusion would certainly run counter to the trend towards positive motivation without extrinsic reward or punishment.

Can you influence or even change a person’s behavior through conditioning? The real question is, which route would you choose—positive or negative? Most people are taught to refrain from engaging in a certain behavior by being given punishments that create negative feelings. This helps maintain discipline at home, school and even organizations. However, it has long been debated as to which one works better on behavior.

Are there genetic and brain chemistry factors that could influence our perspective on this issue?

Hanneke den Ouden and Roshan Cools and their colleagues from the Donders Institute in Nijmegen and New York University have published their research in the journal Neuron. They concluded brain chemicals serotonin and dopamine-related genes influence how we base our choices on past punishments or rewards. This influence depends on which gene variant you inherited from your parents. Den Ouden explains: “We used a simple computer game to test the genetic influence of the genes DAT1 andSERT, as these genes influence dopamine and serotonin. We discovered that the dopamine gene affects how we learn from the long-term consequences of our choices, while the serotonin gene affects our choices in the short term.”

Den Ouden goes on to say “Different players use different strategies. It all depends on their genetic material. People’s tendency to change their choice immediately after receiving a punishment depends on which serotonin gene variant they inherited from their parents. The dopamine gene variant, on the other hand, exerts influence on whether people can stop themselves making the choice that was previously rewarded, but no longer is.”

What implications does this have on the issue of employee motivation in the workplace?

Motivating people to do their best work, consistently, has been an enduring challenge for executives and managers. Even understanding what constitutes human motivation  has been a centuries old puzzle, addressed as far back as Aristotle.

When Frederick Herzberg researched the sources of employee motivation during the l950s and l960s, he discovered a dichotomy that still intrigues and baffles managers: The things that make people satisfied and motivated on the job are different in kind from the things that make them dissatisfied. Ask workers what makes them unhappy at work, and you’ll hear them talk about insufficient pay or an uncomfortable work environment  or “stupid” regulations and policies that are restraining or the lack of job flexibility and freedom. So environmental factors can be demotivating, but even if managed brilliantly, fixing these factors won’t motivate people to work harder or smarter.

It turns out that people are motivated by interesting work, challenge, and increasing responsibility—intrinsic factors. People have a deep-seated need for growth and achievement. Herzberg’s work influenced a generation of scholars and researchers—but never seemed to make an impact on managers in the workplace, where the focus on motivation remained the “carrot-and-stick” approach, or external motivators.

What do we mean by motivation? It’s been defined as a predisposition to behave in a purposeful manner to achieve specific, unmet needs and the will to achieve, and the inner force that drives individuals to accomplish personal and organizational goals. And why do we need motivated employees? The answer is survival. Motivated employees are needed in our rapidly changing workplaces, and to be effective, managers need to understand that and do something about it.

A review of the research literature by James R. Lindner at Ohio State University concluded that employee motivation was driven more by factors such as interesting work than financial compensation. John Baldoni, author of Great Motivation Secrets of Great Leaders, concluded that motivation comes from wanting to do something of one’s own free will, and that motivation is simply leadership behavior—wanting to do what is right for people and the organization.

In his book, Drive, Daniel Pink, describes what he says is “the surprising truth” about what motivates us. Pink concludes that extrinsic motivators work only in a surprisingly narrow band of circumstances; rewards often destroy creativity and employee performance; and the secret to high performance isn’t reward and punishment but that unseen intrinsic drive—the drive to do something  because it is meaningful. Pink says that true motivation boils down to three elements: Autonomy, the desire to direct our own lives; mastery, the desire to continually improve at something that matters to us, and purpose, the desire to do things in service of something larger than ourselves. Pink, joining a chorus of many others, warns that the traditional “command-and-control” management methods in which organizations use money as a contingent reward for a task, are not only ineffective as motivators, but are actually harmful.

Nitin Nohria, Boris Groysberg and Linda-Eling Lee writing in the Harvard Business Review, describe a new model of employee motivation. They outline the four fundamental emotional drives that underlie motivation as: The drive to acquire (the acquisition of scarce material things, including financial compensation, to feel better); the drive to bond (developing strong bonds of love, caring and belonging); the drive to comprehend (to make sense of our world so we can take the right actions); and the drive to defend (defending our property, ourselves and our accomplishments).

Norhria and associates argue that managers who try to increase motivation must satisfy all of these four drives. Best practice companies have initiated reward systems based on performance. They have addressed the bond drive by developing a corporate culture based on friendship,  mutual reliance, collaboration and sharing; addressed the drive of comprehend by instituting job design system where jobs are designed for specific roles, and they have attempted to create jobs are meaningful and foster a sense of contribution to the organization. And finally to address the defend drive, best practice companies restructure their leadership approaches to increase transparency of all processes, ensure fairness throughout the organization and build trust and openness with everyone.

The carrot-and-stick approach worked well for typical tasks of the early 20th century —routine, unchallenging and highly controlled. For these tasks, where the process is straightforward and lateral thinking is not required, rewards can provide a small motivational boost without any harmful side effects. But jobs in the 21st century have changed dramatically. They have become more complex, more interesting and more self-directed, and this is where the carrot-and-stick approach has become unstuck. In summary, the implications for managers in organizations are significant. Leaders today must be not just cognizant of the latest research on motivation, but take action to make those organizational and relationship changes to take advantage of this research. And care must be taken to simply conclude that our motivation is blindly driven by brain chemicals.

Why performance reviews don’t improve performance

Posted November 12th, 2012 in Articles, Blogs by admin

In his article in the Harvard Business Review, Tony Schwartz, President and CEO of the Energy Project, and author of Be Excellent At Anything, says that when we hear the phrase from someone, “would you mind if I give you some feedback?” what that actually means to most of us is “would you mind if I gave you some negative feedback?” wrapped up in the guise of constructive criticism, whether you want it or not.

There are some fundamental problems with negative criticism, regardless of whether we clothe it politely as “constructive.” First, Schwartz contends, criticism “challenges our sense of value. Criticism implies judgment and we all recoil from feeling judged.” Indeed, psychologists such as Daniel Goleman, contend that threats to self-esteem and sense of self-worth in the form of criticism can feel like threats to our survival.

Part of our resistance to positive reactions to negative feedback is the way our brains work. Neuroscientists have clearly identified that our brains are fundamentally protective, defensive mechanisms. If your ego and sense of self is threatened, your brain unconsciously will act to protect and defend, either actively or passively.

Nowhere does negative or constructive criticism appear more frequently than in performance reviews of employees. The prevailing theory is that criticism, which invariably is part of the performance review, will improve the employee’s performance, and in addition the employee will positively welcome it. Nothing can be further from the truth.

The reality is that the traditional performance appraisal as practiced in the majority of organizations today is fundamentally flawed, and incongruent with our values-based, vision-driven and collaborative work environments.

Robert Sutton, a Stanford University professor, says that performance evaluations do more harm than good. A 1998 study by Development Dimensions Incorporated, found that employers themselves expressed overwhelming dissatisfaction with performance reviews. The consulting firm, People IQ, in a 2005 national survey, found that 87 percent of employees and managers felt performance reviews were neither useful nor effective. In an article published inThe Psychological Bulletin, psychologists A. Kluger and A. Denisi report completion of a meta-analysis of 607 studies of performance evaluations and concluded that at least 30 percent of the performance reviews ended up in decreased employee performance.

Tom Coens and Mary Jenkins, in their book, Abolishing Performance Appraisals: Why They Backfire and What To Do Instead, detail studies that clearly show performance appraisals do not work and outline what could replace them. Garold Markle, in his book, Catalytic Coaching: The End of The Performance Review, argues that performance reviews have reached the end of their utility and should be replaced with a manager-employee coaching system.

Charles Jacobs, author of Management Rewired: Why Feedback Doesn’t Work and Other Supervisory Lessons from Brain Science, says that the brain is wired to resist what is commonly termed as constructive feedback, but is usually negative criticism. Brain science has shown that when people encounter information that is in conflict with their self-image their tendency is to change the information, rather than changing themselves. So when managers give critical performance appraisal feedback to employees, their brains’ defense mechanisms are activated, and the motivation to change is improbable.

Samuel Culbert, a professor at the UCLA Anderson School of Management, and author of Get Rid of Performance Review: How Companies Can Stop Intimidating, Start Managing-and Focus on What Really Matters, argues that employee performance reviews are “destructive and fraudulent.” He argues “it’s time to finally put the performance review out of its misery,” adding, “this corporate sham is one of the most insidious, most damaging and yet most ubiquitous of corporate activities.” Culbert argues that the performance reviews “instill feelings of being dominated. They send employees the message that the boss’ opinion of their performance is the key ingredient of pay, assignment, and career progress.” He contends that the use of performance reviews is about “power and subordination, making condor all but impossible,” and causing employee defensiveness and stress. Culbert goes on to argue that the practice is more about intellectual laziness and ego-building for managers, and it avoids having to tackle the hard work of changing organizational processes. What should replace the performance review? Culbert argues that something called a “performance preview,” a process that holds the manager and members of the manager’s team equally responsible for results.

Literature abounds with systems and strategies for giving constructive criticism, and consultants have made lucrative livings implementing such systems in organizations, despite how flawed they are. Perhaps the silliest component of these systems is to suggest to the person giving the constructive feedback to “sandwich it” between positive statements, as if the person receiving the feedback will focus on the positive part of the sandwich, and not the negative. Again, this ignores the brain’s programmed preference to respond to negative information.

Rachel Emma Silverman and Leslie Kwoh, in two articles in The Wall Street Journal, cite evidence from the Corporate Executive Board that some companies are now abandoning formal performance reviews and replacing them with “performance previews,” in which the boss or manager engages in a dialogue with an employee about how a specific task or project will be completed before action is taken. This places onus not only on the employee to specify the how and what action will be taken, but also places onus on the boss to discuss what supportive actions are necessary. This creates a two-sided, reciprocally accountable performance system. The boss’s job then, is to guide, coach, tutor, and assist the employee rather than judge, evaluate and find fault.

Social media can also be used effectively to provide feedback in an informal and developmental way. Some companies are now using online technology to regularly collect “crowdsource” feedback. This system allows any employee to give immediate and real-time feedback to any other employee or boss while work is progressing.

Erick Mosley, writing in the Harvard Business Review Blog Network, argues “a group of independently deciding individuals is more likely to make better decisions and more accurate observations than those of an individual. Crowdsourcing, by leveraging social recognition data, is a better way for managers to collect, evaluate and share information on employee performance.”

Unlike 360-degree performance evaluations, which are end-point or annual processes, crowdsourcing is ongoing and real-time feedback. Also, rather than constructive crowdsourcing evaluations that duplicate performance evaluations that look for faults or critical feedback, a crowdsourcing system can be used as a motivational tool, by providing positive feedback. “When the crowdsourcing conept is applied in this way,” Mosley says, “co-workers and peers can identify and reward desired behaviors and cultural attributes through unsolicited recognition, as they happen…This stream of recognition, which often appears in internal social newsfeeds, provides timely, measurable insights into your talent top influencers and performers.”

The reality is that constructive criticism is an oxymoron. All criticism is inherently destructive and negative, however we may attempt to window dress it, or “sandwich it” between positive statements. Anything constructive is associated with growth, which requires a person to be open, not in a defensive state of mind. When put together, these two ideas constitute an oxymoron.

To be in an open, receiving state of mind, the feedback must be positive, or at least guide the recipient to self-awareness and self-discovery. Leaders in organizations now have an opportunity to abandon a system that is not only dysfunctional but doesn’t recognize the latest in neuroscience research and take advantage of new social media technology.


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How to motivate yourself

Posted January 5th, 2011 in Articles, Blogs by admin

I’m often asked by clients, “how do I motivate or inspire myself to accomplish what I want or be who I want to be.” Most of the research on motivation has focused on what material and external things are motivational. I know that one of the keys to self motivation is connected to self-talk—that conversation you have with yourself in your head.

Recent research by University of Illinois Professor Dolores Albarracin and Visiting Assistant Professor Ibrahim Senay, along with Kenji Noguchi, Assistant Professor at Southern Mississippi University, has shown that those who ask themselves whether they will perform a task generally do better than those who tell themselves that they will. This was reported by Christopher Fisher in The Behavioral Medicine Report.

Little research exists in the area of self-talk, although we are aware of an inner voice in ourselves and in literature. From children’s books like “The Little Engine That Could,” in which the title character says, “I think I can,” to Holden Caulfield’s misanthropic musings in “A Catcher in the Rye,” internal dialogue often influences the way people motivate and shape their own behavior.

But was “The Little Engine” using the best motivational tool, or does “Bob the Builder” have the right idea when he asks, “Can we fix it?”

Albarracin’s team tested this kind of motivation in 50 study participants, encouraging them explicitly to either spend a minute wondering whether they would complete a task or telling themselves they would. The participants showed more success on an anagram task, rearranging set words to create different words, when they asked themselves whether they would complete it than when they told themselves they would.

Further experimentation had students in a seemingly unrelated task simply write two ostensibly unrelated sentences, either “I Will” or “Will I,” and then work on the same task. Participants did better when they wrote, “Will” followed by “I” even though they had no idea that the word writing related to the anagram task.

Why does this happen? Professor Albarracin’s team suspected that it was related to an unconscious formation of the question “Will I” and its effects on motivation. By asking themselves a question, people were more likely to build their own motivation.

In a follow-up experiment, participants were once again parsed into the “I will” and “Will I” categories, but this time were then asked how much they intended to exercise in the following week. They were also made to fill out a psychological scale meant to measure intrinsic motivation. The results of this experiment showed that participants not only did better as a result of the question, but that asking themselves a question did indeed increase their intrinsic motivation.

These findings are likely to have implications in cognitive, social, clinical, health and developmental psychology, as well as in clinical, educational and work settings.

“We are turning our attention to the scientific study of how language affects self-regulation,” Professor Albarracin said. “Experimental methods are allowing us to investigate people’s inner speech, of both the explicit and implicit variety, and how what they say to themselves shapes the course of their behaviors.”

Research like this challenges traditional paradigms regarding public service messages and self-help literature designed to motivate people toward healthier or more productive behavior.

“The popular idea is that self-affirmations enhance people’s ability to meet their goals,” Professor Albarracin said. “It seems, however, that when it comes to performing a specific behavior, asking questions is a more promising way of achieving your objectives.”

The trio published its research, supported by the National Institutes of Health, in the April 2010 edition of the journal Psychological Science.

“This work represents a basic cognitive approach to how language provides a window between thoughts and action,” said Dr. James W. Pennebaker, Professor and Chair of the Department of Psychology at the University of Texas. “The reason it is so interesting is that it shows that by using language analysis, we can see that social cognitive ideas are relevant to objective real world behaviors and that the ways people talk about their behavior can predict future action.”

Goals can impact your relationships–for better or worse

Posted November 23rd, 2010 in Articles, Blogs by admin

We have all heard this advice: Set audacious goals if you want to accomplish anything substantial. That advice comes from personal coaches, self-help gurus, management consultants, managers and executives and is deeply imbedded in leadership practices. Yet, there is evidence that goal setting may actually be counter productive if not a waste of time. Second, there is evidence that goals that are intended for self-growth are far different that goals that are competitive with others.

My experience in working with individuals and organizations is that most do not actually achieve the goals that are set. One of two things occur: Either the goal is so difficult that the individual or organization is actually demotivated or demoralized early in the process of trying to achieve it; or, the goals are set, and thereafter, little or no attention is focused on them. The result is often demotivation and negative attitudes toward goal setting.

The following is a typical template for goal setting that can be found almost anywhere on the Internet:
• Write down the goals
• Make goals specific and clear
• Indicate how you’ll measure goal accomplishment
• Have goal deadlines
• State goals in terms of outcomes

The inherent problem with goal setting is related to how the brain works. Recent neuroscience research shows that the brain works in a protective way, resistant to change. Therefore, any goals that require any substantial behavioral change, or thinking pattern change, will automatically be resisted by the brain. In addition, our brains are wired to seek rewards and avoid pain or discomfort, including fear. When fear of failure enters the mind of the goal setter, it becomes a demotivator in accomplishing the goal, with a desire to return to known, comfortable behavior and thought patterns. How you think about your goals — whether it’s to improve yourself or to do better than others — can affect whether you reach those goals. Different kinds of goals can also have distinct effects on your relationships with people around you, according to the authors of a paper published in Current Directions in Psychological Science.

People with “mastery goals” want to improve themselves. Maybe they want to get better grades, make more sales, or land that triple toe loop. On the other hand, people with what psychologists call “performance goals” are trying to outperform others — to get a better grade than a friend or be Employee of the Year. Both kinds of goals can be useful in different contexts. But P. Marijn Poortvliet, of Tilburg University in the Netherlands, and Céline Darnon, of France’s Clermont University, are interested in the social context of these goals — what they do to your relationships.

Poortvliet’s work focuses on information exchange — whether people are open and honest when they are working together. “People with performance goals are more deceitful” and less likely to share information with coworkers, both in the laboratory and in real-world offices he has studied, Poortvliet says. “The reason is fairly obvious — when you want to outperform others, it doesn’t make sense to be honest about information.”

On the other hand, people who are trying to improve themselves are quite open, he says. “If the ultimate goal is to improve yourself, one way to do it is to be very cooperative with other people.” This can help improve the work environment, even though the people with these goals aren’t necessarily thinking about social relations. “They’re not really altruists, per se. They see the social exchange as a means toward the ends of self improvement.” Other research has found that people with these self-improvement goals are more open to hearing different perspectives, while people with a performance goal “would rather just say, ‘I’m just right and you are wrong.'”

It’s not always bad to be competitive, Poortvliet says. “For example, if you want to be the Olympic champion, of course it’s nice to have mastery goals and you should probably have mastery goals, but you definitely need performance goals because you want to be the winner and not the runner-up.”

But it’s important to think about how goals affect the social environment. “If you really want to establish constructive and long-lasting working relationships, then you should really balance the different levels of goals,” Poortvliet says — thinking not only about each person’s achievement, but also about the team as a whole.

Some people are naturally more competitive than others. But it’s also possible for managers to shift the kinds of goals people have by, for example, giving a bonus for the best employee. That might encourage people to set performance goals and compete against each other. On the other hand, it would also be possible to structure a bonus program to give people rewards based on their individual improvement over time.

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Why We Like Bad News and How It Supports The Recession

Posted September 30th, 2010 in Articles, Blogs by admin

Many of us frequently complain about the negativity of the news, particularly now in the economic downturn. The conga line of bruising news blankets consumers in a headline bombardment that is probably making the problem worse.

Jim Lehrer’s NewHour economics correspondent Paul Solmon did an interesting piece on the cascading effect that consumer pessimism has on our willingness to spend. He said that we are in a state of “learned helplessness”. At the worst, continual bad news can even stimulate a state of depression, and people who concentrate on all the bad news work themselves up emotionally and become much more likely to make unwise decisions, like selling all their investments at a huge loss or halting their consumer spending entirely. Even people who don’t watch television or read newspapers are getting hit with nuggets of negativity through social networking and informal conversations.

When everyone is talking about recession, we all feel like something has to change, even if nothing has changed, says Dan Ariely, author of “Predictably Irrational,” People may be scared to spend money, scared about losing their jobs and in doing so will restrain their spending. Yet look closely. Consumer sales in entertainment, and drugs like Viagra have increased. Viacom’s sales were down from last year but still profitable. Best practice companies with a long-term view are weathering the recession quite well. Social networking in many forms is expanding rapidly.

Is the media negative? Media studies show that bad news far outweighs good news by as much as seventeen negative news reports for every one good news report. Why? The answer may lie in the work of evolutionary psychologists and neuroscientists.  Humans seek out news of dramatic, negative events. These experts say that our brains evolved in a hunter-gatherer environment where anything novel or dramatic had to be attended to immediately for survival. So while we no longer defend ourselves against saber-toothed tigers, our brains have not caught up.

Many studies have shown that we care more about the threat of bad things than we do about the prospect of good things. Our negative brain tripwires are far more sensitive than our positive triggers. We tend to get more fearful than happy. And each time we experience fear we turn on our stress hormones.

Another explanation comes from probability theory. In essence, negative and unusual things happen all the time in the world. In his book, Innumeracy, John Allen Paulos explains that if the news is about a small neighborhood of 500 or 5,000, then the possibility that something unusual has happened is low. Unusual things don’t happen to individual people very often. That’s why very local news like a neighborhood newsletters tends to have less bad news. But in a large city of 1 million, dramatic and negative incidents happen all the time. But most people watch national or worldwide media where news reports come in from large cities at a large scale, so the prevalence of negative stories increase. Add the size of social networking communication, and we expand geometrically bad news. So from evolutionary and neuro-scientific and probability perspectives, we are hard-wired to look for the dramatic and negative, and when we find it, we share it.

What about our personal lives? Psychologist John Gottman at the University of Washington, found that there is kind of thermostat operating in healthy marriages that regulates the balance between positive and negative. He found that relationships run into serious problems when the negative to positive ratio becomes seriously imbalanced. He also found that the magic ratio is five positive to one negative.

Is there any good news in all this? According to positive psychologists we can change our habits, and we can focus on the glass being half-full. When we acquire new habits, our brains acquire “mirror neurons” and develop a positive perspective that can spread to other people like a virus. This is not about being a Pollyanna or “goody-two-shoes,” is about being able to reprogram our brains. To apply this positive psychology and brain research knowledge to our attitudes and behaviors with relation to our current economic conditions, we can encourage our news deliverers to present a balanced and multi-dimensional point of view. Giving us the bad news, so that our brains are hard-wired into a negative state, will just reinforce the current negative economic climate. The best thing individual people can do to help our economy recover, is move toward a more positive, optimistic frame of mind by not seeing and reading negative news about our economy on a frequent basis.

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Why CEOs need to scrap employee performance reviews

Posted September 29th, 2010 in Articles, Blogs by admin

On any given day in most organizations in North America, you’ll find a manager informing an employee that it’s time for their regular performance review. And usually, the news is neither delivered or received with joy. Second only to firing an employee, managers rate performance appraisals as the task they dislike the most. The reality is that the traditional performance appraisal as practiced in the majority of organizations today is fundamentally flawed, and incongruent with our values-based, vision-driven and collaborative work environments.

The practice of giving employees annual ratings or performance evaluations is widely accepted as an essential and valuable tool throughout the business world. Amazon offers over 200 titles focused on this topic, with more than 50 published since 1994. Most employee performance reviews are annual processes, where the manager annually assesses the work of subordinates. In some cases, the employees also participate in self-review. In many organizations, annual salary increases are tied to the performance appraisals, and often as well, according to one study, managers often delay completing them because they are not motivated to do it.

Jim Heskett, writing in the Harvard Business Review says employee performance reviews rank with root canals on the list of least favorite things to do both for employees and managers. Heskett argues that the debate over the utility of performance reviews centers around a “forced ranking” system, made popular by GE, which not only purports to identify the top performers, but also the underperformers who can subsequently be “advised” to leave the organization.

Supporters of a forced ranking system, Heskett says, cite its effectiveness because it averts lawsuits when poorly performing employees are fired. The opponents of the system say the system hurts teamwork and innovation. What little research there is on forced ranking systems show they produce only short-term improvement. It also avoids the obvious question–is the employee performance review system’s purpose only to weed out poor performers?

Robert Sutton, Stanford University professor, says that performance evaluations do more harm than good. A 1998 study by Development Dimensions Incorporated, found that employers themselves expressed overwhelming dissatisfaction with performance reviews. The consulting firm, People IQ, in a 2005 national survey, found that 87% of employees and managers felt performance reviews were neither useful nor effective. . In an article published in The Psychological Bulletin, psychologists A. Kluger and A. Denisi report completion of a meta-analysis of 607 studies of performance evaluations and concluded that at least 30% of the performance reviews ended up in decreased employee performance.

Tom Coens and Mary Jenkins, in their book, Abolishing Performance Appraisals: Why They Backfire and What To Do Instead, detail studies that clearly show performance appraisals do not work and outline what could replace them. Garold Markle, in his book, Catalytic Coaching: The End of The Performance Review, argues that performance reviews have reached the end of their utility and should be replaced with a manager-employee coaching system.

Aubrey Daniels, a world renowned management consultant, argues in his book, Oops! 13 Management Practices That Waste Time and Money, that performance appraisals don’t work and are actually counter-productive. Daniels cites a study by the Society for Human Resource Management (SHRM), which found that 90% of performance appraisals are both painful and don’t work; and further, produce an extremely low percentage of top performers.

Charles Jacobs, author of Management Rewired: Why Feedback Doesn’t Work and Other Supervisory Lessons from Brain Science, says that the brain is wired to resist what is commonly termed as constructive feedback, but is usually negative criticism. Brain science has shown that when people encounter information that is in conflict with theirself-image their tendency is to change the information, rather than changing themselves. So when managers give critical performance appraisal feedback to employees, their brains’ defense mechanisms are activated, and the motivation to change is improbable.

Samuel Culbert, a professor at the UCLA Anderson School of Management, and author of Get Rid of Performance Review: How Companies Can Stop Intimidating, Start Managing–and Focus on What Really Matters, argues that employee performance reviews are “destructive and fraudulent.” He argues that “it’s time to finally put the performance review out of its misery,” adding, “this corporate sham is one of the most insidious, most damaging and yet most ubiquitous of corporate activities.” Culbert argues that the performance reviews “instill feelings of being dominated. They send employees the message that the boss’ opinion of their performance is the key ingredient of pay, assignment, and career progress.” He contends that the use of performance reviews is about “power and subordination, making condor all but impossible,” and causing employee defensiveness and stress. Culbert goes on to argue that the practice is more about intellectual laziness and ego-building for managers, and it avoids having to tackle the hard work of changing organizational processes. What should replace the performance review? Culbert argues that something called a “performance preview,” a process that holds the manager and members of the manager’s team equally responsible for results.

Clearly, the annual performance review was designed for a work environment where control of individual employee performance was a key function. In today’s team and collaborative environment, that perspective no longer makes sense. Some key questions that need to be answered are: Why are we perpetuating a system that research (including recent brain research) shows is not only ineffective, but counterproductive; and what are better processes to replace the performance review? And managers need to look in the mirror and honestly answer whether they use the performance review as a way of dominating and controlling employees, rather than demonstrating a transformational style of leadership.