Sunday, 30 January 2011

Pay and motivation - bonding vs information

Another little canter around this issue of pay and motivation. One of the books I read recently is Rewards and Intrinsic Motivation: Resolving the Controversy. This is a very thorough and well-argued attack on the idea that rewards undermine intrinsic motivation, rooted in behaviourism. I read it because I knew there had been a big academic debate over the ideas put forward by people like Deci, and I wanted to understand what the arguments against were.

Actually I found the book fascinating, as I do most of the stuff I've read about motivation. On the theoretical level it certainly provides a very good argument for why experimental evidence for motivation crowding/overjustification/whatever you want to call it might be treated cautiously, and could be interpreted differently. I didn't find myself convinced to shift perspective, but it did help point out the weak spots in the views I've developed/adopted.

I also found it enlightening on the practical level, and there are two key things I would point to here. First, there is an entire chapter about getting reward programmes to work. A clear message is that you may need to keep tweaking it in order for it still to provide the reinforcement effect that it is intended to deliver. I say this not to make light of such programmes but because, once again, I find myself wondering about executive pay. When Cameron and Pierce talk about amending programmes there is a lot of emphasis on the reinforcement schedule and monitoring the effects. Since executive remuneration schemes are, I believe, rooted in behavourism (although I expect the vast majority of remuneration committees, and maybe many rem consultants too, are unaware of this implicit model), you would expect this kind of monitoring and modification to be going on. But generally all we see are changes to the reward itself (normally the size) and/or the targets used. Does anyone actually look at whether the behaviours sought are being achieved?

As an aside, I suppose that one could argue that the emphasis of intervention by the FSA to develop longer-term payoffs could be interpreted as a change to the reinforcement schedule, but it's not really intended this way is it? It's more designed as a safeguard that people don't take too much risk in the short-term despite the potential long-term damage it could do.

Second, there are some areas where those informed by behaviourism and those coming from other perspectives agree. A key example is the way that rewards are portrayed and/or perceived. There is a big difference between a reward that is seen as informational (ie you did well) and one that is seen as controlling (ie you should do X and will receive Y if you comply). In the latter case, those coming from the behaviourism perspective agree that there's a potential problem of reactance.

Why does this matter? Well go back to agency theory, and people like Jensen, and you find that much of the discussion about compensation is framed in terms of bonding - making sure that the agent does exactly what the principal requires of them. For example, in the bit I dug out here Jensen talks about using options to ensure that managers do not take too little risk. In other words compensation design (reward design) is often explicitly about control rather than information. Even if you accept behaviourism, implicitly or otherwise, this doesn't sound like a wise way to frame the way you reward executives.

There is one point I would make in the other direction. I argued a while back, before I had actually read much about this stuff, that I think in practice that executives are pretty sure of themselves, and as such interpret rewards as 'I am great at my job'. They may do this even though the intention of the schemes are to engender the idea 'I must fulfill the tasks required of me by the principal'. That's obviously speculative, but perhaps suggests that executive rewards can work in a way that wasn't intended. This might suggest the need to explore how explanatory styles affect interpretation of rewards (and their non-award). How many rem comms do you think have looked at that one....

No comments: