Providing Intrinsic Rewards: When Theory Meets Reality
Matthijs Van Der Want and I first became acquainted some twelve years ago when we successfully collaborated on a project to advance business development at a major European bank. Today, Matthijs serves as a business coach in Belgium and joins me in a consortium of like- minded consultants who regularly exchange thoughts, articles and outcomes of consulting assignments.
Matthijs is the author of this guest post on the outcome of a project where intrinsic rewards replaced extrinsic ones at a small start-up in Belgium. The topic of intrinsic rewards has been covered several times on this blog featuring the results of researchers like Edward Deci who have found that they are more powerful motivators than the much more common extrinsic variety.
But, what happens when theory meets reality and a company actually makes the shift from extrinsic rewards to intrinsic ones? Read Matthijs’ fascinating story to find out. AJT
Providing Intrinsic Rewards: When Theory Meets Reality
Matthijs Van der Want
Roughly two years ago, I met Michael Soetens an old colleague of mine at the Centre forEntrepreneurship of the University College Ghent in Belgium. He had left the Centre for starting up his own company, which offers telecom solutions to companies. He shared with me his worries about keeping the right salespeople on board. The majority of his salespeople left for another organization for what they considered a more attractive compensation scheme in the sense that it offered a higher bonus or commission. The higher the variable compared to the fixed component, the more they seemed to like it.
While being an addict of the blog of Arnold Tilden, I remembered immediately his post of September 27, 2012 with the title Amazin: The Larger the Reward the Poorer the Performance. He wrote: “Tangible extrinsic rewards like bonuses or commissions, do not work when you need smart behaviors.” And one needs to have smart behavior especially in a consultative B-2-B selling process.
In addition, I had just read the article: Self-Determination theory and basic need satisfaction: understanding human development in positive psychology by Edward L. Deci and Maarten Vansteenkiste (2004). According to the self-determination theory, people have three inherent psychological needs, the need for competence, relatedness and autonomy. In the article, it was mentioned that “controlling factors undermine intrinsic motivation by thwarting the need for autonomy” and “positive feedback satisfies people’s need for competence and thus enhances their intrinsic motivation.”
So, I advised Michael to read the blog and the article, while explaining that if he wanted to keep the right salespeople on board while paying less variable than the competition, he needed to stimulate intrinsic motivation. Furthermore, I told him that it’s all about the organizational culture one wants to have within the company. By explaining the culture during the hiring process, one will attract salespeople which can relate to that culture. So, if he wanted to keep within his company a culture, which stimulates intrinsic motivation, he should provide to his salespeople autonomy, a positive feedback culture, opportunities for personal development and a higher fixed salary than the competition. And by doing so, he should expect the volatility of his sales force to be reduced.
Normally, when one advises another for free, one doesn’t know whether the other will do something with it or not. Time will tell. So when I recently met Michael, I asked him whether he had done something with my advice. I was both delighted and curious when he informed he had implemented some of the changes I suggested.
What was the result?
In Michael’s start-up, there were three groups with the new “more fixed – less variable” compensation plan being tried on New Salespeople. The second group of Existing Salespeople stuck with the old more variable less fixed plan, basically because Michael thought this group was performing well. When the third group, comprised of IT and an office manager, heard about the new plan, they asked if it could be applied to them.
The results are summarized below:
New Salespeople: New Plan More Intrinsic Rewards – Did Not Work
Existing Salespeople: Old Plan More Extrinsic – Working – Ain’t broke, why fix it?
Office Management & IT: New Plan More Intrinsic Rewards – Working Well
If this were an experiment, we would have predicted the new salespeople would have been driven by the intrinsic rewards and performed at a high level. After all, that is what the research by Deci and Vansteenkiste shows. But, when theory met reality, at least in this case, that was not the outcome. In fact, Michael had to say goodbye to the two newly recruited salespeople because they were lacking performance.
Why was their performance lacking? In Michael’s opinion it was because he did not have a stick to beat them with. In my view, as an enlightened consultant, that was too easy. The fact is salespeople in Belgium are frequently changing their jobs and many variables, not just compensation plans and sticks, could be at play.
As noted in Table1, Michael was satisfied with the performance of his existing salespeople and chose not to alter their “more variable-less fixed’ plan. As the saying goes, If it ain’t broke, why fix it. Plus, Michael may think that controlling variable compensation provides him with the stick when he needs it.
The third group is interesting. When they heard about the new compensation plan, they asked for it. And, Michael was very pleased with their performance noting that they were working more hours and were taking on more responsibilities.
What can we conclude? One, the samples here are quite small and conclusions must be guarded. Two, in real life, one cannot expect to change one variable, when many variables are always working, and expect positive change. Three, the fact that the third group asked for the new plan cannot be ignored. “Buy-in” was already there and cannot be an overlooked factor in how change affects performance.
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