So, what you see here is a model of diminishing returns.
That, when I'm making, say, less than US$50,000,
the impact on my happiness for the money is actually quite positive.
But, as I get up into that 50 to $90,000 range, and
then especially above the $90,000 range, what you see is the relationship between,
say, very happy in income, actually begins to diminish and tell off.
Same thing for pretty happy.
And so, at some point, the number that researchers have landed on,
at least in today's market and
cost of living is that the happiness benefits of money,
salary, bonuses, a lot of these extrinsic monetary rewards,
the incremental benefit of the next dollar begins to
diminish somewhere after $70 to US$80,000.
And for many people, that seems counterintuitive,
because we strive to make more money.
And so, one of the questions that Kahneman and his colleagues really
got their hands around and really tried to explore was, why is that?
Because it is so
counterintuitive given how much people do focus on these monetary incentives.
And what they found was really interesting.
In that, as soon as you get that raise, you were making 50,000 and
now you're gonna make 75,000.
The question is what do you do with that money?
And often times people go out and they buy a bigger house.
They buy a fancier car.
And, what happens is, our social comparison set actually changes.
Now, we're no longer comparing ourselves to people who drive the Chevrolet or
the Ford, we're comparing ourselves to the people who drive the Mercedes, or
the Porsche.
And, we're always seeming as if we don't have what we want.
Same thing for the house, we move in to a nicer neighborhood, and
the house around us is nicer than the one we have.
And so, from a happiness perspective, we're always unhappy,
even though we're making more money.
One of the most fascinating conclusions in findings.
But the impact for you is you think about motivating yourself and
other people in your organization or your team is, don't fall trap to
the assumption that more money, more extrinsic rewards, status, recognition,
those sorts of things will have a linear relationship with happiness because
of that social comparison aspect that becomes so prevalent in modern life.
The third trap that I want to draw your attention to is not aligning
rewards with outcomes.
We've talked a lot about, for example, intrinsic and extrinsic motivation today.
And so, I'll share with you a really interesting finding from
a study in 2014 around the impact of these different
intrinsic versus extrinsic motives on performance, but
it really matters in terms of what type of performance you want.
If you are in an organization where quantity is important.
For example, if you're on an assembly line where mistakes are really rare,
but it's about the number of units you're able to produce in a finite
amount of time versus quality.
If you're in a professional services environment where it's all about
problem solving for example, or you're in a new product development and
innovation environment where quality actually is the name of the game, and
is most important criteria and in terms of task performance.
You, actually, based on these data,
need to think about the use of intrinsic and extrinsic motives differently.
What these data suggest and
what you're looking at here is the effect of motivation on performance.
The different intrinsic and extrinsic motivations.
What we see is for quantity, if the element or the aspect of task performance
that you really care about is how fast you're able to produce something, or
how many you can produce in an amount of time.
Extrinsic motivation, actually, has a significant positive effect,
even more so than intrinsic, on average.
But if what you're interested in is quality, innovation,
creativity, what we're finding in our latest research is
that extrinsic motivation has almost no effect on improving task performance.
But intrinsic motivation, again really focusing on relationships,
the value I get from work, the meaning, the significance.
Really focusing on those intrinsic motives drives higher quality in teams and
organizations.
And so as you think about what dimension of performance do you really care about.
Is it quantity, or is it quality?
And that desired outcome will determine which rewards you use.
And so, ultimately, if you want quantity,
you're going to emphasize maybe a mix of extrinsic and intrinsic.
But you're certainly going to have the extrinsic tied to maybe completion or
engagement in that task.
If you want quality, you might leave the extrinsic completely aside and
focus entirely on the intrinsic.
So, again, this is the emphasis of aligning rewards with outcomes and
in week four, you're going to talk with Maxim a lot about how you
effectively align rewards with those desired outcomes.
So, more to come on that later in the next session.
The fourth and final trap that I want to bring your attention to
is that you think about leveraging these rewards to motivate and
engage your team, your team members, individuals, and yourself.
And it comes back to the study that I mentioned in number two,
with Daniel Kahneman, and focusing on the impact of money and
its relationship with life happiness,
is I don't want you to ignore the social comparison and fairness concerns
that come anytime you begin to individualize or personalize rewards.
So, imagine you have a team of five, ten people.
They have different values.
They need different things in order to be motivated engaged.
Maybe they share some needs but they have some unique elements as well.
One of the natural inclinations that people have is, well,
I should just customize and give Scott what he values,
give Maxim what he values, give Sherrie what she values.
And on the surface, that's exactly what you want to do.
But you have to be careful, because you don't want to go too far and
ignore the social comparison and fairness concerns that can get created by that.
Because if I'm in that team and I see somebody else getting a different reward,
even if I don't value that reward as much, if I see them getting that other reward,
there's a risk that I may feel unfairly treated.
And so, you want to pay very careful attention to the social comparison and
fairness concerns.
Make sure you're aligning rewards with values.
Make sure you're aligning rewards with those values and needs, but
also ensure that rewards are aligned with contributions across people.
Because that's the essence of equity and fairness and
that's something you'll talk extensively with Maxim about in our next session.
Is how do you ensure that when you begin to align these rewards with values and
the contributions that people are making to the team,
how do you ensure that people feel fairly treated?
Because they are going to compare themselves to others, and so,
one of your responsibilities is to ensure that they feel as if they are being
treated in an equitable and fair manner, and that's something that you'll have
an opportunity to work with Maxim on extensively in our next session.