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How Behavioral Economics Can Motivate Your Staff

Apr 26th 2019
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If you’ve picked up a business magazine in the last few years, you’ve almost certainly come across articles about the importance of staff motivation and engagement…whether you’ve actually read them is another question.

For those who have yet to dive into the details on the importance of staff motivation, here’s a very short summary:

  • There’s a high correlation for both motivation and engagement with the business metrics that matter most: profitability, productivity, customer satisfaction, innovation, and employee retention, to name a few. 
  • Despite the seemingly critical importance, the state of motivation and employee engagement in the US is shockingly bad.  Two out of every three employees are not engaged in this country.  And only two in ten report their managers motivate them effectively.  That’s a lot of lost revenues, clients and employees for organizations.
  • For the large majority of people, employee motivation and engagement are particularly elusive during periods of transformation and change.

If your takeaway from these three bullets is that the accounting profession, given its impending transformation, would do well to focus on staff motivation and engagement, then score one for the author. Of course, that does nothing to answer the question of practical importance: “So, now what?”

You could Google it, if you have time to read roughly 70,000,000 articles, or you can ask your friendly neighborhood behavioral economist. As from my last piece in AccountingWEB, the first rule of behavioral economics is that whatever SHOULD positively impact motivation and engagement is irrelevant.  The only thing that matters is what WOULD positively impact them.

Therefore, before we can begin to address motivation and engagement, we have first to understand what actually drives them, and to ignore what ought to drive them (at least according to perfect rationality).  Those answers come from the field of Industrial/Organizational Psychology, which despite being about 100 years older as a practice, I like to call, “behavioral economics focused on the workplace.”

The first thing to understand is that while motivation and engagement are related, they differ in important ways.  Those differences are the subject of some nuanced debate, but the short version can be summarized as:

  1. Motivation = what’s in it for me?
  2. Engagement = what’s in it for us?

Let’s Begin With Motivation

This is not a case of one or the other, but rather we need to maximize both and they each require their own strategy.

Motivation comes in two flavors, extrinsic and intrinsic. Extrinsic motivation is driven by external factors, like rewards or punishments.  In the world of work, that is represented by things like promotions, demotions, compensation and bonuses.

Intrinsic motivation is driven by internal factors. In other words, intrinsic motivation means doing something simply because you want to.  Not surprisingly, intrinsic motivation is far more powerful than extrinsic motivation, as research has repeatedly demonstrated.

This is not to say that extrinsic motivation doesn’t matter – obviously incentives work.  This is only to say that intrinsic motivation is far more powerful and, by the way, free.

But how do you nurture intrinsic motivation at work?  The answer comes from Self-Determination Theory.  Created by Drs. Edward Deci and Richard Ryan, Self-Determination Theory posits that three underlying conditions support intrinsic motivation: autonomy, competence and relatedness. 

Autonomy describes an employee’s discretion to determine how to accomplish her work.  Organizations and leaders can be prescriptive in what needs to be accomplished, such as goals or outcomes.  However, it’s better (from a motivational perspective) to take a hands-off approach in terms of how those goals are achieved. 

Competence describes an employee’s ability to demonstrate mastery and skill, and to receive positive feedback reflecting that mastery (particularly when it’s unexpected).  This is instructive both for job design and leadership.  People’s jobs should correlate with their strengths, and leaders ought intentionally to create opportunities for employees to demonstrate their mastery. And to provide recognition of that mastery.

Relatedness describes the fundamental human need for social connection, expressed in terms of experiencing fulfilling relationships and feeling a part of a group.  So, it behooves organizations to try to foster healthy relationships in the workplace, professionally and socially. And it helps to shine a light on the importance of their work in the lives of their clients.

Putting Theory into Action

You might be thinking something like, “That sounds great in theory, but what do I actually DO about it?” Admittedly, there is a big leap from concept to practice. But the first step is always to talk about this with leaders. 

You’ll likely find that very few have been practicing these ideas consciously, intentionally and consistently. And from a behavioral perspective, you and they can begin to conceptualize nudges, framing and procedures that support the contributors to the intrinsic motivation.

Engagement is a slightly broader concept, and as such, there is even more debate about what it is, what it means, and what drives it.  For our purposes, we’ll consider employee engagement as an individual’s commitment to the organization’s success.  Generally, engagement is associated with higher discretionary effort and consequently far better business metrics across the board.

There are a lot of opinions on what drives employee engagement. And while studies can produce results with nuanced differences, the general themes remain the same: 

  • People value healthy relationships with managers and peers
  • People value a sense that they are developing new skills 
  • People value a sense that their work has meaning
  • People value feeling empowered to deliver their best
  • People value a sense that they are valued

When firms can provide the above to their staff, engagement runs quite high and the results are enviable. Again, a common and understandable reaction to learning about the contributors to engagement is, “Sounds great in theory, but in practice…?”

It’s true, driving employee engagement requires a great deal of focus and effort, specifically on the part of team leaders.  Driving engagement is necessarily the responsibility of team leadership and more often than not, those leaders lack the knowledge and available time to make it a productive focus. That reality isn’t going to change by itself.

Certainly, driving leadership development is a heavy lift, but consider the consequences of failing to address it. 

Final Thoughts

By understanding what is actually driving motivation and engagement and anticipating how human beings will actually respond to interventions and support, practitioners are able to produce results that would have seemed out of reach just a few years ago.

So, don’t despair!  Sure, motivation and engagement are both really important and a lot of work, but thanks to advances in technology and our understanding of the human condition, innovative tools and solutions are emerging with increasing frequency and effectiveness to help. In short,  the heavy lifting is getting lighter by the day.

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By BillFotsch
Apr 27th 2019 08:01 EDT

I appreciate the author's pragmatism. One that note, if someone is interested in profitable growth through employee engagement, it would be reasonable to look for lessons from companies that excel at both.
Industry leaders, like Southwest Airlines, Capital One, BHP Billiton, and hundreds of private companies empower employees to think and act like owners, driving and participating in the profitable growth of the company. They provide challenges, not perks. Their employee engagement and financial results speak for themselves. This Forbes "Engage Your Employees in Making Money" and this Harvard Business Review article "More Than a Paycheck" provide more background.

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