“People have three psychological needs – to feel autonomous, to feel competent and to feel related to others,” he says. Payment, according to Deci’s research, does not fulfill these needs. Over-emphasis on financial reward undermines autonomy and therefore intrinsic motivation, he says. “This [negative effect of money on motivation] matters hugely. You need high quality performance from bankers. You need thinkers, problem solvers, people who can be creative and using money to motivate them will not get you that.”
Perhaps more surprisingly some economists also question how good money is as a motivator. Dan Ariely, of Duke University, North Carolina, in the US, provides a compelling example. “If I ask you to help me change a tire on my car you might be willing to help, but if I offer you a dollar for this you don’t say to yourself ‘gee I get to help Dan and I get a dollar’. In contrast you say: ‘It’s a dollar, I don’t work for a dollar’ and you’re less interested in doing this.” In other words the introduction of financial incentives into a relationship by one party can undermine another’s motivation to perform a task.
But maybe the small sums involved in Ariely’s example and Deci’s experiments undermine their application to real-world international business and finance. To address this, Ariely and colleagues, recruited villagers in India to play games testing memory, creativity and motor skills, offering three different groups four, 40 or 400 rupees per game for scoring highly. The maximum reward was equivalent to the amount spent by the average person living in rural India in five months. They found that those offered the highest incentives performed worst, earning an average of 20% of the maximum possible, compared to around 36% for those in the low and medium reward groups. “Our results challenge the assumption that an increase in motivation would necessarily lead to improvements in performance,” says Ariely.
It also illustrates the complexity of teasing apart motivation. He believes the giant potential rewards on offer to some of his Indian subjects undermined their ability to perform by making them overly focused or mentally aroused. This idea that there is an optimal level of mental arousal that stimulates good performance, which when either lowered or raised undermines our abilities, was first proposed by US psychologists a century ago.
This concept of failure to perform under pressure, or “choking”, is well known in sport. A famous example saw French golfer Jean Van de Velde needing to sink the ball in six shots on the last hole of the final round of the 1999 British Open to win. Having done so in just three shots in the two previous rounds, he crumbled under pressure and took seven shots, before losing the resulting play off.