From managing cash flow to finding new customers, small businesses have their hands full. And as any business owner will attest, employees can represent one of their biggest challenges. Yet to grow a business often requires adding more “hands.” At SCORE, we talk to scads of small business owners who ask us about what is involved in hiring employees and how to get started. However, hiring is only the beginning of those challenges. Motivating and providing incentive for employee performance is by far the biggest challenge facing business owners.
Our challenge is rooted in that we have long believed monetary rewards have been the primary motivators for employees. There was a time in the industrial age when this was largely true, but now our work is very different. The predominant type of work today is “knowledge work,” where we use primarily cognitive skill to create or add value. For knowledge workers, monetary rewards actually have a demotivating effect. Many of you are thinking, “Impossible, it goes against everything I’ve been taught.” Yet, study after study has validated the findings that when cognitive skill is required, monetary incentives actually impair performance.
You may have been exposed to the concepts of Theory Y over Theory X, as I was in college, but I’m sure it was as dryly academic to you as it was to me. I don’t think I had ever seen it in actual practice anywhere I had ever worked. It’s not that I disagreed with the approach, but I didn’t fully appreciate or see the difference until I read Daniel Pink’s book “Drive: The Surprising Truth About What Motivates Us.” The research is astounding. The examples are spot on, and most anyone who has employed knowledge workers typically has an “aha” moment when they see it in light of the research and examples.
Many of you are probably thinking, “Wait a minute, you’re telling me employees don’t want money. I’m not buying it!” Well, what’s interesting is how often knowledge workers actually create tremendous value for no monetary gain at all — Open Source software and Wikipedia are but two examples. Yet, most of the people who contribute to those platforms have other jobs and receive salaries. So what we know about compensation, as it relates to knowledge workers, is that we need to pay people enough that they are no longer thinking about money.
So, if monetary rewards are not what knowledge workers want, what do they want? Pink distills it into three main areas: autonomy, mastery and purpose.
Autonomy is the ability to work self-directed, at least part of the time. Some of the most innovative products and services were developed when companies provided the opportunity for their employees to work on whatever they wanted. The Post-it Note is just one of those products. Think about it: No one likes to be told how and what to work on all the time.
Mastery is the opportunity for a person to become a master in a specific area of expertise. Most of us want to be an expert at something, the go-to person for our organization in some specific area.
We also want to think we are making a difference in the world in some way through our vocation. This is the purpose we would like to find in our work. The organization needs to offer a meaningful purpose to its knowledge workers.
The secret sauce to employing knowledge workers is paying them enough that they no longer worry about money and allowing them to become masters and purveyors of purposeful work.