Mauboussin on Incentives

In his latest piece, the thinking investor’s strategist, Michael Mauboussin writes about the complex nature of incentives and the importance of “intrinsic motivation” — as opposed to purely external rewards — in encouraging desirable behavior: 

[I]ntrinsic motivation only thrives when an organization fosters autonomy, a sense of mastery, and a feeling of purpose. Unfortunately, these conditions are frequently absent in a corporate setting. Many popular management techniques—budgets, goal-setting, and financial reward systems—actually undermine the conditions that encourage intrinsic motivation…

Intrinsically-motivated people are not simply going through the motions to reach an end; they believe that their actions contribute to a greater good. Purpose often comes through as passion.  

Maybe I’m being old-fashioned, but the words “drive and mindset” seem like poor substitutes for “character”. Intrinsic motivation is neat, cutting-edge stuff, but there are plenty of mundane or uncomfortable situations where people face a choice between doing the right thing and doing something else. No matter how much we learn about ourselves, character will always count — and the fact that character is made, not born makes it all the more relevant. 

That quibble aside, it’s a great piece as usual from one of the most interesting minds in our business. Should be of interest to investors, executives, HR folks, and psychology buffs.