Many leaders believe actions like recognition, offering incentives, being encouraging, celebrating progress, and setting clear goals are the five main ways to drive good performance.

“Unfortunately, most leaders are wrong.” according to Harvard Professor Teresa Amabile. (Full study here.)


Great performance comes from the inside, not from financial (or other external) rewards.

People who are internally motivated are, in fact, 3x more likely to be highly satisfied AND highly effective. [Want to see the research? Start herehere, or here.]

This internal motivation to perform well is even stronger in Millennials – making this a trend that isn’t going away anytime soon. This is a simple truth.

Why then, are so many companies still trying to attract talent and drive great performance with external rewards?


What’s Happening Today

Deloitte reports that

50% of leadership pay today is based on behavioral elements like:

  • Did the leader own their SBO’s?
  • Did the leader develop their team?
  • Did the leader enhance customer relationships?

And the other

50% of leadership pay is based on their financial impact on the business, and performance metrics like:

  • Total shareholder return, or earnings per share
  • Increased efficiency/overall cost savings
  • Number of new accounts, retention, and so on…


This Approach Is Doom & Gloom – Here’s Why…

Paying a leader based on what they’ve done as an individual will never inspire collective greatness.

Sharing, celebrating, and rewarding PROGRESS is the best way to bring out the best in everyone. People want to know they’ve made a difference – that their work matters.

The one factor that motivates people to perform at their best every day is PROGRESS.

Show them the progress, and they will give you their best.

Rewarding individuals limits your potential. It puts people up against each other instead of putting the team up against the problem they need to solve. It keeps people focused on themselves instead of the company’s goals. It steals value from many to increase the value of some.


Better Ways Forward…

Aggressive companies like Zappos are pushing the limits, exploring flat-organization options like Holacracy, while others are using tournament, membership, or bonding compensation systems. The good news is there are many options for moving away from a performance-based pay system.

Money is messy. Money for performance is even messier, and that’s why we value Dr. Deming’s perspective on the issue.

W. Edwards Deming believed in people. “I believe people want to show up [for work] and deliver the best possible result, every day.” He went on to say, “it’s leadership’s job to give their people the proper systems, along with the proper education, and then get out of the way.”


Want the best someone has to offer? MOTIVATE them to deliver.

What’s the best way to motivate them? PROGRESS. Track it. Celebrate it. Reward it.


Tired of struggling with pay-for-performance systems? Start exploring alternatives here

Need help putting better processes in place so your people can do their best? We can help.