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Enterprise Engagement Alliance

What Drives the 21st Century Employee?

By Allan Schweyer, Principal, Center for Human Capital Innovation and Chairman of the Enterprise Engagement Alliance

Over the past two decades, extraordinary work has been done in the field of human capital management. Yet, the science of performance management and measurement has evolved more slowly than the changing nature of work itself. Today, in an age where routine “algorithmic” work is being displaced by creative “heuristic” work, we’re forced to question how human performance is measured, and even more importantly, how it is improved.

Performance Measurement

The outcomes are what must be measured and encouraged, not the behaviors that might get people there. All of this implies far greater emphasis on the design of programs or packages that hope to measure and encourage performance.

As routine work has given way to non-routine work, performance measurement has become much more difficult. In the past, when the majority of the workforce was employed in factories and on farms, time (inputs) and outputs (productivity) were clear and most job performance could be measured using basic mathematics. As the industrial economy gave way to a services economy in the 1970’s and 1980’s, organizations were faced with the difficulty of measuring intangibles. How could the performance of a lawyer, advertising executive, teacher, manager, nurse or engineer be measured both meaningfully and reasonably scientifically?

In 1992, the Incentive Research Foundation (IRF) released a groundbreaking report entitled, “The Master Measurement Model of Employee Performance.”1 The Master Measurement Model (MMM) proposed a methodological process for measuring any role or task. Though the MMM is hampered by various limitations, no alternative model has fully displaced it, despite the passage of almost two decades.

Earlier this year, the IRF commissioned a project to update the MMM. To date, more than 60 experts, authors and senior practitioners have participated in Delphi panels and interviews. The discussion and debate has focused on what is needed and what is possible in measuring human performance and the programs and initiatives intended to drive individual and team performance against organizational objectives. From this, it is hoped that a modern MMM will emerge, with the ultimate goal of effecting better worker performance.

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Performance Improvement

Employee performance relies on a range of factors including natural talent, education and training, personal interest and dedication, tools and equipment, teammates and the quality of management. It is generally accepted that performance can also be driven by the right mix of incentives and rewards. Until recently, few would have questioned the use of incentives such as cash bonuses, gain sharing, watches, exotic trips or big ticket electronic items (to name a few) in encouraging behavior change and higher performance. Yet today, many question where and even whether incentives and rewards programs have any place at all in the modern workforce.

Indeed, the pendulum of debate has recently swung against the use of explicit rewards. Dan Ariely’s book, The Upside of Irrationality (2010) and Dan Pink’s, Drive (2009) build on the classic works of Alfie Kohn and W. Edwards Deming, both of whom made impassioned arguments against the use of extrinsic incentives and rewards – especially those that are offered before the fact, in an effort to induce specific behaviors. All share a philosophy that workers (especially modern knowledge workers) cannot be counted on to predictably and reliably change their behaviors or perform better through the use of extrinsic rewards. The arguments go on to state that creative workers will, in many cases, actually perform worse in the presence of extrinsic incentives and rewards. Moreover, they remind us that in at least some cases, the wrong balance of incentives might lead to severe adverse impact on organizations and society (think Wall Street).

As Pink reports, 70% of the U.S. workforce now performs heuristic work and only 30% performs algorithmic work – the exact reverse of what existed only a few decades ago. Logically then, the use of incentives and motivators must evolve to reflect the new reality. Yet as Pink states in Drive: “… while a few advocates would have you believe in the basic evil of extrinsic incentives, that’s just not empirically true.”

Thoughtful pundits and practitioners believe not that extrinsic rewards should be eliminated, but that incentives are today becoming much more individually focused and situational. They suggest that more attention to design is required to create the ideal “total rewards” package for each employee and/or to encourage different outcomes.

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Better Performance

Figure A below illustrates a model that may be effective in taking a range of work into consideration in designing effective models to encourage better performance.

Assuming an organization has finite resources with which to drive employee performance, the scale above might suggest how an organization that hopes to motivate or engage a worker could balance and blend extrinsic rewards and intrinsic reinforcers into the ideal combination for the greatest impact. The best blend for “Job A” might skew that person’s total rewards package slightly toward extrinsic incentives (cash bonuses, reward travel, consumer items, etc.). For “Job B” the right balance might skew toward intrinsic motivators (projects of interest, more autonomy, flexible work, recognition, etc.).

Figure A does not necessarily imply that if the use of intrinsic reinforcers increases, extrinsic motivators must decrease or vice-versa, rather that, in general, the more heuristic the work, the less effective will be reliance on cash and tangible type incentives (and vice-versa). That said, every employee must receive extrinsic rewards for performing well over the long term (competitive pay at minimum) and is entitled to the intrinsic reinforcement provided by a competent leader who understands how to coach and provide feedback. Note also that extrinsic type incentives might well be appropriate for Job B. However, care must be taken to align extrinsic rewards with the incumbent’s intrinsic motivations. For example, if a travel incentive is used, rather than a week at a beach resort, the designer might substitute the opportunity to travel to the organization’s overseas operation for work on an interesting project.

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As work becomes more creative, motivation becomes more intrinsic and the balance of incentives, rewards and reinforcers grows more complex. After all, creative workers cannot easily be induced to follow a proscribed process that lends itself to easy measurement and reward. For organizations to realize their full value, creative workers must be given the freedom to innovate. Within reason, the outcomes are what must be measured and encouraged, not the behaviors that might get them there. All of this implies far greater emphasis on the design of programs or packages that hope to measure and encourage performance.

It will be challenging to construct a new MMM that is both useful and relevant in a 21st Century context. The right mix of incentives, motivators and reinforcers is a moving target and may be unique to every individual. Doubtless, for a new model to be practical, it must recognize that our industrial age focus on changing behaviors should give way –within reason and through careful design – to a creative age focus on outcomes.

Do you have ideas on what a new Master Measurement Model might include? If so, we’d love to hear from you. You can reach me at:

1 “The Master Measurement Model of Employee Performance,” 1992 (re-released without change in 2004), IQPC for the Incentive Research Foundation. Accessible at: http://theirf.org/research/content/6000068/the-master-measurement-model-of-employee-performance/

Figure A: Use of Extrinsic Rewards and Intrinsic Reinforcers

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September/October 2010

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