How Incentives Hinder Innovation

This article was originally published on The Psych Report before it became part of the Behavioral Scientist in 2017.

Imagine you are a CEO intent on increasing your employees’ creativity so that your company can be more innovative. If you ask an economist how to make these things happen, she will probably tell you to incentivize creativity either by rewarding it, punishing its absence, or both. A CEO could offer employees financial incentives, such as bonuses or stock options, for novel ideas, or terminate them for a lack of innovation. After all, people will do more of almost anything if they are properly motivated. Won’t they?

Yes and no. Yes, when offered incentives, people will certainly try harder to come up with ideas. No, because the result may be less creative than if the incentives had not been offered. Sam Glucksberg demonstrated this in a famous 1962 study.

Glucksberg asked participants to solve the classic Candle Problem. Each person was given a thumbtack box, about fifty thumbtacks, a matchbox, about thirty-five matches, and one wax candle. Their task was to mount the candle on the wall.

What won’t work is softening the side of the candle with a lit match and sticking it directly to the wall. The candle is too heavy and falls off. And if you try to tack the candle directly to the wall, the wax crumbles.

There is, however, a way: Take the thumbtack box, empty it if there are any tacks in it, tack the box to the wall, and then mount the candle on top of it. To stabilize the candle, first light a match and heat the wax on the bottom of the candle to soften it so that it will stick to the box.Glucksberg used two slightly different versions of this problem. One group of participants saw the thumbtacks presented inside the thumbtack box. For the other group, each box was empty, and the thumbtacks were loose rather than in a container.

When the tacks are presented in the box, this induces “functional fixedness”—it’s hard to think of the box as anything other than a container. Solving the problem usually requires an insight to change one’s perspective about what the box is for. Few people solved this version of the problem, and those who did took a relatively long time. However, when the tack box is empty, its container function isn’t prominent, and a change of perspective isn’t necessary to think of it as a platform for the candle. People solved the empty-box version relatively quickly, easily, and analytically.

If your goal is a creative product, then the threat of being late will make it that much harder for you to innovate.

The novel part of this study was the financial incentives. Half the participants were just asked to solve the problem. The others were told, “Depending on how quickly you solve the problem, you can win five dollars or twenty dollars.” That’s 1962 dollars–real money for these college-student participants.

In the analytic, empty-box version, offers of prize money induced more people to solve the problem. But in the insight, container-box version, incentives actually reduced the number of people who were able to solve the problem; money prizes also increased the amount of time that the few successful solvers needed.

Paradoxically, stronger motivation decreases insightfulness.

Another common feature of pressure-cooker companies, schools, and contests is the deadline. When not carried to extremes, deadlines can be useful for motivating people and focusing them on the task at hand. But what happens when the desired outcome is a new idea or a solution to a problem?

If you’re in an analytic mode of thought and you run out of time, then you can always submit your work in progress. Insightful thought, on the other hand, is mostly unconscious and offers up a solution only when complete. If you’re in an insight mind-set, you won’t have anything to offer until you’ve had your aha moment. That’s why when confronted with a deadline an Insightful tends to make “errors of omission” by drawing a blank, while an Analyst’s errors are more likely to be incorrect solutions (“errors of commission”).

Deadlines can have an additional negative effect on creative work. The threat of punishment or loss associated with missing a deadline can cause anxiety and avoidance motivation, which push you into an analytic mind-set. Of course, moderate anxiety can motivate you to produce something by the deadline. But if your goal is a creative product, then the threat of being late will make it that much harder for you to innovate.

Consider the process by which U.S. scientists typically obtain grant funding to pursue their research. Scientists prepare detailed research proposals for submission to funding agencies such as the National Institutes of Health (NIH) and the National Science Foundation (NSF). The NIH has three grant submission deadlines per year; the NSF has two. If a scientist misses one of these deadlines, she will then have to wait for several months to submit the application. If the result of this delay is an interruption in her laboratory’s funding, then the consequences can be devastating. Lab personnel may have to be terminated. The lab may even have to shut down. This creates enormous pressure to submit a regular stream of grant proposals and to submit them promptly for every deadline.

In the United States, there is a great deal of concern—fueled by recent evidence of decreasing creativity test scores—over what some believe to be dwindling innovation.

While, the system of infrequent grant proposal deadlines helps government agencies process proposals effectively, unfortunately, it likely also hinders innovation. The obvious fix would be to eliminate the deadlines, or at least make them much more frequent. Researchers would be more likely to relax and wait for creative ideas to flow if they knew that their proposals would be evaluated soon after submission, no matter when they were submitted.

Money can’t buy love, but it can certainly attract suitors. Similarly, money can lure people to work on particular problems, but it can’t make them have breakthrough ideas. Prospects of financial gains and losses don’t have the same power to enhance or suppress creative thought that they have over noncreative behaviors.

Excerpted from “The Eureka Factor: Aha Moments, Creative Insight, and the Brain,” published in the United States by Random House. Copyright © 2015 by John Kounios and Mark Beeman.  Reprinted with permission.