"Leaders should talk a lot more about why and a lot less about how"

It’s a beautiful sunny afternoon in Boston and we are waiting for Daniel Pink at the Mandarin Oriental as he is yet to wrap up his keynote at the conference being hosted by private equity firm, Berkshire Partners. Even as he makes his way towards us, some of the attendees are still hanging on to his every word. Through our nearly two-hour conversation, he passionately explains his points with illustrations. What we are really amused about though is that Pink scribbles all the illustrations or explanatory words upside down so we see it straight from the other side of the table. It’s almost like he has perfected upside down writing.

When we ask him about this unusual skill, modesty takes over and he says, “All I was trying to do was to show things from your perspective rather than mine. You are grossly overestimating my skill.” Those who have read his works certainly disagree and three of his books — A Whole New Mind, Drive and To Sell is Human — have made it to The New York Times bestsellers list. Pink’s work, born out of deep insights from behavioural and social sciences and various survey research, focuses on frameworks to drive performance of individuals and enterprises. Pink maintains that while left-brain skills are still absolutely necessary in the traditional world of business, they are no longer sufficient.

Would you say there is a divergence or mismatch between what science knows and what business does? Can you elaborate with examples?

Basically, what 50 years of science tells us is the following: There is a certain kind of motivator we use in organisations. One is what psychologists call a controlling contingent motivator. I call it the if-then reward. If you do this, then you get that. 50 years of science tells us very clearly that if-then rewards are very effective for simple short-term mechanic algorithmic tasks; they work really well there. But there is nuance, which is that they get our attention in a focused, fixed way. It is very good if you know precisely what you need to do, if you are following an algorithm — so, if-then rewards are great for simple, mechanical, algorithmic, short-term things.

The problem is that the same body of research tells us that if-then rewards are not so good for complex, creative, conceptual kinds of things. They don’t work very well because they focus you narrowly when you want to be expansive. It is sometimes hard over the long haul to sustain that kind of motivational energy; people will often take short cuts. Now, let’s say you want people to stuff envelopes. Pay them per envelope — if you stuff one envelope, you get 10 cents; if you stuff ten envelopes, you get $1. Stuffing envelopes?

No question about it. Even certain kinds of transactional sales where you are not solving problems but just taking orders — if you want to get people to make a lot of sales calls, pay them per sales call. But organisations end up applying if-then rewards to everything rather than this one category where we know that they work. They don’t say, “May be we should try something different.” They say, “Carrot-and-stick failed again. I guess we need a lot more carrots. Give us eight bushels of carrots. Give us crunchier carrots. Give us sweeter carrots.” 

What kind of research evidence do you have to demonstrate your point?

If you look at the experimental evidence, it is pretty clear. Look at one of my favourite studies, one that I wrote about in Drive, which is by Teresa Amabile of Harvard Business School, about commissioned and non-commissioned art work. What Amabile found is that when independent evaluators compared the commissioned and non-commissioned work that artists had created, they evaluated the latter as being more creative than the former.

There is this great study done last year that was a meta-analysis — it looked at 80 studies and synthesized their results. The study compared intrinsic and extrinsic motivators. What it found is that the controlling extrinsic motivators are very effective if you are concerned about the quantity of performance and the intrinsic, less controlling mechanisms are very effective if you are thinking about the quality of performance. 

You talk about three things — autonomy, mastery and purpose — as essential constituents of a workplace. Can you give us some examples of enterprises that have restructured themselves to allow for these things either together or separately? 

I don’t think there are too many firms taking my book and saying, “Here we go!” But there are a lot of firms that pursue at least one of these three. We’ll start with autonomy. Let’s take retail groceries. What they do at Whole Foods is that they hire someone to work in the produce department as produce manager. Whether that person stays beyond 30 days is up to everyone else in the produce department. So, people have some autonomy over their teams. You saw this a little bit with Facebook when it was hiring engineers; the applicants would do interviews with the product and technology teams. Then, at the end of the interview, the young engineers would decide which team they want to work for. The company hires the talent and the talent chooses the team. That’s autonomy. 

When you look at autonomy over task, there is the example of the software company Intuit. It offered people 10% of their time to work on whatever they wanted. It turned out that a lot of the company’s innovations and its ability to be agile came from this 10% time. Then there is the Columbia Credit Union, which is in Vancouver, Washington, where a young woman wanted to spend 10% of her time on her team. What she did is if it was her teammate’s job to answer the phone, she answered the phone in the hour that they were away — she named it the genius hour. One hour a week.

Because of that woman, there is a genius hour movement in American schools now. Now, that company is a credit union, not even a high-tech company. Netflix is also doing something remarkable. Its expense policy (statement of accounts for travelling for work) can be summed up simply — act in the company’s best interest. You just get reimbursed and nobody evaluates your expense report. That says, “We have more important things to do. We trust you.”

Richard Branson has done this at Virgin. Netflix has also got an open holiday policy. The company says, “Take as much vacation as you want, whenever you want to, we have more important things to do than count your vacation days.” Then, there is this American company Zappo, which is doing something really crazy called Holacracy, which is eliminating managers and job titles. Zappo also just made its call centre autonomous. So, when a call comes in, the call centre representative’s job is to solve the customer’s problem. The company doesn’t time, record or monitor the calls; it just says, “solve the problem”. If it takes five minutes, great; if it takes an hour, that’s fine too. What they do is get feedback from customers to make sure that everything is going all right. 

Your view of other people is fundamental in granting autonomy. If your view of people that you hire is that they are lazy, they don’t want to work, they don’t really care, they need to be controlled, that leads you down one path. But if your premise is that people want to do a good job, people care and take pride in what they are doing, that leads you down another path. A lot of these are less strategic management decisions and more of what is your view of people who come in. To my mind, if you hire someone and you think of them as lazy, that they don’t care about work and need to be controlled, I don’t think they have a motivation problem, you have a hiring problem. You have hired the wrong people. 

So, what are the ground rules for hiring? Most organisations still hire after two meetings with the potential candidate and that’s more like a punt.

That is exactly right. The way we hire people is like witch doctors; it is not medicine. Job interviews have zero predictive value in how somebody is going to perform. But, for instance, Google has designed a lot of analytics to help figure out how to hire better. Except for immediate college graduates, they have eliminated asking for people’s school transcripts and GPA because they looked at the numbers and said GPAs have no correlation with performance.

The things that seem to have some predictive value are the traits of conscientiousness, team orientation and general cognitive ability. Google has found that general cognitive ability matters but is not always correlated with your grades in school. Another of their findings is that structured interviews have greater predictive value rather than freewheeling interviews. Research on job interviews shows that people basically make up their minds literally within seconds of meeting a person. Then, they spend the rest of the interview confirming their biases, whether positive or negative. People are biased towards people who are like them. 

So, assuming that there is no foolproof way of hiring, you’re going to get it wrong. What do you do to ensure that you are able to create a structure where creativity thrives? 

Try to hire for things that you know have predictive value. In general, the bias should be towards more autonomy and less control, it should be in terms of helping people get better at something and make progress, and then talking about why people are doing stuff, rather than simply how to do stuff. You can create conditions where the odds are in favour of people doing their best work. 

What is the best way to go about creating these conditions as a leader?

So, let’s think about power as a dial. Our tendency is to want to turn it up and be more powerful. Now, one of the most important leadership skills is the quality of attunement, which is about understanding things from someone else’s perspective. Can you understand where they are coming from, see the world the way they are and understand their interests? This is really important.

What research shows is that there is an inverse relationship between feelings of power and your ability to consider someone else’s perspective. That is, the more powerful you feel, the more your perspective taking skills erode. There is also research in sociology about status. High-status people are generally terrible at taking perspective and low-status people are extremely good at it.

Why? If you don’t have power, you better know what the people in power are thinking, because this is a survival skill. So, one of the counterintuitive facts about leadership is that you can be more powerful by dialing down your power. Many times, you can become more influential by feeling less powerful. The really genuine leaders tend to be much more humble and less narcissistic. 

There is another thing about leadership. Leaders often talk about how — here is how you have to make a sales call, here is how you prepare for a meeting, etc. They don’t talk about why — why does it matter, why I am doing it in the first place. I think what is counterintuitive is that leaders should talk a lot more about why and a lot less about how. Here is an example of why that works. The University of Michigan was raising money from its alumni through a call centre. They divided the callers into three groups and everybody was treated exactly the same. For the first few minutes before they got on the phone, the first group would read a neutral newspaper article.

The second group, called the personal benefit group, would read letters from people who studied there, talking about how it was such a great experience and how it benefited them. The third group, called the purpose group, would also read letters, but from people who benefitted from the money that was raised — testimonials that said, for instance, “I got a scholarship from Michigan State University. I do research on toxic diseases.” What is amazing is that when they looked at the results, the purpose group earned more than twice the weekly donations and twice the weekly number of pledges. Just five minutes of reading about the purpose of what you’re doing led to this incredible boost in people’s performance.

Coming back to autonomy, would it be fair to say that autonomy is the preserve of the creative field, or maybe the advertising or communications business? If we were to apply autonomy to any manufacturing industry, like steel or cement, would autonomy be as effective? 

I think so. Because in those kinds of industries, where there are safety issues, there is an argument for having some of the things check listed. But one of the reasons why American manufacturing got trounced by Japanese manufacturing in the 1980s was the lack of autonomy. If you look at something like lean manufacturing, it requires autonomy. For someone making a car on a lean manufacturing line, it doesn’t matter what your status is but if you see a defect, you can stop the line.

You have the freedom and autonomy to stop the line. The checklist and autonomy are actually compatible because you need autonomy to generate the checklist. You see it in medicine, where the checklist is extraordinarily effective but depends upon autonomy. Say, you have a surgery and the surgeon has a checklist. The lowest ranking person in the room can raise his or her hand and say, “Excuse me, Dr Bigshot. You forgot Step 14.”

Also, now, a lot of things are being done by machines. Earlier, people who were in manufacturing plants, particularly in the US, were people who would leave secondary school and go straight to a manufacturing plant. Now, manufacturing workers are less likely to be wearing blue shirts with grease all over them — now, you have people on the factory floor who have associate degrees, which means that you want them to be able to exercise their judgement and allow them that degree of autonomy. 

How do you create this culture of mastery across the organisation, which again is very intrinsic to an individual?

There is another great piece of research from Amabile. She went to seven or eight organisations in North America and had several hundred people at these organisations volunteer to receive an email at the end of every day asking, “How was your day, were you motivated or not motivated?” The methodology is very important here. If I ask you how was your week two weeks ago, you will remember the highs and the lows but not what you did specifically on Thursday at 4 pm.

But if you are asked at the end of the day, you would know if you had a good or bad day. She basically received about 12,000 diary entries for people’s day-to-day motivation on the job for a year. She crunched the numbers. The single biggest motivator by far was making progress in meaningful work. The days people were making meaningful progress in work were the days they were getting motivated. The trouble is that this depends upon feedback within the organisation, and usually there is no or very little feedback mechanism inside companies. You have companies like Adobe, which got rid of performance reviews altogether.

These days, we are used to instant feedback. You play a game on your mobile, you get a score. You send a text, it gets there instantly. You receive texts instantly. You want to know something; you get on the internet and get it instantly. So, you have this whole generation of people whose entire lives have been so rich in feedback all the time. Now, you look at an alternative universe of large companies where you give people feedback once a year. It’s crazy. It is a big generational issue. The question is, how do we make feedback inside a company as meaningful as it is outside a company? That is the big challenge. That is the key to achieving progress and mastery, which are fundamental motivators.

Any other pointers on how to develop mastery or develop a culture of mastery within an organisation?

Adobe went from weekly performance reviews to check-ins — weekly one-on-ones. You can do things like peer-to-peer rewards, which some companies have experimented with. There is a big difference between an if-then reward and a now-that reward. If-then is a contingent reward — if you do this, then you get that. It is announced ahead of time, it is a contingency, which to my mind is a form of control.

You do something amazing and if I am your boss, I say, thank you and say to everybody, “Look what this guy did — it is amazing, so let’s give him a round of applause.” It is non-contingent after the fact. So, it is not a form of control — it is a form of feedback. What you see now is these companies doing peer-to-peer feedbacks, where, let’s say, I am your peer and you did this amazing thing to help me out of a jam, I can give you an on-the-spot $50 bonus. What is valuable about that? It is from a peer, so you take it seriously. It is instant so you get motivated.

Some companies are experimenting with this. There is also what I call progress rituals, where you take time out every day to reflect on the progress made that day. I happen to use a piece of software called iDoneThis. At the end of the day, this software sends you an email that asks what you got done that day. You just take 30 seconds, type it in and it keeps a little calendar. You can access this data and see how you have progressed. I think those kinds of progress rituals can be good — we are talking 60 seconds to three minutes. It can be very effective. Anything you can do to get small wins is usually very advantageous.

Everything said and done, incentive systems play a very important role in the corporate sector. How can incentive systems be designed to perform better? 

The trick is to pay people a little more than what they may get outside. Arguably, the reason for that is fairness. Human beings are exquisitely attuned to the norm of fairness. You violate that norm, game over for you. George Akerlof, who started this line of research, says that companies that outpay tend to be high-performing companies. The reason is that they are taking the issue of money off the table. If you pay somebody less, they are going to be thinking about money a lot. If pay is taken care of, they are more liberated to do their work and can overtime actually save you money. As for incentive systems they have to be simple, fair and hard to game.

Where things go awry is if I offer you an individual incentive for short-term results, if you are smart, you will figure out how to get those short-term results. We see this with sales commissions all the time when individual incentive is not aligned with the organisational incentive. If it is a very high-stakes return, you might bend the rules a little bit. So, you can have all kinds of distortions. That is why some companies are getting rid of sales commissions. The other thing is that sales has become much less transactional, recipe-oriented and much more about consultation, expertise and insight.

Even with respect to selling, you said that it has moved from servant leadership to servant service. Could you explain that with a few examples?

Servant leadership was this idea from Robert Greenleaf, who said that the leader is actually at the bottom of the pyramid — the job of the leader is to serve people and that is what gives him the moral legitimacy to lead. I think there is something analogous going on in selling, which is that you are better off serving first and selling next. I do that myself. I don’t charge anybody. I don’t have any advertising. Basically, I say, here is some stuff that you might be interested in.

Over time, it gives me some legitimacy to ask people to just go check out my book rather than hardsell it. Take the case of insurance. If an agent wants to sell insurance, instead of trying to hardsell a policy right away, he could simply start building a rapport with the customer and educate them in terms of how to think about insurance and so on. The best way to get something is not to go after it. 

Isn’t that point counterintuitive, when you say service and sell it? The insurance and sales person has targets to meet. He or she has numbers to achieve. So, how does it balance out?

Maybe, companies shouldn’t have those kinds of insane sales quotas for the short term. If my livelihood depends upon selling X units of something, in the next three months, I am going to do whatever the heck I can to sell X units of things in three months. What I am arguing is that that is a great strategy for three months but a terrible one for three years, and even more terrible for 30 years. Insurance is a great example. Right now, insurance is a math piece. I can go online, figure out what kind of insurance I need, compare the prices and buy. Now, if you are an insurance sales person, you better do more for me than what I can get online. 

In today’s age of information symmetry, what kind of skill sets does a salesperson really need and how does he or she develop it?

A bunch of things. Number one would be expertise. If I am selling property and casualty insurance to a business run by you, I better know everything there is to know about property and casualty insurance. I want to know your business even better than you know your business. The second thing is quality of attunement. Can I get out of my own head and see things from your perspective? And third is what I call buoyancy, which is, can you stay afloat in an ocean of rejection? Because when you’re in sales, you get rejected all the time and being able to deal with endless, constant rejection is very important. 

Another interesting revelation about sales is this great study out of Stanford University, which demonstrates that a small negative or a product blemish actually strengthens the consumer’s impression of the product. What the research says is that you are better off being honest and revealing the small honest blemish. It’s more pragmatic. You have to have small negatives. I’ll give you an example of a company that has done something remarkable. Perfetti, which makes Mentos, had a sales force out there that was going to small retailers and asking them to buy some Mentos. Then they got a new guy in, who said, “Let’s try something different.”

They had lots of data on what’s selling, especially local market data in the US and Europe. So, what the sales force now does is to go and say, “Hey guys, I got some data on what is selling.” So, they recommend a total selection of candies that the retailer should offer in the store based on that analysis. This includes products by competitors as well. So they have gone from selling candy to selling insights about the confectionery business. That’s a good approach to sales.