There is powerful evidence that we have been completely wrong about the effectiveness of financial incentives and extrinsic motivation.

Financial incentives often improve performance. But they can also lead to unethical behavior, fuel turnover and foster envy and discontent. Wharton management professors argue that it is time to cut back on money as a chief motivational force in business. Instead, they say, employers should pay greater attention to intrinsic motivation. That means designing jobs that provide opportunities to make choices, develop skills, do work that matters and build meaningful interpersonal connections.

Knowledge@Wharton: The Problem with Financial Incentives and What to Do About It

Incentives are dangerous, and not just because people game them. They often yield collateral damage. Remember the tale of the Darwin Award winner who strapped a jet engine to his car, dreaming of a joyride for the ages, and then met his sorry end as a human flapjack on the side of a mountain? Incentives are like that jet engine. There’s no question the engine will take you somewhere, fast, but it’s not always clear where. Or what you’re going to mow down on the way. Yet incentives are still the first resort of most managers, perhaps because they all think they’re smart enough to create the perfect carrot.

– Fast Company: Why Incentives are Effective, Irresistible and Almost Certain to Backfire

Extrinsic motivation and financial incentives are culturally dominant in Singapore.

Salary.sg: Salary benchmark for ministers

The income benchmark for ministers and top civil servants is pegged at 2/3 the median income of all the top 8 earners in these 6 professions: lawyer, accountant, banker, MNC executive, local manufacturer and engineer. These means that we take the 48 top earners (top 8 from 6 groups), sort them according to their income, take the middle guy’s income, and multiply it by 2/3.

Ministers and MPs argue that they deserve to be paid as much as top earners in the private sector, but the point is that everybody in the private sector is also overpaid. This isn’t a matter of preference , philosophy or emotion- this is a scientifically established fact. Increasing pay diminishes performance. And if there’s anything we can all agree on, it’s that we all want the best for Singapore, yes?

“As long as the task involved only mechanical skill, bonuses worked as they would be expected: the higher the pay, the better the performance.

But once the tasked called for even rudimentary cognitive skill, a larger reward let to poorer performance.”

– A study by economists from MIT, Carnegie Mellon and the University of Chicago, funded by the US Federal Reserve Bank

“We find that financial incentives can result in a negative impact on overall performance.”

-Economists from the London School of Economics

The highest performing people in the world are not the most paid.

I have a simple hypothesis- the founding fathers of Singapore, who everybody can agree were the most awesome team of badasses that our country has ever seen- were not motivated by money. (The Pirate Ship analogy works beautifully here.) We need a star team, not a team of stars! Lee Kuan Yew and his team of heroes were intrinsically motivated. They had autonomy, mastery and purpose.

Lee Kuan Yew, whose title is minister mentor, said naysayers like this need a reality check.

“I say you have no sense of proportion; you don’t know what life is about,” he said last month.

“The cure to all this talk is really a good dose of incompetent government,” Lee said. “You get that alternative, and you’ll never put Singapore together again.”

He presented himself as an example: “A top lawyer, which I could easily have become, today earns 4 million Singapore dollars. And he doesn’t have to carry this responsibility. All he’s got to do is advise his client. Win or lose, that’s the client’s loss or gain.”

The Straits Times newspaper quoted him as saying his current salary as minister mentor was 2.7 million Singapore dollars.

Money may buy happiness for a government minister, but some Singaporeans suggested that other motivations should also come into play for government service.

“What about other redeeming intangibles such as honor and sense of duty, dedication, passion and commitment, loyalty and service?” asked Hussin Mutalib in the Straits Times’ online forum recently.

Carolyn Lim, a prominent writer, suggested in an essay in The Straits Times that Singapore needed a little more heart to go along with its hard head. “Indeed, a brilliant achiever without the high purpose of service to others would be the worst possible ministerial material,” she wrote.

“To see a potential prime minister as no different from a potential top lawyer, and likely to be enticed by the same stupendous salary, would be to blur the lines between two very different domains.”

The minister mentor brushed aside concerns like that.

“Those are admirable sentiments,” he said. “But we live in a real world.”

The New York Times: Singapore announces 60% pay rise for ministers.

I agree with MM Lee Kuan Yew.

We do live in a real world. A real world where it has been proven that financial incentives decrease productivity for any task that isn’t purely mechanical.

We have to stop trying to entice people with sweeter carrots, and similarly we have to stop threatening them with sharper sticks. This turns off the our best and our brightest Singaporeans.

What they really want is autonomy, mastery, and purpose- all of which our Government, culture and systems generally fail to provide!

What Singapore needs in the 21st century is less compliance and more engagement. Before we all get obsolete.

We live in a real world. So let’s get real, take our fingers out of our ears and start paying attention to the evidence.

2 – Do things have to be this way?

I refer to page 4, The New Paper, Tuesday Jan 17th:

DPM Teo Chee Hean on setting ministerial salaries:
Difficult balancing act needed.

I do like a lot of what DPM Teo Chee Hean says about balancing acts.

Passion for public service is necessary but not in itself sufficient to run a country well. Agreed.

A broad range of qualities are needed- organizational and leadership capabilities, capacity to handle multiple responsibilities, ability to solve problems and take charge in a crisis, and the ability to hold his own with world leaders and further Singapore’s interests. Agreed again.

(In fact, I agree so much that I’m tempted to cite MG Chan’s brilliant perspective on diversity and survivability, and argue that our government doesn’t have as broad a range of qualities as it could, or should. I’d like to see more entrepreneurial thinking, for instance. But that is not the main point I want to explore here.)

“We are a city-state which is critically dependent on good governance to survive, sustain ourselves and achieve success.” Yes. Agreed.

“Hence the high importance we must place on getting the best possible leadership from our small population for Singapore, more so than in other countries.” Yes.

“What is most critical is the emphasis Singaporeans place on having a system that will help us bring in a steady stream of the most committed and able people to ensure the future of Singapore and Singaporeans.” I agree, so much!

What exactly is this system? That’s something I want to explore here. But to get to that, we first need to talk about the most interesting statement of them all.

“Many top earners may have the competencies but not the sense of public mission.” – DPM Teo Chee Hean

He’s completely right. It’s absolutely true. But does it have to be? This is the most important question that I feel we ought to be exploring, that I feel we aren’t talking enough about. And the problem is that the question isn’t asked at all. We take the validity of the statement for granted- something that is static, unchanging, a fact of life.

I often get frustrated in discussions about politics, economics and the like because they sometimes involve leaving certain assumptions about human nature unquestioned. People are “like that”, perhaps because they have been “like that” for a while, and we can reasonably make plans and calculations for the future that involve assumptions that they will continue to be “like that” in the future. But paradigms shift and people’s priorities and interests do change.

In this case, the assumption is that highly skilled individuals are, well, individualistic, and don’t have a sense of public mission. If you don’t pay them, they won’t do the work. It’s a reasonably valid interpretation of the status quo.

But do things necessarily have to be this way? I don’t think so leh.

A lot is being said by a lot of people about whether salaries are high, or low, or whether they’ll attract people, or discourage them. It’s great. But almost all of it (in my opinion) seems to hinge on the assumption that things are the way they are- that our “small talent pool” is fixed and unchanging.

The Machiavellian side of me suspects that ministers perpetuate this mindset to line their own pockets and cement their own authority. Let me get this clear- I do not think that’s a bad thing. I’m not trying to defame them. It’s neither good nor bad. I don’t mean to suggest that they’re selfish or trying to exploit Singaporeans. All of these are interpretations that tell you more about the interpreter than what’s being interpreted. It’s a false dichotomy we like to construct- if you’re earning a big salary as a public servant, it must be at my expense, because I’m paying you. At a basic level- if you’re earning a big salary, but you put more into the communal pie than you take, then you completely deserve it, and the outcome of your actions could be described as socially beneficial, even if you don’t personally care very much about others.

The court jester side of me would like to joke that our ministers are too obtuse to consider that people are complex and changing, that they spend too much time mired in theories and statistics and not enough time reading good books, which is why they’re so terrible at making people happy, and so disconnected from the ground. But I really hope that it isn’t the case. (There are some wonderful exceptions anyway. I will never tire of professing my adoration for Indranee Rajah and Irene Ng, for instance- and they’re both PAP MPs.)

Whenever given the chance to choose between sinister ministers who look out for themselves, and incompetent ministers who’re fumbling in the dark, I prefer the former. I think most Singaporeans actually feel the same. Because you can look out for yourself, and enrich others in the process. That’s a win-win for everybody. (Steve Jobs is a great example. I think of him as a man who had tonnes of self-interest. He wasn’t selfish, but he had tonnes of self-interest. He never bothered donating much to charity, but he didn’t have to- his contributions created wealth and enriched the world nevertheless.)

Neither option is highly desirable. So here’s how I suggest that ministers avoid being put into either category- initiate the conversation about a future that transcends the status quo. Let’s stop bickering about the present, and focus on where we want to go from here. How do we make the balancing act less necessary, less precarious in the future?

I wish Singaporeans would start looking to the future and think about what sort of culture we want to have. (I like to think of the Government as a subset of Singaporeans, rather than a separate entity.) I mean, we’re already doing it in bits and pieces, but it needs to be a nation-level conversation, a collaborative, bottom-up narrative that we construct for ourselves. (As opposed to having one imposed upon us.)

I want to hear less talk about how limited our talent pool is and more about how we can spread a sense of public mission throughout society, like an epidemic. One of my readers pointed out in a previous entry that we can’t always have the best bang for our buck. That’s true. But we can always make an effort to pursue it. And if we know that the effort is being made, and we feel like we are a part of it, our daily troubles will feel a little more bearable.

I think a part of Singaporean’s frustration with ministerial pay is that our ministers keep defending themselves, arguing why they deserve to be so highly paid. Because “like that lor.” I mean, the ministers are in a difficult position- if they defend themselves, they come across as defensive, and they’re worried about something. If they don’t, then the allegations are true. It’s an impossible battle. Maybe that’s the real reason they’re paid so much, because it must be pretty stressful to be under all that fire. (Kidding.)

I’d like to meet folk like Grace Fu and Teo Chee Hean and Shanmugam for kopi and pick their brains to figure out how they would get around to addressing a challenge where we are to change Singaporean culture from the bottom up, so that we see personal development as something that is inseparable from community development. I think it would be genuinely interesting. How do we teach people to transcend the limitations that we have accepted as a part of our own reality?

I would really like to get a sense of our politician’s intellectual and cultural backgrounds. What kind of music do they listen to, what kind of books do they read? What are their personal philosophies- who are their favourite authors, philosophers? What are their favourite swear words, their guilty pleasures? They might seem like silly or trivial questions to ask, but I think part of the problem about the rocky relationship between people and government is that they don’t seem… well, human.

The next time you feel like making an argument about how people are “like that”, remember there was a time where women were considered property, not people. When slavery was normal and acceptable. When loving someone was a crime- well, in some places it still is. But the point is, people change. My vision for the future involves people becoming less xenophobic, for one.

We don’t have enough people who dare to envision something different from the status quo. Yet the world- and our nation- is entirely dependent on such people! (Lee Kuan Yew is a great example of a man who dared to imagine a future that nobody else believed in.)

“An individual has not started living until he can rise above the narrow confines of his individualistic concerns to the broader concerns of all humanity.” – Martin Luther King, Jr.

PS: I wrote this while in camp, so it’s a little rushed and not as polished as it could be! Please do leave comments with your thoughts and opinions, and I’ll refine mine along the way. Let’s talk. 🙂