Recently, my good friend and partner, Chris John, co-founder of United Benefit Advisors, e-mailed me a link to a video on the Internet. The video was of Dan Pink, former speechwriter for Al Gore and best-selling author, speaking to a TED gathering in London this past June. (I highly recommend TED: Ideas worth spreading at ted.com).

In this 18-minute clip, "The surprising side of motivation," Pink raises powerful questions about business, which we in benefits might also want to consider.

The most controversial of Pink's ideas is the notion that using rewards (prizes, bonuses, etc.) isn't necessarily effective to motivate higher productivity or performance. In fact, he maintains, there are many situations where these incentives actually reduce performance and productivity.

A new mindset

With the growing interest and momentum I am seeing as advisers are engaging CEOs (one on one and through roundtable discussions) to discuss the relationship between leadership, engagement, productivity and performance, these revelations could spark some very interesting and valuable dialogue.

Pink suggests that 20th century management and reward philosophy centers on and promotes compliance in the workforce, and that the way many firms (including employee benefit firms) use incentives and rewards actually impedes performance and stifles the creativity that we and our clients need in today's benefit environment.

If we want our employees, or our producers, to think outside the box, to find creative solutions for our firms and our clients, offering financial incentives may actually delay the finding of the best solutions.

The candle problem

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In an experiment first conducted in 1945 by psychologist Karl Duncker called "the candle problem," participants were given the following objects:

* A candle

* A box filled with thumb tacks

* A book of matches

The task was to attach the candle to a wall so that it didn't drip on the table below without using any additional items.

At first participants tried to tack the candle to the wall so that it didn't drip on the table below, or adhere it to the wall by lighting a match and melting the side of the candle.

Neither approach worked.

The solution to the problem is to stop thinking of the box of thumb tacks as a "container," and instead look at it as a shelf or platform, use a couple of tacks to nail it to the wall, and then use it as a candleholder.

Later, scientist Sam Glucksberg, now at Princeton, used "the candle problem" to evaluate the power of incentives. Glucksberg told two groups of participants that he was going to time them to see how quickly they could solve the candle problem:

He told one group simply that he was going to time them to determine how long it typically took to solve this type of problem.

To the second group he offered a reward: If they were in the 25% that solved the problem the fastest, they would get $5.00.Additionally, the fastest person would get $20.00.

It took the "reward" group three and a half minutes longer, on average, to solve the problem. This goes against the popular notion that if you want people to perform, you offer prizes or bonuses as incentives.

In this situation, an incentive intended to sharpen focus and enhance creativity did just the opposite: It dulled thinking and blocked creativity.

This isn't an aberration; this experiment has been replicated over repeatedly for more than 60 years.

So why does business insist on doing the opposite of what science proves?

Change the problem

Interestingly, Glucksberg later redid the same experiment, except this time, he presented the box empty with the thumb tacks on the table beside it.

Basically, he made the problem easier because once the box wasn't viewed as a container it took less mental flexibility to assign a different function to it.This time, the group being rewarded finished the task much faster than the other group.

The conclusion from these studies is that rewards (extrinsic motivation) work well for tasks with simple rules and "if-then" linear thinking.

Rewards by their nature, narrow our focus and concentrate the mind. A bonus plan for account managers to "account round" could work well using this philosophy.

But how do we promote new ideas for more successful employee programs?

For these real-life candle problems (the one with the thumb tacks in the box), we don't want tunnel vision; we want to be able to see what's on the periphery and to expand our possibilities.

Next time, we'll talk about what behavioral science is showing us about effectively increasing creativity, self-direction, engagement and performance. In our rapidly evolving benefits marketplace we have to find new and unique ways to create client value.

Those interested in watching the entire video can go to ted.com/talks/dan_pink_on_motivation.html.

Nielsen is president and CEO of the LeaderLabs. He can be reached at rnielsen@theleaderlabs.com.

For an in-depth look at the most up-to-date trends in pharmacy benefits, be sure to attend Employee Benefit Adviser's "Drug Benefit Management by the Numbers" Web seminar on November 9 to keep your clients up to date.

The seminar will feature the latest research from the Pharmacy Benefit Management Institue.

Register now at eba.benefitnews.com/webcasts/web-seminars.html.