Rethinking Incentives: What Leaders Miss About Employee Engagement | Stephan Meier | 652

And welcome, welcome, welcome. This is Peter Winick. I'm the founder and CEO at Thought Leadership Leverage, and you're joining us on the podcast today, which is Leveraging Thought Leadership. Today, my guest is Stefan Meyer, and Stefan is the chair of the management division and the James P. Corman Professor of Business Strategy at Columbia Business School. He grew up in Switzerland. He's has an MA in history, economics, and political science, and he has been teaching and researching at Columbia for 15 years, and he's gonna share with us some of his views and thoughts and experiences. So welcome, welcome aboard today, Stefan.

Uh, thank you so much for having me, Peter. It's a pleasure.

Yeah. So world according to me, which may or may not be accurate, there's a subset of thought leaders that are academics. That's kind of. Where you fit. So tell me how that sort of happened, because not all academics expand their horizons to delve into thought leadership. So tell me a little bit about that journey, those experiments.

Right. Thank you so much. So, I mean, it, it was indeed kind of a journey, and like some of the steps, uh, along my career kind of informed me about, you know, how I want to bring kind of the research that I do to inform leaders and policymakers more broadly. And the first step after I finished my PhD, I actually left academia. So I went to the Federal Reserve Bank in Boston. So I worked in the Federal Reserve System here in the US and was at the Center for Behavioral Economics and Decision Making. That was a newly formed center. You know, I'm not a macroeconomist, so don't ask me anything about like inflation and I can only give you kind of the Businessweek version of that, but I know a lot about kind of, you know, how people make decisions, what biases they have, uh, and how mistakes happen. And so while I was at the Fed, I really saw kind of firsthand that, you know, how important it is to have like evidence-based policymaking and that it's important to like, you know, shape kind of how, how leaders think. Uh, and so that's kind of my first array into thinking about thought leadership, you know, taking my knowledge that I know from my research and expanding it outside. And then I chose to come to the business school here at Columbia. And same thing, you know, like while I do, I spend a lot of time in my office doing just research, thinking about with myself, like writing it in academic papers, but I Got really passionate about bringing that outside of my office into the classroom, but then also beyond the classroom, thinking about how can I help leaders across the globe to just be better versions of themselves.

Um, give an example because one, one thing that's really, really interesting is as a discipline, as a science, behavioral economics is fairly young, right? Maybe 30 years, 40 years, something like this. It's not, doesn't go back to Adam Smith, right? And it was really at some level an admission that economics isn't perfect. This, you know, this concept of rational man and all this other stuff, that there is psychology involved, that people do weird things, that people do sort of unpredictable things that are not in their self-interest economically. So talk about sort of the, the difference between teaching those concepts to students and now going out into, let's call it the real world, into the business world, right? And doing some applied stuff.

Yeah. Yeah. Thank you, Peter. You know, like the beauty about economics and the standard economics, it's relatively straightforward. You know, like people are like in a certain way, they behave relatively predictable. You know, they're rational. We kind of have those models where we predict, oh, people react to X, Y, and Z and whatever. The beauty of that is it's very easy to make predictions. The not so nice beauty about the, or what is not so nice is that it's often wrong. You know, like people are actually not perfectly rational. And so when you then go into the area of behavioral economics and bring psychology in, it gets messy because humans are complicated. And so that's what I try to do then, kind of helping in this realm where like we think like sometimes it's like, You know, this is like really random what people are doing, bringing still some structure into how do we behave in this, you know, human way that is still predictable. Because if it's just random, you know, there's very little we can do.

That being said, you alluded to that you're bringing this into, you know, organizations, corporations. What's an example of an opportunity where a company, not a, an institution brought you in to say, hey, uh, Stefan, help us figure this thing out. Yeah.

So I mean, I'm doing like basically related kind of two things, uh, that I'm mainly focusing on, like what motivates people. So like how to think about incentives in those areas. So I'm teaching also at the business school in ExecEd opportunities, you know, where I bring in, where leaders come in.. And I tell them about like, how do, can we think about monetary incentives and how can we think about when they work, when they don't work. And now expanded this quite significantly. And that's related kind of to my newest book, which is called The Employee Advantage, which kind of thinks about how do people behave and how can we humanize work in order to make the organization more profitable and more successful.

Stay there for a minute though.

Yeah.

So the data tells us and has told us for quite some time that people do respond primarily to intrinsic rewards, motivation, et cetera. Yet I would argue, may— maybe I'm wrong, tell me if I'm wrong, most organizations, most companies got the memo, yet their compensation systems, their reward systems and all that are still largely, not 100%,, but primarily extrinsically. You know, I will pay, you know, if Stefan's miserable, I'll pay him more and he'll stay. Well, maybe he wants to work from home 2 days a week. Like, how do, how come that reaction to the data still gets them to think to an old, stick to an old way?

Yeah, absolutely. I think you are so right, uh, Peter, you know, like while most, I mean, I've never met an executive that I talked to would say like people only care about money, but the actions they take kind of reflect that notion that they think like, oh, people would switch job if there is $10,000 more. You know, they're all about compensation and they kind of neglect or not focus enough of those other factors that really motivate people.

So what I, I mean, what I, I, I would say that, you know, at some levels, right? If I was working at Starbucks for $15 an hour and Dunkin' Donuts across the street offered me $10,000 more, yeah, the $10,000 relative to the total income is huge, right? So in that case it would be, but in most instances, assuming that $10K is not 30% of their earnings or something like that, that's not going to happen. So if that's true, I would argue that the organizations are acting in a way that's not economically sound, right? If you knew that it was better to give them— it's cheaper to motivate people intrinsically mostly than to throw another $20,000 at them.

Yeah, no, absolutely. I think like it is really— I think, and the evidence is relatively clear. I mean, you're absolutely, you know, on the lower end of the income distribution, you know, income obviously is very, very important. You know, having more money makes a huge difference in their lives and also in their productivity. So actually it's also good for the, for the organization to keep, like, to create kind of that secure financial security that like those individuals want. But once you reach a certain level, it's much more about this. The problem a little bit is like, if I would ask you right now, think about a way to motivate people with money. I mean, you need 15 seconds to come up with like, I increase it by like whatever. I create a bonus, whatever. It's a relatively easy, well-understood mechanism. So, but the other one, think about like, how can you motivate people when you think about autonomy? You know, that's a motivator that people have, you know, have flexibility, autonomy. Now come up with a good scheme on actually make that happen. Now that's much, much harder because it now there's trade-offs involved, but I actually think it works better. So what I try to do now with organization is like creating kind of workshop style where they think about those motivators that are, are, the research is pretty clear that motivate people beyond money and for them to come up with ways of actually now implementing this in their organization.

If you're enjoying this episode of Leveraging Thought Leadership, please make sure to subscribe. If you'd like to help spread the word about our podcast, please leave a 5-star review at ratethispodcast.com/LTL and share it with your friends. We're available on Apple Podcasts and on all major listening apps, as well as at thoughtleadershipleverage.com/podcast. So, you know, you mentioned earlier, oh, well, you know, if everybody does X, they get a 10% raise, or I can come up with a bonus scheme or whatever it is, right? And number one is that assumes everything's equal because money is equal. A dollar, you know, a dollar in your pocket is the same as a dollar in my pocket. So if I come up with these schemes that are money is the answer to everything, it's a one-size-fits-all approach, right? So you mentioned autonomy. Well, if we knew that this subset of people in our company Autonomy's really important, yet for this subset of people, they want to be more collaborative, whatever the things are. So I think you actually have to design lots and lots of things, right? That are—

That's absolutely, yeah, that's absolutely right. You have to personalize it more. And so the analogy I sometimes use, which like bring, hammers kind of that point down, is, you know, the employees are kind of the new customers. So let's talk about customers for a second. If you think about customer centricity.

Yes.

And you'll, let's ask customers what they care. Now, an important part of what they care is the price. Yeah. Don't know whether it's top or is somewhere. Now, customer centricity is not lowering the price.

Mm-hmm.

Customer centricity is figuring out what does Peter actually care about? What does really make him, his experience better? And your experience is gonna be different than what I care about in my experience. And so it's this personalization aspect that led to customer centricity, and it's not lowering price. In fact, it's increasing price afterward. The whole idea is like to make the experience better for you. And I'm totally right with you. That has to be like, it's individual. You care about certain things in your customer experience that I don't care and vice versa. And the same is now true for employees. You know, if you think about employees and employee centricity, this is not about increasing the wage. It's about improving the experience. And you are absolutely right. The experience you, that you care is very different from mine. There is a—

said based on the book, then, you know, there's a whole body of work on customer experiences, a whole body of work on employee experiences, you know, lots of things. What is the employee advantage? How are you defining that? 'Cause it's, it's an interesting concept. What is it and, and why, why should I consider embracing it as, as a—

Yeah.

Leader.

Yeah. I mean, how I define it is like, it's really putting your employees first, you know, really caring about your, the experience that the employees have.

But that sounds like, that sounds like a poster with all due respect on the, in the lunchroom.

Yes.

Yeah. You know, we care about our people. Our people are like, really? Like, how would I know if I'm doing it well?

Well, I think you're doing it well if you really get like engagement. You know, if you look at, I'm absolutely with you. I've never met an executive who doesn't say, I don't care about my employees. I mean, they're all thinking like the most—

But they'll do things that line up to that being the outcome, but they'll never say that out loud.

They never say that. But like, if you actually look in the engagement levels, Either is like they're lying or they don't know how to do it. Could be both. Could be that they're—

that, that, that employee engagement scores, when you look at Gallup and all that, have in essence been flat for as long as they've been measuring them. So, you know, if I'm miserable, if I was on a diet for 5 years and I was still overweight, I would eventually say something's wrong with this diet.

Yes. Yeah. So the engagement levels are constantly low. They're actually low for like a decade or more, or even more. And so that's exactly where the work happens because I do think we are now moving into an era where like it becomes more and more important to care about the employee experience. And it's the same with customers. You know, I've never met anybody who says like, I don't care about my customers. They all obviously do. But only few companies can actually pull it off to be employee-centric.

Give me an example or two of things that a company that embraces the thinking of employee advantage would be doing versus one that's not.

Yeah.

Okay.

So, so let me start with an example that again starts with the customer that shows this.

Okay.

Amazon, Bezos at Amazon, you know, very customer-centric organization, not as employee-centric, but they're very customer-centric. And when asked about what is so great about his customer, Bezos said in one, I mean, has many quotes, but in one quote says like, the amazing thing about customer, they're very unhappy all the time. And what he means, and so what he means with that is like, I can always learn how to get better. Now, turn this around for employees is like very few people that say like, what is great about my employees is they're unhappy., but like the same logic applies. If I actually listen to my employees, I can constantly improve. So I think employee-centric organizations take this very, very seriously and have mechanisms in place how to get like inputs from their employees and constantly improve. I mean, this is not a new concept in general, you know, the Toyota way, the Toyota is exactly that, like getting mechanisms in place so that frontline workers actually have input. That improve the process, and as a result, the organization is gonna be better off. And so the really employee-centric organizations do that really, really well. That's one example, like listening.

Apply that to 10+ years ago, and I'm not picking on Google, but just use that as an example. Google, one of the things they were known for when we were in a, in a come-to-work environment more was, oh my God, the amenities. There's, you know, you can get sushi and you can get your dry cleaning and you can like, oh my God, this sounded like the greatest resort. But when you, when you looked under the hood, it was really math that said, listen, if you're a $300,000 engineer and for $5 or $10, I can underwrite your lunch and get another hour's work out of you. That's just a good investment if I'm Google.

Yeah, that's true. Although I actually am a little critical about those amenities. You know, I call those ping pong table solutions. So we're like, nobody, well, very, very few people leave an organization or join it because there is free lunch or there is a ping pong table or a kombucha tap. People leave organizations because, you know, the manager is bad. And so that's we, or the, the working environment, or they don't learn anything new. And that's why they really leave. And those quick fixes. Are just not doing much, in my opinion.

So I think you're right because back when WeWork was a thing, you would go to tour a WeWork office in New York, Seattle, Miami, whatever. And it was like, oh wow, they've got beer on tap. And on Tuesdays it's piña colada, like whatever it was like, that's really cool. And then the reality is, you know, if I want a beer, wouldn't I rather just go home and have a beer? Like, do I, like, like, am I going to pay $1,000 more a month in rent because I can grab a beer. It just seems—

Absolutely. So you have to do much more, and which is a, which is a good thing. You know, hard is actually good because hard means you can differentiate from your competition. If it's like just everybody needs a ping pong table or a beer tap, I mean, just get a beer tap. Let it get a ping pong table. I mean, it's cheap if that's really the kicker, but it is not. It's the hard work. So going back to what I said before, like having a mechanism in place to listening. You know, getting inputs from your worker and constantly improve. That's hard, but that actually makes the real difference. Or another example will be, you know, what people read, why people often leave jobs is because they don't learn anything new. They're stuck.

And that's a, that's an interesting piece because you look at the friction between the organization. It says, while Stefan is a really good, whatever, accountant. And yes, you might be really good based on your productivity, the amount of work you can get done, whatever. But if you're not learning, you're bored and therefore you're stagnant. So individually, you're in conflict with the organizational. Eventually you're either going to grind it out or say, oh, I got to go somewhere else.

I can't do the same thing. It's a, you're, you're hitting the, the nail on the head. I mean, that's part of the problem, you know, like let's say you're in my team. Now, Peter is like my best worker. I mean, he's really— what he does, he does really well. Why would I let you go somewhere else and learn something new? Because like what you're doing is really valuable to me. So it needs to change kind of the mindset in the organization because eventually you're going to leave the organization. So it hurts the organization, including my team. So you need mechanisms in place to allow for like Peter and Stefan Winick to learn something new. And like get constantly stimulated and have what I call like those just right tasks, you know, where you always have like tasks that are ideal for your skills, but you constantly want to learn new, new skills and new tasks.

Love it. Well, this has been great. I really, really appreciate you coming on today and the conversation has been fantastic. So thank you so much, Stefan.

Thank you so much for us, Peter.

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