Previously, I discussed how science has proven that incentive-based compensation, pay-for-performance schemes, and “if-then” type rewards generally reduce people’s performance. This goes for employees, contractors, colleagues, partners, spouses, children, students, and even you. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free So here I will delve into what you should do instead (and not just talk about what you shouldn’t). This information will be relying heavily on Daniel Pink’s excellent book Drive. In it, Pink stresses the importance of “intrinsic motivation.” He refers to this as “Motivation 3.0,” whereas the old-fashioned “Motivation 2.0” was all about carrots and sticks. (Motivation 1.0 was about not getting eaten by a tiger and the like.) He breaks down the types of behavior associated with each. Motivation 2.0 (the old, “if-then” type) is based on Type X behavior. This behavior is “fueled more by extrinsic desires than intrinsic ones. It concerns itself less with the inherent satisfaction of an activity and more with the external rewards to which that activity leads.” On the other hand, there is Type I Behavior, which is the basis for Motivation 3.0. “Type I behavior is fueled more by intrinsic desires than extrinsic ones. It concerns itself less with the external rewards to which an activity leads and more with the inherent satisfaction of the activity itself.” Related: How to Motivate Yourself and Others with an Internal Locus of Control Think about it, what do you put more energy and passion into: things you want to do or things that you have to do? It’s like that question we all get asked in high school by our academic adviser: “If you had a billion dollars, what would you do?” The idea is that whatever your answer is, you should choose a profession related to that. Indeed, if you can make the things you want to do your work, then are you really even working at all? Getting Compensation Right With regard to employees and contractors, Pink’s advice is pretty straightforward; “Pay enough so it’s not an issue.” Forget the fancy incentive-based compensation schemes and the like. As discussed in my previous article, they do more harm than good. But at the same time, an employee (or contractor for that matter) who feels under-appreciated and believes you're stiffing him is going to feel a lack of motivation. And an employee or contractor who literally can't make ends meet will be forced to look elsewhere for enough money to get by. So just pay enough so the issue is off the table. Yes, some people are just unreasonable in this department, and you will probably have to let them go. But most won't be. The long and the short of it is that you shouldn’t try to skimp for every penny, especially with compensation. Doing so is penny-wise and pound-foolish, and you will pay for it many times over with unmotivated employees, contractors, and the like. Motivation 3.0 There are a lot of different points that Pink makes that will help inspire various people in your life. Some will work in some cases and some in others. But hopefully these ideas will spur some of your own when it comes to encouraging intrinsic motivation everywhere. Here we’ll focus on four key areas. Autonomy No one likes to be micromanaged. And if someone needs to be micromanaged, that person probably shouldn’t be working for, or with, you in the first place. Pink gives the example of the ROWE system, which was the brainchild of Cali Ressler and Jody Thompson, who put it into practice at Best Buy. ROWE stands for Results Only Work Environment. In other words, it doesn’t matter how often you show up to work, or when you work, or even how you work (as long as it’s ethical), as long as you get your job done. This system of “flex-time” worked extremely well for Best Buy, and Ressler and Thompson now have their own full-time consulting company. In some places, this method won’t work: for example, with the sales clerks at Best Buy. But the more you can move in this direction, the more you can provide employees (and other people in your life) autonomy, which they will generally love. Related: 7 Reasons Bonuses and Incentives Don’t Work (& What Actually Does) Here’s one idea outside the workplace that I, as a non-parent, hesitate to share. But oh well, here goes. How about not giving your kids a bedtime, instead letting them choose when to go to sleep? The only catch is they have to get up for school in the morning. After a few exhausted trips to bus stop, they very well may learn to be more self-disciplined at a younger age, instead of just following “orders.” Again, I have no kids, so take my advice with a grain of salt. Mastery No one likes to feel like they’re in a dead-end job, going nowhere. Sometimes, it may be unavoidable. But whatever you can do to offer paths to progress will be hugely beneficial regarding motivation. So let’s say you have hired a maintenance technician. After a certain amount of time on the job, you could offer to pay him for some classes on HVAC, so he can get certified and move up. Or perhaps a leasing agent can move toward becoming an assistant property manager. Or, if nothing else, offer or encourage employees (and others) to take courses on personal and professional development. And I would stress this for your personal life, as well. If you feel you are in a rut, it may be because you feel like you’re doing little more than spinning your wheels. If you can’t find a passion to become a “master” in at work, pick up a hobby like guitar, or golf, or whatever. Challenging yourself in new ways is one of the best ways to reinvigorate your passion for life. Purpose In Good to Great, Jim Collins stresses the importance of a company’s mission. He describes profit as “air or water for the body.” Yes, we need oxygen and water to survive. But we don’t live for them. So Disney’s mission is “to make people happy.” Merck’s is to “preserve and improve human life.” Indeed, this is why Merck ended up giving away a drug they made to treat River Blindness, because those who were afflicted were mostly too poor to pay. Yes, profit is needed to survive, but the mission was “to preserve and improve human life.” Your company should stand for more than just making money. And it needs to be more than just words on a paper. You need to live and breathe that mission if you want to inspire those who work for, and with, you. Team Even the worst job can be made enjoyable if you like the people you work with. Work isn’t all about being serious. Have fun! If you have employees, host company lunches or functions like going to a baseball game together. Consider volunteering together. If you don’t have your own employees, you can still do many of the same things with contractors, vendors, and other key members of your team. One employee we hired as a receptionist had previously come from a much higher-paying job. She had told us it would likely be a temporary position for her. But she ended up staying on because she liked the people she worked with and the environment so much. And as far as friends and family goes, I think this point is too obvious to be worth elaborating on. Conclusion The key point is that people aren’t very motivated by extrinsic rewards. Instead, you need to find ways to inspire their (and your own) intrinsic motivation. So drop any pay-for-performance schemes you had in mind, and start thinking of ways to put Motivation 3.0 into practice. How do you motivate your employees (and yourself)? Share your strategies below!