Your Old-School Management Practices Will Doom You

When it comes to running a business, I've noticed that while many founders are forward-thinking when it comes to the technical aspects of their business ideas, their understanding of how small businesses operate is decades behind the times and is based on many industrial-era concepts that have long outlived their utility. Since the industrial revolution, science has advanced in company management techniques, but few business owners have recognized.

Many entrepreneurs, in my experience, focus on the technical elements of their businesses while overlooking the development of company management techniques. While the evolving practice of company management has many aspects, the one I'd want to concentrate on here is employee motivation.

What many entrepreneurs and managers fail to understand is that motivating a knowledge worker to function at top performance levels differs from motivating workers in the industrial period.

Most enterprises in the agricultural era centered on the family farm. The motivation sprang from a sense of duty to the family and a desire to live.

Workers in the industrial period were mostly engaged in manual labor. They had defined goals and results for the tasks they did.

Business leaders of the time aided in the establishment of public schools to educate employees in the new business language of reading, writing, and arithmetic. However, in addition to providing them with the fundamental skills required to transition from agricultural to industrial employment, they must also find a method to encourage them to perform at their best.

Because the employee was no longer working for himself, the company sought a method to keep him motivated. To motivate employees to perform at their best, management started to use extrinsic incentives in the form of a carrot and stick strategy.

Businesses provided carrots to workers in the shape of commissions and bonuses to motivate them to put in the additional effort. The carrot was the threat of losing their employment and money.

For many years, extrinsic incentives were sufficient to motivate employees to put in extra effort. However, most companies today, at least in the United States, do not employ employees from the industrial period.

We now live in the information age, and extrinsic incentives that were successful in the industrial period are no longer useful for knowledge workers whose jobs are more cognitive in nature. The majority of companies, big and small, continue to adhere to the lessons learned throughout the industrial revolution.

I believe we can all agree that the job done by contemporary workers differs significantly from that done by their predecessors in the industrial age. Furthermore, the period of an employer managing all elements of a person's work-life has been replaced by a worker who is much more self-reliant, similar to the agricultural era.

Most employees nowadays are working on jobs that are more intellectual in nature and need them to concentrate on concepts and company goals that are on the outskirts or on the edges of clarity. When extrinsic motives from the industrial period are given to these employees, research after study has shown that not only do they not work, but that they also contribute to worse performance.

Incentives for today's knowledge workers must be focused on intrinsic rather than extrinsic motivators. Three main intrinsic motivators are used in modern business management philosophy.

• Autonomy — Today's knowledge workers are no longer confined to an office or a 9-to-5 schedule. The employee may work from any location and is often available at unusual hours. As a result, the contemporary worker needs greater liberty to decide when and where they work in order to maximize their productivity.
• Mastery - As the activities done by contemporary workers become more specialized, the manager's understanding of the worker's mastery of his trade is frequently lacking. Micromanagement is no longer a constructive strategy, even if the manager has a hazy knowledge of all the tasks required in achieving a goal.
• Purpose - Today's worker is less interested with monetary rewards and prefers to perform work that is meaningful.

Consider the tale of Microsoft Encarta to illustrate this change. When personal computers became more common, Microsoft recruited a group of brilliant programmers and researchers and paid them well to create an Encyclopedia on a CD, which was deemed groundbreaking at the time.

Today, that approach is no longer viable, and Wikipedia has supplanted Encarta. Wikipedia writers/editors utilize their knowledge of a subject area to voluntarily write on a particular topic that they know about and feel strongly about sharing with others simply because they believe in the goal. They typically work from home on their own time.

Finally, there is a disconnect between what research has discovered about motivation and what companies often use. The majority of company operating systems are based on the usage of extrinsic motivators that were intended for workers in the industrial period who worked in a completely different environment from today's knowledge workers.

Are you still utilizing old extrinsic motivation methods to drive your workers, or have you adopted an intrinsic reward culture to inspire them?

Thanks to Steven Imke at Business 2 Community whose reporting provided the original basis for this story.