A linkage between altruism and intrinsic motivation

In the Excel Homework due after the Thanksgiving break, we will take on the principal-agent model, which you can think of as giving a basis for performance based pay.  Some type of work, notably jobs in sales, typically entail performance based pay.  So we need to understand why that is. 

Yet the latest blog post you wrote on teamwork and gift exchange included reacting to a piece on altruism  The column by David Brooks argued that altruistic motives are inhibited when economic incentives are present.  The lesson from Brooks' piece is that when altruism is important for organization productivity (as in the gift exchange model, the Okun implicit contracts view, or the Akerlof and Kranton view where identity is important) then economic incentives need to move to the background.  It is my view that you can't eliminate economic incentives entirely and shouldn't try.  But performance based pay moves economic incentives front and center so the incentives are always present.  Type A personalities may want such an environment.  The B personalities prefer something that is more low key.  Yet the research which Brooks reports on argues that either type of personality will be less altruistic in the presence of performance pay. 

There is a different reason to depart from performance based pay that is intellectual in nature and is particular to knowledge work.  This other view is articulated by Daniel Pink in this RSA Animiate video and focuses on psychological explanations for productivity.  There can be performance anxiety or, if you prefer, writer's block.  If this persists, evidently it lowers productivity. High performance is achieved when intrinsic motivation is strong and the individual becomes so involved in the work as to entirely lose a sense of self.  Making extrinsic rewards overt then moves the individual's focus away from the intrinsic motivation and thereby lessons productivity.  Better to have the economic rewards provided up front, so that one can put them out of mind when the real work commences. 

I have critiqued this video on how it represents the economics.  You can't put the economic incentives away forever after a single, up-front contracting process.  There will be subsequent re-contracting to enlist the employee again in the future, especially after word about the previous work has gotten out and the employee's reputation has been enhanced as a consequence. Yet I concur with its representation of the importance of intrinsic motivation. So my view is that the manager tries to achieve a balance between the two types of motivation.  You might consider time broken up into episodes.  Each episode begins with extrinsic rewards to enlist participation.  After that the work begins and the rewards fade into the background.  Then intrinsic motivation takes over for a time.  As the episode reaches conclusion the extrinsic motivation returns and the next episode begins. 

This system is by no means perfect.  (The economic rewards can reappear too early and interfere with intrinsic motivation when the work is not yet completed.  Alternative, the manager might pretend the work is not yet done so as not to make an appropriate upward adjustment in the employee's pay, creating hard feelings in the process and inadvertently encouraging turnover.)  But it is better, in my view, than the alternative where rewards for performance are omnipresent.  An environment with strong pay for performance incentives is likely to inhibit both altruism and intrinsic motivation.