From return-to-office sabre-rattling to hectoring memos declaring the end of rewarding employee loyalty, it’s clear that chief executive officers (CEOs) are feeling their oats. A slowing US economy is shifting power back to the corner office after years of tight labour markets gave workers extraordinary pull. And leaders aren’t hesitating to put that juice to use. They’re swearing off warm and fuzzy cultures and instead channelling one of Don Draper’s most memorable Mad Men lines: “That’s what the money is for.”
Wanting to reassert this kind of top-down control over their organizations may be a natural instinct, but it’s also a profoundly counterproductive one. Management that relies primarily on fear as a stick—and financial incentives as a carrot—stifles creativity and innovation.
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Examples of CEOs cracking down in ways that would have been inconceivable a year or two ago are now legion. Consider Cognition, an AI startup whose leader followed up an acquisition by telling his new employees they are now expected to work 80+ hour weeks and that many of his people “literally live where we work.”
Then there’s a recent memo from AT&T CEO John Stankey, in which he doubled down on the company’s return-to-office mandate and declared that he will no longer reward loyalty. Employees, it implies, are expected to show total commitment to AT&T, but it will offer none to them in return.
Earlier this year, Meta’s Mark Zuckerberg laid off about 5% of his workforce by labelling them “low performers,” despite the fact that many insisted they had never received a bad evaluation; some speculated that the cuts “were a scare tactic to dissuade employees from dissent.”
There’s something seductively simple about this approach. Do what I say, and I’ll pay you. Don’t, and I’ll fire you. After all, isn’t it the job of employees to execute their CEO’s vision?
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Stankey claims that “management science” supports moving from what he calls “familial cultural norms” to a “competitive market-based culture.” Speaking as a management scientist, though, nothing could be farther from the truth—especially for companies where innovation is a priority.
To see why, we need to look at the work of the legendary management scholar Teresa Amabile, who studied the effects of intrinsic and extrinsic motivations on creativity. She defines intrinsic motivation as when people are motivated “primarily by their own interest and involvement in the task.” Extrinsic motivation is when they are “motivated primarily by external goals such as the promise of reward or the expectation of evaluation.” Her findings: People who accomplish tasks due to intrinsic motivations are much more creative and innovative than those with extrinsic ones.
This won’t surprise anyone who has worked with a gifted scientist, engineer or artist. The most innovative and creative people have always been driven by love for what they do.
But surely it helps when managers provide a little extra incentive, right?
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Not quite. Amabile found that extrinsic motivations actually cancel out internal ones. If you take an intrinsically motivated person and layer on an extrinsic driver—like a bonus for success or fear of punishment for failure—then extrinsic factors take over; the person ends up less motivated, less interested in the task and, crucially, less creative.
You can’t pay people into being creative. And you definitely can’t scare them into it. What you can do is create a culture that fosters free thought and innovation.
What does that look like? Innovative workplaces tend to invest in developing their people, have strong and consistent cultures, are highly adaptable and willing to take risks, and have a clear sense of mission. They also prioritize psychological safety—the feeling that you can disagree without fear of punishment. Ultimately, they’re places where people come to work because they feel motivated and fulfilled, not because they feel threatened or see it as a trade-off for a fat paycheck.
What does that mean for a company like Meta, which was recently described by departing senior AI researcher Tijmen Blankevoort, as having “a culture of fear?” Any organization that lives or dies on its ability to innovate must cultivate an environment where intrinsic motivators rule. That doesn’t mean scare tactics—or the types of pay packages that would make LeBron James blush (not that those are working anyway).
It means fostering a culture where creative people feel supported to pursue their life’s work. Any CEO who feels the temptation to squeeze the levers of top-down control should remember that creativity and innovation will also get trapped in the contraption. ©Bloomberg
The author writes about corporate management and innovation.