Is Performance Management really the best approach for success? — Part 3

What can neuroscience tell us that motivation models may have missed?

By Dr. Reg Butterfield
22-minutes reading time.

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In our last two newsletters we discussed the current situation regarding performance management systems commonly used in organisations to motivate people and to align their work with the strategic goals of the organisation. This is commonly achieved through using strategic human resource management (sHRM) as the underlying approach to people activities and development. At the same time, management by objectives (MBO) and more recently objectives and key results (OKR) are the main methods used to drive this approach. We argued that this ends in compliance as opposed to motivation and that a new approach needs to be found if people are to be engaged in their work and remain committed to their organisation.

We suggest that understanding the relationship between belief, motivation, and fear can help us identify an environment that supports a new way of working, which we call Futocracy. We also believe that another key to unlocking the inner drivers of people is through some form of entrepreneurial mindset for people in many areas of work.

This week, we will explore the ideas around entrepreneurial mindset, motivation, and engagement with the assistance of emerging knowledge around neuroscience and motivation.

The Entrepreneurial Mindset

In our 16 October 2022 newsletter, we introduced the definition of an entrepreneurial mindset used by Ernst and Young (2018). They described it as “simply the way an entrepreneur thinks and acts. It’s a set of characteristics, behaviours and skills that drive action. A person with an entrepreneurial mindset recognises an otherwise overlooked opportunity; has the confidence to take a risk; communicates their ideas clearly; and can not only adjust but also learn from setbacks” (p. 3). Shane and Venkataraman (2000) support this view and take it a little further, which is important for the future of work, we suggest. They argue that entrepreneurship involves sources of opportunities; the processes of discovery, evaluation, and exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit opportunities. The latter point about “the set of individuals” clearly moves away from this oftentimes view that entrepreneurs are single-minded focused individuals as opposed to being more team oriented.

Given the increasing demand for innovation it is also comforting that Hitt et al. (2001, p. 480) defined entrepreneurship as “the identification and exploitation of previously unexploited opportunities.” With Miles, (2005) specifically mentioning that entrepreneurs create value by leveraging innovation to exploit new opportunities and to create new product-market domains.

However, an organisation with everybody viewing the world through the eyes of an entrepreneur may not be the best recipe for success. The challenge is to introduce the mindset where it is needed without creating disturbance to areas that need a greater level of continuity and certainty that goes with steady-state operations.

Strategic Entrepreneurship — Harnessing both Strategic and Entrepreneurial Mindsets

This leads us to the ideal of bringing the strategic management element of an organisation’s wealth-creating elements, primarily through competitive advantages, together with an entrepreneur’s view of the world and associated wealth creating behaviours. This strategic entrepreneurial (SE) approach enables both the exploitation of the current competitive advantage and the exploration of advantages that can lead to greater value and wealth creation. This fits nicely with the value formula that we also discussed last week. Figure 1 is a representation of bringing this formula into the ideas behind SE.

Limitations of this newsletter mean that we can only provide a short summary of the input side, albeit there are some important points that differ to most models of this type of input. For example, the environment is a variable, and it is important to understand and maximise opportunities as well as manage the challenges. When an entrepreneurial view of resources is taken by an organisation it can often capitalise on resources that other organisations deem to have less value-creating potential.

Organisational behaviour and top leadership are probably the most idiosyncratic resources of an organisation. If the leader is an entrepreneur who supports associated behaviour within the organisation, it follows that when an entrepreneurial opportunity is presented, then the organisation has the attributes and behaviour to positively pursue it, successfully. Evidence supports the view that an entrepreneur’s social skills and social networks influence outcomes for both new ventures and established organisations (Baron & Tang, 2009; Batarga et al, 2009).

Resource Orchestration

Hitt et al (2011, p. 2010) discuss what they refer to as resource orchestration, which has many characteristics of what my colleagues Dr Ross Wirth, Silvia Calleja, and I refer to as Purpose Alignment in our Futocratic approach to organisations.

It is concerned with the actions leaders take to facilitate efforts to effectively manage the organisation’s resources. These activities include developing the organisation’s resource portfolio, create people and other resource capabilities, and leverage the capabilities to create value for customers, thereby achieving a competitive advantage for the organisation. How this is achieved in detail is the subject of a future newsletter. Suffice to say that it includes synchronising the orchestration of the resources to ensure action that positively influences the outcomes.

Figure 1: Creating competitive advantage via strategic entrepreneurship.

Insofar as the outputs are concerned, there are two that we will mention here today: (1) organisational and individual benefits, and (2) societal value. The others are pretty much self-explanatory for the purpose of this newsletter.

Organisational and Individual benefits

It is increasingly important for many organisations of all sizes to create and or use new technology. In some organisations it is crucial to break into or create new markets, develop different products that are highly differentiated from the existing as the means to create substantial value for customers. In a previous white paper, we referred to Schumpeter (1942) who wrote about entrepreneurs and the necessity for disequilibrium, which he referred to as radical innovation. To create a novel product often requires creativity and entrepreneurial approaches (Ward, 2004). Ward reinforces the view that successful new ideas frequently achieve an effective balance between novelty and attributes that are familiar but attractive to customers, the very essence of Strategic Entrepreneurship.

At the individual level, entrepreneurs gain satisfaction in creating value for customers through strategic entrepreneurship. Deliberate entrepreneurial practice improves their knowledge, perceptual acuity memory etc., which helps them to recognise, evaluate, and exploit business opportunities, more accurately (Baron & Henry, 2010).

Societal Value

In today’s society, probably one of the most important aspects for a business to consider is ‘social responsibility’. This opens the door for part of an organisation’s SE to include aspects of their innovations that can be used to address some environmental problems (Adner & Kapoor, 2010). In considering the environmental situation more, entrepreneurial activity can help build new approaches to social, institutional, and economic situations such as those that created the impetus for the “circular economy”, which sits at the heart of all forward-thinking organisations.

Reflection

Thus far today, we have proposed that organisations will benefit from bringing into play a more entrepreneurial mindset as part of their strategic ‘toolset’ when seeking ways to both future-proof the organisation and develop an environment that encourages engagement by the people who work there.

We added the “Value Formula” to the SE model to demonstrate the importance of linking the “Resource Orchestration” with the creating value elements together to create the synergies necessary for success. The resulting organisational and individual benefits are in line with the changes in society as well as the expectations of the workforce that we discussed in earlier newsletters.

In last week’s newsletter and previous white papers, we set out the difficulties associated with using management by objectives (MBO) and strategic human resource management (sHRM) in their current form. At the same time, we suggested that the issues were not about setting objectives per se, but more about the processes involved in using them as a foundation for performance management systems.

In the next section of this newsletter, we will explore alternative approaches and uses for objective setting with the aim of increasing the motivation and engagement of all the people who populate organisations. We call upon neuroscience to assist in this respect.

What can neuroscience tell us that the motivation models may have missed?

If we look at the neuroscience around the performance management process, it gets interesting. Bearing in mind that we are not neuroscientists or medical doctors, we will do our best to follow the research and how we may be able to see performance management in a new light and behave differently.

At risk of upsetting the purists amongst readers, we want to introduce and propose a relationship between three things here: beliefs, motivation, and basic fear. It is not possible to compartmentalise these three areas in our discussion as they interact with and impact one another.

Neuroscience research indicates that many ‘performance management’ (PM) practices damage the performance that they are intended to improve. Behind this statement lies a fundamental misunderstanding of human responses by the advocates of PM systems that we are now able to understand through patterns of brain activity. Most PM systems in use today are the legacy of extremely old psychologically based studies that did not have the benefit of the world of MRI and fMRI we have today. It follows that assumptions had to be made on the evidence available and, in many cases, neuroscience does support many of those assumptions, such as setting goals can increase motivation. So, it is not about abandoning everything. It is about bringing knowledge up to date and using that to help think differently around the problems of management today.

A neuroscience perspective of goal setting — what happens in the brain?

We will endeavour to keep explanations of the terminology at a level that will interest most readers and briefly explain the relationship between our Systolic Blood Pressure (SBP) and how goal setting gives it a boost, which drives us to act upon it (Granot, Stern, & Balcetis, 2017). If the goal is a challenge and yet achievable, the SBP is increased and that creates a greater degree of desire to act and achieve it. Goals that are an extreme challenge or may seem to be impossible are linked with low systolic thrust and thus there is no spike in brain chemistry to become active. Extensive studies have shown how neural connections and the brain increase our motivation to set and achieve goals.

Madhuleena Roy Chowdhury (2019), a writer and teacher of the subject describes it thus, “the Medial Prefrontal Cortex (MPFC) deals with the present orientation of the goal-setting process. The MPFC activation allows us to think about what we need to do right now to achieve our goals, and we set the targets accordingly. If the goal seems too distant or is too future-oriented, the MPFC activation lowers significantly which is why we may lose interest in sticking to the goals or lose the vision of what might be the best ways to achieve them.”

The neuroscience view is pretty much in line with the psychological view up to this point and yet takes it a step further. There is a part of the brain known as the Reticular Activating System (RAS), which is an important part of what keeps us motivated by regulating our goal-setting actions. Chowdhury describes the RAS as a cluster of cells located at the base of the brain that processes all the information and sensory channels related to the things that need our attention right now. Importantly, it gives us signs by recognising and bringing attention to things that are important to achieve the goal.

For example, a person who is working hard to achieve enough money to buy a dream car (the goal) will see more models of that car than before. This happens because of RAS activation. The RAS is aware that this is what the person is paying attention to at this very moment, and hence they choose to register only the information related to it. Before setting that goal, the person would not have been aware of such a car in such intensity because it would be just one of many passing by each day.

When it comes to goal setting, the reticular activation functions in two ways. (1). Merely writing the goals down on paper activates the RAS. (2). True goal setting requires imagination and not the copy paste type often used by management. Studies have shown that people who have the power to visualise their goals before setting their actions have a higher activation level in the brain. Repeatedly imagining success and reminding ourselves of our targets maintains a steady stimulation of RAS and promotes effective goal setting (Berkman & Liberman, 2009). RAS activation helps focus the mind to attend to only those pieces of information that are related to the goals we seek to achieve. This is an important point for our discussions later because it may be one of the routes to employee engagement in a very different way.

Neurologists working on the science of goal-setting have proved that the brain cannot distinguish between reality and imagined reality. So, when we give ourselves a picture of the goal we want to achieve, the mind starts believing it to be real. Eventually, the brain begins driving us to take actions for making the state and hence, the goal-setting becomes a success (Berkman, 2018).

We have discussed some aspects of setting goals; the next challenge is taking action to achieve them, which is often referred to as “the way” in literature. The neuroscience literature on executive function (of the brain) offers some practical if not entirely hopeful advice about the “way” of behaviour change. The first lesson is that executive function feels hard for a reason. It is a serial process, so the sense of effort that accompanies executive function is a signal that working on a difficult task necessarily means losing out on other opportunities. In other words, effort reflects an opportunity cost. In this view, effort also signals one’s internal priorities; the more important the alternatives are, the harder a focal task will feel. The inverse is also true: a given task will feel relatively easy when it is more important to a person than the alternative choices. Consultants and coaches can work with clients to reflect on their priorities and make them explicit, which can explain why some goals feel harder than others (Berkman, 2018, p. 19–20).

Berkman suggests that consultants and coaches should help their clients focus on improving specifically the skillsets relevant to the goal or new behaviour. These will improve with practice and, with some proper motivation, become habitual in time. We will return to this later when discussing new ways of aligning people to the Statement of Purpose of organisations.

Can we move extrinsic motivationally driven change of behaviour to become intrinsic motivation?

If we move on to the issues around motivation to change behaviour, the psychological literature is quite vague and whilst it discusses intrinsic and extrinsic motivation, there is scant evidence on how to move the extrinsic value to become intrinsic. It is here that we look to neuroscience to see if it can give us some clues.

Neuroscientists ask themselves, which brain systems are involved in motivational processes? How do those systems interact with other networks in the brain? And what does neuroscience indicate about motivating behaviour change?

Motivation is conceptualised here as the strength of the desire to attain a particular outcome, irrespective of how pleasant or unpleasant the experience of attaining it is. This distinction between the motivational component of a reward — “wanting” — and the hedonic component of consuming it — “liking” — is maintained with remarkable evolutionary consistency in the brains of both humans and animals (Berridge & Robinson, 2003)

However, for the purpose of this newsletter we will focus on the ‘wanting’ side of the situation. Without going into the complexity of the activities of the mesolimbic dopaminergic neurons, the ventral striatum and ventromedial prefrontal cortex, and many other regions of the brain, we will refer to the dopamine activity as an example of the reinforcement learning cycle. Reinforcement learning is the reason behaviours that are rewarded are likely to be repeated in the future. This is particularly important to understand because the amount of cumulative, learned reward value of behaviour is its expected value, which can be referred to as subject value (Rangel & Hare, 2010).

Berkman (2018, p. 23) describes subject value as follows, “subjective value represents the amount of reward that an actor expects to receive for a given action, largely based on past learning. This learning cycle is one of the key impediments to behavior change: old behavior has been rewarded and new behavior has not. A protein called brain-derived neurotrophic factor (BDNF) is important for maintaining new behaviors after engaging in them initially because of its critical role in memory consolidation, (Bekinschtein et al., 2008)”.

One of the keys to bringing about behaviour change is finding the key to increase the subjective value of new behaviour. Self-Determination Theory suggests, that if we choose to engage in a behaviour as opposed to being forced, it increases performance because it is an intrinsic motive. At the neural level, autonomy also prevents a reduction in reward system activity in the face of negative feedback, particularly in the ventromedial prefrontal cortex (Murayama, et al., 2013). This observation about autonomy is important bearing in mind that performance management systems are based on compliance often through reward and punishment as opposed to autonomy. This indicates that when autonomy is present, the negative impacts of feedback and key performance indicators have a lesser impact on the receiver of that information, which may account for how some people cope better than others, despite the negative results.

Can motivation be increased

A promising route to increasing motivation is identifying the value inputs to a new behaviour (i.e., the reasons why the behaviour is or is not valued) and learning ways to modulate them. Neuroscience suggests that motivation is guided by an integration of the value of features of the behavioural options. This then means that behaviour change can be achieved by increasing the value of the new goal-related behaviour, reducing the value of old behaviours or some combination of the two. This could form the basis for a different approach to behaviour change when considered with the following approach relating to “identity”. [Note: this is also a key part of organisational behaviour change via Idioculture, which was discussed in another of our publications].

This next approach relates to the role of identity, which is somewhat susceptible to cognitive shifts such as framing. Some researchers used a simple “noun-verb” manipulation to increase motivation for behaviour change. This assumed the extent to which the new behaviour is considered as identity relevant. Examples given in the research include asking questions about voting intentions in terms of identity (noun: being a voter) instead of an action (verb: voting). This shift from framing the question in the context of a noun instead of a verb increased the actual turnout in elections. In another example, participants were less likely to cheat by claiming money they were not entitled to if behaviour was described as a negative identity — noun: being a cheater — instead of an action — verb: cheating.

This research is consistent with the idea that identity can influence motivation by highlighting the subjective value of desired (e.g., voter) or undesired (e.g., cheater) identity. We find this invaluable in our current quest to identify ways of motivating people to feel engaged in organisations as well as other changes of behaviour. If feasible, it could be part of a low-cost, scalable way to bring about a broad range of change, both in beliefs and behaviour.

Is Identity of Self a major breakthrough to motivation and engagement?

Identity currently seems to be an exciting opening to create new behaviours because it links into the often-quoted needs and beliefs of the emerging workforce: autonomy, self-direction, adding value, being involved, and being valued, etc. This self-image is potentially an important link between the neuroscience perspective and the organisational need to increase the self-motivation and associated engagement of its workforce.

Merely highlighting certain attributes of a behaviour can alter the value placed on that behaviour. Whilst this is not new in that psychologists have suggested this before, the reason for this is now better known with what we are learning from neuroscience research. It links to our attentional bandwidth being fairly narrow so that not all relevant properties will be equally salient at all times. For example, people’s motivation to act on a choice option increases as attention is allocated to it (Krajbich et al, 2010). The highlighting of certain attributes moves beyond the psychological interpretation to focusing on the different behaviours in the brain.

For example, when making a decision about the choice between taste and health when considering what to eat, the reminders of taste versus health were dealt with differently in the brain. In the research, information about the two approaches health and taste were presented some time before people were offered the different foods. The test of healthiness was assessed earlier and separate from tastiness by the participant. The results are important for our situation of motivation, we suggest. The healthiness rating of the foods was strongly correlated with activity in the ventromedial prefrontal cortex “at the moment of decision”, which in turn predicted the food choice. In contrast, when unhealthy foods were selected, the earlier tastiness ratings were correlated with ventromedial prefrontal cortex activity “during choice”.

Psychological framing effects are broadly similar to these findings (Kahneman & Tversky, 1984) and yet they are most often applied to decision-making, whereas the neuroscience perspective suggests that motivation may also be susceptible to framing effects.

Matching is an important aspect of motivation.

People have different “achievement motivation” and a matching effect has been identified by the way people “value from fit” when their regulatory style matches the particular means through which goals are pursued (Higgins, et al, 2003). For example, this matching effect has been observed with achievement motivation and performance goals. People high in achievement motivation experience greater intrinsic motivation when provided with performance as opposed to mastery goals. Whereas people low in achievement motivation experience greater intrinsic motivation with mastery as opposed to performance goals (Elliot & Harackiewicz, 1994). Yet most, if not all, performance management systems operate at the goal associated outcome level and seldom, if ever, at the mastery element of development.

Summary

In this newsletter we started with discussing how an entrepreneurial mindset (EM) may assist in our journey towards designing future organisations that encourage and motivate people in novel ways. This led to the integration of the organisational strategic perspective with that of EM, which is known as strategic entrepreneurship (SE). In doing so we saw parallels between the ‘resource orchestration’ aspect of SE, together with the ‘value formula’, and the ‘purpose alignment’ activities in Futocracy, a new framework of principles for future organisational design.

Our next stage was to explore neuroscience as a means of expanding our knowledge in areas of motivation. Whilst neuroscience agrees with the psychological view of goal setting, it does not support the way that performance management uses goals, ostensibly to motivate and yet is more akin to gaining compliance. Neuroscience opens new ways of thinking about motivation. In exploring these new ways, we covered a wide range of perspectives such as attention focus, internal prioritisation, potential to widen the intrinsic motivators, the subjective value of learned behaviour, value inputs and the desired or undesired value of role identity, attentional bandwidth, decisions made prior to or during a choice, and the importance of understanding performance versus mastery preferences in individuals.

We are of the view that these psychological and neuroscience views of motivation are sufficient to enable us to reconsider the role and operation of managing performance. We do not see performance management in the same isolated perspective that most organisations view the subject and its consequent methodologies. We see it in a more holistic way organisationally with major shifts in operations at the individual level.

The question of how this can be achieved is the subject of next week’s newsletter.

If you find our travels around the subject of organisational behaviour, change, and new ways of working, please hit the like button below. It will also help us if you refer our newsletter to a friend or members of your network. Thanks for supporting our aim to improve organisational design and management.

Major references

Baron, R. A., & Henry, R. A. (2010). “How entrepreneurs acquire the capacity to excel: Insights from research on expert performance”. Strategic Entrepreneurship Journal, 4 (1), 49–65.

Baron, R. A., & Tang, J. (2009). “Entrepreneurs’ social skills and new venture performance: Mediating mechanisms and cultural generality. Journal of Management”, 35(2), 282–306.

Batjargal, B., Tsui, A., Hitt, M. A., Arregle, J., Webb, J. W., & Miller, T. L. (2009). “Women and men entrepreneurs’ social networks and new venture performance across cultures”.

Berkman, E. T. (2018). The neuroscience of goals and behavior change. Consulting Psychology Journal: Practice and Research, 70(1), 2844. https://doi.org/10.1037/cpb0000094

Chowdhury, M. R. (2019) “The Science & Psychology Of Goal-Setting 101”, Positive Psychology.com, 2 May. https://positivepsychology.com/goal-setting-psychology/

Cole, S., Balcetis, E., & Zhang, S. (2013). Visual perception and regulatory conflict: Motivation and physiology influence distance perception. Journal of Experimental Psychology: General, 142(1), 18 -22.

https://doi.org/10.1037/a0027882

Elliot, A. J., & Harackiewicz, J. M. (1994). “Goal setting, achievement orientation, and intrinsic motivation: A mediational analysis”. Journal of Personality and Social Psychology, 66(5), 968–980.

Higgins, E. T., Chen Idson, L., Freitas, A. L., Spiegel, S., & Molden, D. C. (2003). “Transfer of value from fit”. Journal of Personality and Social Psychology, 84(6), 1140–1153.

Hitt, M. A., Bierman, L., Shimizu, K., & Kochhar, R. (2001). “Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective”. Academy of Management Journal, 44(1), 13–28.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). “Strategic management: Competitiveness and globalization” (9th ed.). Mason, OH: Thomson South-Western. hr.research.institute (2022) “Performance Management 2022–23”, published by HR.Com, accessed via https://www.hr.com/en/resources/free_research_white_papers/the-future-of-performance management_l5j4t3xt.html

Krajbich, I., Armel, C., & Rangel, A. (2010). “Visual fixations and the computation and comparison of value in simple choice”. Nature Neuroscience, 13(10), 1292–1298.

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