BusinessInsider: 15 Business Theories That Will Improve Your Life
BusinessInsider is running a feature on How Will You Measure Your Life, distilling down lessons taken from the book:
Many companies operate on the “principal agent,” or “incentive theory.” It’s based on research by economists Michael Jensen and William Meckling, who determined that people work as hard as you pay them. For example, it’s why shareholder values are aligned with executive compensation.
But incentives are not the same as motivation. Incentives are based on “hygiene factors,” including status and job security. Motivating factors include a broader sense of purpose.
If you choose a job based on motivating factors, you are much more likely to be rewarded with hygiene factors, because you will do your job well — you’re intrinsically motivated.
Hygiene factors only go so far, and operating on a principal agent theory will eventually lead to burnout.