Inner Work Life: Understanding the Subtext of Business Performance

Teresa M. Amabile; Steven J. Kramer

Article | Harvard Business Review | May 2007

Inner Work Life: Understanding the Subtext of Business Performance

by Teresa M. Amabile and Steven J. Kramer

Abstract

Anyone in management knows that employees have their good days and their bad days and that, for the most part, the reasons for their ups and downs are unknown. Most managers simply shrug their shoulders at this fact of work life. But does it matter, in terms of performance, if people have more good days than bad days? Teresa Amabile and Steven Kramer's new stream of research, based on more than 12,000 diary entries logged by knowledge workers over three years, reveals the dramatic impact of employees' inner work lives--their perceptions, emotions, and motivation levels--on several dimensions of performance. People perform better when their workday experiences include more positive emotions, stronger intrinsic motivation (passion for the work), and more favorable perceptions of their work, their team, their leaders, and their organization. What the authors also found was that managers' behavior dramatically affects the tenor of employees' inner work lives. So what makes a difference to inner work life? When the authors compared the study participants' best days to their worst days, they found that the single most important differentiator was their sense of being able to make progress in their work. The authors also observed interpersonal events working in tandem with progress events. Praise without real work progress, or at least solid efforts toward progress, had little positive impact on people's inner work lives and could even arouse cynicism. On the other hand, good work progress without any recognition or worse, with criticism about trivial issues could engender anger and sadness. Far and away, the best boosts to inner work life were episodes in which people knew they had done good work and their managers appropriately recognized that work.

Keywords: Employees; Performance; Motivation and Incentives; Perception; Practice;

Format: Print

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Citation:

Amabile, Teresa M., and Steven J. Kramer. "Inner Work Life: Understanding the Subtext of Business Performance." Harvard Business Review 85, no. 5 (May 2007).

BOOK ABSTRACT: The Creativity Reader is a necessary companion for anyone interested in the historical roots of contemporary ideas about creativity, innovation, and imagination. It brings together a prestigious group of international experts who were tasked with choosing, introducing, and commenting on seminal texts focused on creativity, invention, genius, and imagination from the period of 1850 to 1950. This volume is at once retrospective and prospective: it revisits old ideas, assesses their importance today, and explores their potential for the future.
Through its wide historical focus, this Reader challenges the widespread assumption that creativity research is mainly a product of the second half of the twentieth century. Featuring primary sources interpreted through the lenses of leading contemporary scholars, The Creativity Reader testifies to the incredible richness of this field of study, helps us understand its current developments, and anticipates its future directions. The texts included here, many of them little known or forgotten, are part of the living history of creativity studies. Indeed, an examination of these seminal papers helps the new generation of creativity and innovation researchers to be mindful of the past and unafraid to explore it.

We present a framework for analyzing “model persuasion,” where persuaders influence people’s beliefs by proposing models (likelihood functions) that suggest how to organize past data (e.g., on investment performance) to make predictions (e.g., about future returns). Receivers are assumed to find models more compelling when they better explain the past. A key tradeoff persuaders face is that models that better fit the data induce less movement in receivers’ beliefs. Model persuasion sometimes makes the receiver worse off than if he interprets data through the lens of a default model. The receiver is most misled by persuasion when there is a lot of publicly available data that is open to interpretation and exhibits randomness, as this gives the persuader “wiggle room” to highlight false patterns. Even when the receiver is exposed to the true model, the wrong model often wins because it better fits the past. Competition more broadly pushes persuaders towards overfitting available data and as a result tends to neutralize the data by leading receivers to view it as unsurprising. With multiple receivers, a persuader is more effective when receivers share similar priors and default interpretations. We illustrate with examples from finance, politics, and law.

Chapter | Handbook of Behavioral Economics | 2019

Behavioral Economics and Health-Care Markets

Amitabh Chandra, Benjamin Handel and Joshua Schwartzstein

This chapter summarizes research in behavioral health economics, focusing on insurance markets and product markets in health care. We argue that the prevalence of choice difficulties and biases leading to mistakes in these markets establish a special place for them in economic analysis. In addition, we argue that while the behavioral health-economics literature has done a better job documenting consumer-choice mistakes in insurance and treatment choices than explaining why those mistakes occur, it is clear that we should not ignore these mistakes in our analyses. We document evidence showing that consumers leave lots of money on the table in their insurance-plan choices, sometimes thousands of dollars. This is true both when consumers make active choices (e.g., they do not have a default plan) and when they make passive choices (e.g., they have a default plan). We discuss the implications of this body of work for the design and regulation of insurance markets, including the interaction between consumer choice difficulties or biases and adverse selection. We then document evidence on consumer mistakes in health-care utilization and treatment choices, especially in response to changes in prices such as copayments and deductibles. We show how choice difficulties or biases may lead patients to respond to such increases in patient cost-sharing by reducing demand for high-value care, muddying the traditional argument that the price elasticity of demand for medical care meaningfully captures the degree of moral hazard. We conclude with directions for future research.

Keywords: Behavioral economics; Consumer Behavior; Economics; Health Care and Treatment; Insurance; Markets;

Citation:

Chandra, Amitabh, Benjamin Handel, and Joshua Schwartzstein. "Behavioral Economics and Health-Care Markets." In Handbook of Behavioral Economics: Foundations and Applications 2, edited by B. Douglas Bernheim, Stefano DellaVigna, and David Laibson. Amsterdam: Elsevier/North-Holland, 2019. View Details

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