Three years ago this month Microsoft shut down its Encarta website and acknowledged the obvious – that its encyclopedia had absolutely no chance of competing with Wikipedia. In 2009, Wikipedia – a free collaborative project – was getting 97% of the online encyclopedia visits in the United States. Encarta, after 16 years of trying, was a distant second with 1.27%

So what happened? How do we explain the fact that a loosely organized group of unpaid hobbyists decisively defeated one of the most powerful corporate juggernauts ever assembled?

The answer drives right to the heart of the most pressing of all human resource issues: how can organizations best engage and motivate employees to collaborate effectively, creatively and energetically? In turn, that question takes us right to the heart of human nature.

On the one side of the Encyclopedia competition you have a command and control corporate structure of well-compensated managers who are selecting and supervising professional writers and editors to produce content. On the other side you have tens of thousands of unpaid people who are writing and editing articles because they enjoy doing so.

Compensation is essential because we all need to support our families, however the research on compensation and motivation demonstrates that beyond some “fairness point” compensation has a negligible impact on creative work. So if people aren’t producing you’re probably not going to change much simply by waving carrots and sticks at the problem. The best creative work is driven not by extrinsic rewards but by three innate psychological needs governing our experience of work: competence, autonomy and relatedness (see the research of Deci & Ryan http://selfdeterminationtheory.org/ ).

If you prefer traveling the Wikipedia highway to stumbling down the Encarta path make sure you know how these innate needs are being nurtured (or thwarted) in your organization:

1.  Competence – Whether we’re baseball players or engineers or accountants we love getting better at our trade. That means having the opportunity to practice our skills, the freedom to try new methods and the resources to support continuous learning. We hate everything that gets in the way of improving our competence – distractions, interruptions, office politics, interpersonal conflicts, inadequate feedback, etc.- and extrinsic rewards don’t move the needle on these feelings.

2.  Autonomy – Starting (dramatically) at some point during our adolescence we develop a very strong aversion to people who are trying to control us and it never leaves us. Our detection system is finely tuned to resist perceived assaults on our independence. When we feel micromanaged or jerked around by inconsistent supervision or constantly shifting priorities, our creativity, motivation and energy and take a nose dive.

3.  Relatedness – Great teammates make each other better. The pleasure of performing well and achieving something of value is amplified and sustained by the joy and camaraderie of being part of a talented and diverse team getting something done. On the other hand, the productive synergies of teamwork are destroyed by toxic interpersonal conflicts among employees. Employee conflicts are more than annoying distractions, they are destructive sand in the gears of creativity and productivity.

To get the most out of your investment in employee compensation make sure your organization is paying attention to these three engines of motivation.