We have been fortunate to work with many nonprofits that have dramatically changed their business. One nonprofit grew from five to twenty million in annual revenue. Another grew from twenty to one hundred and twenty million. Yet another rescued its nonprofits from going out of business to becoming a thriving association. I spoke to one of these nonprofit executives about how he made his board more effective as he grew his organization. I think there is a lot to learn from his changes over the last few years.

In my previous blog post, I shared some stories from Dan Pink's book Drive on the new science of motivation. This book has been highly influential in causing many organizational leaders to re-evaluate their ideas about the best ways to motivate people.

In companies and organizations that thrive on creative thinking and innovative solutions, financial rewards and external "carrots and sticks" are being replaced with a new management doctrine of Autonomy, Mastery and Purpose.

But do these ideas really work? What are some real-life examples of Autonomy, Mastery and Purpose, and how can your organization adopt these ideas in your workplace?

Encarta vs. Wikipedia

You don't have to look far for a perfect illustration of Autonomy, Mastery and Purpose. It's a story of two competing projects, pitting hundreds of unpaid volunteers against the mighty Microsoft.

Microsoft Encarta was started back in the mid-1990s. Microsoft paid professionals to design and write an online encyclopedia. Project management practices were implemented to sure it was done on time and done in compliance with all the specifications from leadership.

Encarta essentially said "Let's do this by the rules," and reinforced specific behavior by financially rewarding timeliness and quantity of output. Microsoft then bundled and sold this software as a CD.

As a contrast, Wikipedia was started in 2001, using thousands of mostly anonymous online volunteers to build an encyclopedia. But instead of selling the encyclopedia, Wikipedia made it freely available to the public on the World Wide Web. Instead of rewarding writers with financial incentives, Wikipedia's only reward was its sense of community. Wikipedia rewarded its online volunteers by uniting them in a common purpose and giving special public recognition for those who "went the extra mile" with their contributions.

Instead of doing it "by the rules," Wikipedia said, "Let's do this for fun!"

And whether they intended to or not, Wikipedia created the perfect culture of Autonomy, Mastery and Purpose:

• Autonomy: Thousands of people working on their own, for fun.
• Mastery: Adding one's own expertise and earning respect within the community.
• Purpose: Being part of a movement to create a shared body of knowledge for the world.

Encarta was a job. Wikipedia was a historic mission.

Encarta only published about 62,000 articles in six languages, despite an eight year head start on Wikipedia. The Encarta articles did not have communal input, did not promote autonomy, mastery, or purpose, and Encarta did not succeed. Eventually Microsoft conceded defeat and shut down Encarta in 2009.

Meanwhile, nine years later, Wikipedia is succeeding beyond even the wildest expectations. It is one of the most-visited websites in the world, with 78 million monthly visitors, over 17 million articles, and is available in over 270 languages.

Wikipedia continues to grow with thousands of daily additions in hundreds of languages. And they have continued their culture of Autonomy, Mastery and Purpose by providing a sense of community and rewarding those who "go the extra mile" in adding, editing and moderating content.

Tying incentives to performance

So how can your organization best reward your people if "rewards" don't matter?

The best ideas for incentives come from public recognition of good work. In Wikipedia's case, rewards do not come in the form of a bonus check. But for those individuals who are dedicated and active on the site, they can be honored by becoming a Wikipedia administrator.

With administrator privileges, the honoree gets an added level of Autonomy, Mastery and Purpose. They have the responsibility and privilege of being responsible for the final draft of articles that will be read by millions of readers. They are intrinsically motivated because their work is its own reward.

Wikipedia administrators don't get paid in money, but they get rewarded by being the gatekeepers and standard bearers of a movement that they believe in. Within the community of Wikipedia contributors, this honor is worth more than money.

Atlassian and "FedEx"

Another example is a software company called Atlassian. Atlassian hosts a 24 hour event called "FedEx." During "FedEx," Atlassian developers are given 24 hours of free time to work on anything they want, but they have to "Deliver something overnight." It sounds like a recipe for chaos and wasted time – but "FedEx" has become one of the company's biggest success stories, with the special Autonomy time leading to many important product developments.

Why does it work? The "FedEx" winners are heartily celebrated within the company. Winning the "FedEx" presentation is widely prized within the company – much more than arbitrary cash payments would be.

Through this event, Atlassian gives its employees Autonomy, Mastery and Purpose.

• Autonomy: Freedom to work on whatever they like.
• Mastery: The chance to develop something that they're experts in and truly care about.
• Purpose: Feeling connected to a high-visibility, exciting opportunity that matters to the company and is admired by their colleagues.

"Sure, it sounds great," you might say, "But I've never heard of Atlassian... "

Have you ever heard of Google?

Google – 20% Time

This 21st century phenomenon intentionally under assigns each employee. Google gives every employee "20% time" – the equivalent of one full workday each week to use their time however they see fit. Google employees use 20% time to invent, explore and work on any projects they are interested in, in any environment they like. Google's "20% time" has resulted in hugely valuable ideas. Gmail, Google News, and other popular services were invented during Google employees' 20% time.

Atlassian and Google both understand that the future is driven by new ideas and fulfillment of a larger purpose – and they give their employees the autonomy to pursue it.

Sharing Responsibility

Perhaps the most surprising lesson from Dan Pink and the new science of motivation is that greater freedom often results in greater responsibility. Given the chance, people will start to work harder and think smarter – for their own sake.

If employees are given simple tasks, clear goals, and promised more money to do more work in less time, the organization might make incremental improvements.

But if employees are truly motivated from within, then the sky is the limit. If employees have a spirit of Autonomy, Mastery and Purpose, they will have the freedom and inner drive to develop truly creative solutions. Intrinsic motivation – where work is its own reward – is the best way for your organization to achieve transformative goals.

Every organization needs to get the most out of its people, especially with the looming skills shortages that the U.S. workforce will be facing in a few years. Maximizing our human potential can start with trusting in employees and giving them the freedom to innovate.

The city of Charlottesville, VA is in the process of rolling out a performance management and measurement initiative. This initiative is managed by the Office of Budget and Performance Management and is called P3 within the city. It stands for "Plan, Perform, Perfect."

For many of us it is budget season and time to decide how and where we will spend our money next year. Sadly, too many places, especially resource strapped organizations simply take last year's budget and modify it by a percent or two. But there is no excuse for just letting it ride. If you want to achieve your mission you need to take the time to periodically review the effectiveness of your programs. Do you programs support your strategy? Does your Balanced Scorecard or strategy management system reveal the impact of the programs? Or are there corrective actions that are required?

A few years ago, V. Kasturi Rangan from Harvard Business School argued that nonprofits need to have more than just a lofty mission to survive. In his article, entitled "Lofty Missions, Down-to-Earth Plans," he argued that nonprofits need a systematic method that connects their callings to their programs.

Yesterday, InsideNGO kicked off their week-long annual meeting in Washington, DC. The first few days focus on Finance, Grants, Contracts, and Personal/Professional Development. The next few days focuses on Human Resources. Ascendant and one of our clients, Rare, gave a presentation yesterday afternoon.

I get a regular email from HBS Working Knowledge, and today's email had a very interesting article in it. The article was called Trusth in Giving: Experimental Evidence on the Welfare Effects of Informed Giving to the Poor. Professor Felix Oberholzer-Gee is doing research with Christina Fong to study whether people give more when they understand the plight of the person they are giving to. They try to answer the questions about how giving changes based on the context of the group being helped. Would you give more or less money to individuals who are poor because of circumstances they control (gambling or drug problems) or circumstances out of their control (children or economically devistated region). His research is interesting.

On June 18, the New York Times in coordination with the Nonprofit Coordinating Committee of New York and Philanthropy New York (the old Regional Association of Grantmakers). Like last year, this event was held in the wonderful NY Times center, and the presentations were excellent.

I recently had the opportunity to lead a clinic at GSMI's Enterprise Risk Management summit in New York. It was a very interesting and interactive session where we really had the opportunity to "roll up our sleeves" and talk about how risk management works (or doesn't, for that matter) in the trenches.

Columbia Business School's "Ideas@Work" blog had an interesting post last week entitled "The Nonprofit MBA." The premise was that in a time of unprecedented challenge for non-profits, hiring a MBA may be a way for social sector organizations to tap into management expertise that can help them survive. (Since MBAs are a lot cheaper now than they used to be!)