Why salary bonus and other "incentives" fail to meet their objectives

Introduction

This article was originally conceived to show that incentive programs have failed due to inherent management and personnel problems. The work environments where reward programs are typically used are also very hierarchical and politically charged. No matter how many carrots are put out there, employees can’t get past the day-to-day atmosphere.

In the process of researching books covering the topic, all I could seem to find were books on how to implement them! After thinking about it for a while, this seemed very strange. Where were the books that showed the cold hard facts on the success of incentive programs?

SixSeconds.org, an organization focusing on emotional intelligence (EQ, for short), suggests that when “choosing ourselves” we should “engage intrinsic motivation”.

In addition to motivating ourselves, it is important to learn how to motivate others. There are many ways to do so; the most obvious are “extrinsic” motivations. For example, “If you carry my bag, I'll give you a candy bar,” is a simple example of extrinsic motivation -- it is a bribe or a type of commercial interaction. Quite useful at times -- but it doesn't last. Building lasting motivation requires a more complex strategy; one that employs both intrinsic and extrinsic motivation (ideally 60-80% of the focus is on intrinsic motivation).

I didn’t quite buy the idea that bribes work, so I posted a question to the EQLeadership and EQThesis lists asking if anyone knew of solid research in this area. A list mediator, Josh Friedman, pointed me to the book Punished by Rewards: The Trouble with Gold Stars, Incentive Plan$, A’s, Praise, and Other Bribes by Alfie Kohn.

What is the Problem with Incentives?

Researchers have performed hundreds of studies regarding incentives and, unlike most psychological research, the results are overwhelmingly conclusive: rewards actually interfere with motivation and lower morale, quality, and productivity. So why are there so many books pushing incentive programs? Frankly, we don’t want (or know how) to make the tough effort or dynamic thinking that it takes to encourage others to self-motivate.

Why are managers inclined to use rewards? Managers use them to get people to do their jobs. "Douglas McGregor (refers to this) as Theory X: people basically don't like to work and therefore need to be controlled and coerced ... if we expect them to get anything done."

In other words, ‘motivating’ people usually means ‘making them do what you want.’ It is coercive and controlling, and people respond by rebelling. The rebellion is either direct - the employee responds by ‘making a scene’, or indirect - the employee begins a campaign to undermine the manager. And there begins the endless loop of control and rebellion. The manager and the employee are so busy with politics that they have little time to focus on the task at hand. It is not surprising that neither party recognizes what’s happening… the feedback loop is rarely obvious: the employee and manager are both good at not getting caught!

How Can We Get Beyond Rewards at Work?

In truth, the best a manager can do “is set up certain conditions that will maximize the probability of (the employee) developing an interest … and remove the conditions that (constrain).” Mr. Kohn suggests that to do this, managers need to “attend to three fundamental factors:” collaboration, content, and choice. But to focus on “the three C’s”, managers must first remove their impediments.

Firstly, get rid of all rewards. Specifically, get rid of bonuses and at-risk pay. This will give employees the freedom to stop worrying about money at work. If people are paid equitably, they won’t be worrying about their personal life at work nor will they need to be job hunting. Also, forego all “recognition” ceremonies, plaques, and certificates. Recognition sets people at each other’s throats and interferes with the first “C”, collaboration. Removing these visible tokens does not, however, relieve managers from providing feedback. If anything, it suggests that managers must be observing and communicating with employees constantly.

Secondly, get rid of employee evaluations. "W. Edwards Deming ... has called the system by which merit is appraised and rewarded 'the most powerful inhibitor to quality and productivity in the Western world.' He adds that it 'nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and ... leaves people bitter.'" In addition, "punitive strategies, such as holding out the possibility of termination or demotion for inadequate performance, are counterproductive in the extreme -- not to mention unpleasant, disrespectful, and in general, an intrinsically offensive way to deal with other human beings... punishment typically leads not to improvement but to defiance, defensiveness, and rage." Again, the optimal approach a manager can take is to observe and communicate in an on-going basis.

Finally, “create the conditions for authentic (intrinsic) motivation.” In other words, the best thing a manager can do is treat employees with respect. According to the research anthology Paying for Productivity: A Look at the Evidence, “Changing the way workers are treated may boost productivity more than changing the way they are paid.” To begin with, managers should first ‘observe’. Look for problems that are impeding their performance and work with them to solve the problems. Also, managers should ‘listen’. They should take the time to hear what an employee is saying from the employee’s perspective. In addition, managers should provide plenty of feedback. People need a non-confrontational approach so that they can internalize the things they are doing well, as well as, focus on the things they can improve. Ultimately, managers should take a moment to think about the consequences of their behavior. Is the behavior controlling, or does it improve collaboration, content, or choice for the employee?

Collaboration

“On most tasks, especially those that involve some degree of complexity and require some degree of ingenuity, people are able to do a better job in well-functioning groups than they can on their own. They are also more likely to be excited about their work. Both effects are due to the exchange of talent and resources that occurs as a result of cooperation - and also to the emotional sustenance provided by emotional support. People will typically be more enthusiastic where they feel a sense of belonging and see themselves as part of a community than they will in a workplace in which each person is left to his own devices.”

Content

“What is a good job? … It offers a chance to engage in meaningful work. (A good job) isn’t just that the process of working provides enjoyment, but that the product being made (or the service provided) seems worthwhile and important. … The question is not just ‘Are we having fun yet?’ but ‘Are we making a difference?’” Even jobs that don’t seem interesting can be made palatable if offered “a meaningful rationale for doing it anyway (in terms of its indirect effects, for example), and giving people as much choice as possible about how they perform the task.”

Choice

“We are most likely to become enthusiastic about what we are doing … when we are free to make decisions about the way we carry out a task. The loss of autonomy entailed by the use of rewards or punishments helps explain why they sap our (personal) motivation.” One researcher, Peter Scholtes, has observed, “People don’t resist change, they resist being changed.” Critics have argued that this is simply managing by inaction. “The truth of the matter is that creating structures that support worker autonomy is itself a challenging job.”

Conclusion

The quote from Lao-tzu (the father of Taoism) shows that he recognized over 2600 years ago a problem that we’re still grappling with today. It is certainly time for a change.