The Econ 101 Management Method by Joel Spolsky. Once again Joel presents interesting ideas very well - past posts referencing Joel.
But when you offer people money to do things that they wanted to do, anyway, they suffer from something called the Overjustification Effect. “I must be writing bug-free code because I like the money I get for it,” they think, and the extrinsic motivation displaces the intrinsic motivation. Since extrinsic motivation is a much weaker effect, the net result is that you’ve actually reduced their desire to do a good job.
Alfie Kohn has some great books and articles on this, and related ideas - I know it is hard for many people to believe (the link provides some online articles that can help as well as some books).
Joel notes relying on extrinsic motivation to drive performance is an abdication of management.
Instead of training developers on techniques of writing reliable code, you just absolve yourself of responsibility by paying them if they do. Now every developer has to figure it out on their own.
You cannot buy this kind of motivation:
Not one bug in the hardware, not one bug in the software. And you just can’t find a product like that nowadays. But, you see, I had it so intense in my head, and the reason for that was largely because it was part of me. Everything in there had to be so important to me. This computer was me. And everything had to be as perfect as could be made. And I had a lot going against me because I didn’t have a computer to compile my code, my software.
From an interview of Steve Wozniak in Founders at Work: Stories of Startups’ Early Days by Jessica Livingston.
Update - The next day Joel posted: The Identity Management Method:
I’ve identified three major styles: two easy, dysfunctional styles and one hard, functional style, but the truth is that many development shops manage in more of an ad-hoc, “whatever works” way that may change from day to day or person to person.
January 7th, 2007 at 12:10 pm
[...] When focusing on providing solutions to customers, it is important to know that too much choice can be demotivating. [...]
April 28th, 2008 at 4:52 pm
[...] Why Extrinsic Motivation Fails - Dangers of Extrinsic Motivation - Alfie Kohn has some great books and articles on the problems with extrinsic motivation by [...]