When Performance-related Pay Backfires
Posted on August 3, 2009 Comments (2)
When Economic Incentives Backfire by Samuel Bowles, Sante Fe Institute
Punished by Rewards, by Alfie Kohn, is a great book on this topic. The area of “motivating” employees is one it is often hard for managers to learn. Even managers that have been studying Deming, Ackoff, Ohno… for years still have trouble with the idea that trying to find the right incentive scheme to motivate the right behavior is the wrong approach. Read the The Human Side Of Enterprise by Douglas Mcgregor (in 1960) to re-enforce the understanding of human motivation provided by Toyota’s respect for people principles.
Managers need to eliminate de-motivation in the work systems not try and find bonus schemes to motivate behavior. Eliminating de-motivation is often much more work. You can’t just get some money from the bonus pool and start giving it away. You have to manage. But if you are a manager you shouldn’t be afraid to actually manage the system and make it better.
Related: “Pay for Performance” is a Bad Idea – Reward and Incentive Programs are Ineffective — Even Harmful by Peter Scholtes – The Defect Black Market – What’s the Value of a Big Bonus? – Problems with Bonuses – Losses Covered Up to Protect Bonuses – Stop Demotivating Employees
When performance-related pay backfires:
‘We find that financial incentives may indeed reduce intrinsic motivation and diminish ethical or other reasons for complying with workplace social norms such as fairness. As a consequence, the provision of incentives can result in a negative impact on overall performance,’ said Dr Bernd Irlenbusch from the LSE’s Department of Management.
The research concludes that companies should be aware that the provision of performance-related pay could result in a net reduction of motivation across a team or organisation.
Categories: Competition, Data, Deming, Economics, Management, Performance Appraisal, Psychology, quote, Statistics, Systems thinking
Tags: bonus, demotivate, executive pay, management, management research, motivation, respect for people
2 Responses to “When Performance-related Pay Backfires”
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November 2nd, 2009 @ 11:46 pm
“When people drop paper into the water she hides it under a rock at the bottom of the pool. The next time a trainer passes, she goes down to the rock and tears off a piece of paper to give to the trainer…”
May 24th, 2010 @ 8:13 am
[...] keep trying things we have proven over and over again don’t work, like pay for performance schemes for individual [...]