What’s the Value of a Big Bonus? by Dan Ariely
So it turns out that social pressure has the same effect that money has. It motivates people, especially when the tasks at hand require only effort and no skill. But it can provide stress, too, and at some point that stress overwhelms the motivating influence.
When I recently presented these results to a group of banking executives, they assured me that their own work and that of their employees would not follow this pattern. (I pointed out that with the right research budget, and their participation, we could examine this assertion. They weren’t that interested.)
This is an interesting look at an effect of bonuses. We all know monetary bonuses can influence behavior. The problem is the type of behaviors that result. Huge bonuses, for example, create huge incentives to risk the future of the company for the chance at a huge bonus for the executive. Extrinsic motivation leads to many problems.
Problems with bonuses: Losses Covered Up to Protect Bonuses – “Pay for Performance” is a Bad Idea – Problems with Bonuses – Book: Punished By Rewards: The Trouble With Gold Stars, Incentive Plans, A’s, Praise, and Other Bribes by Alfie Kohn – posts on executive pay