Why Incentive Plans Cannot Work

Incentive programs, and the performance appraisal systems that accompany them, reduce the possibilities for cooperation. Peter R. Scholtes, senior management consultant at Joiner Associates Inc., put it starkly, “Everyone is pressuring the system for individual gain. No one is improving the system for collective gain. The system will inevitably cra... See more

As Thane S. Pittman, professor and chair of the psychology department at Gettysburg College, and his colleagues point out, when we are motivated by incentives, “features such as predictability and simplicity are desirable, since the primary focus associated with this orientation is to get through the task expediently in order to reach the desired g... See more

Do this, and you’ll get that” is not really very different from “Do this or here’s what will happen to you.”

not receiving a reward one had expected to receive is also indistinguishable from being punished.

Do this, and you’ll get that” is part of the fabric of American life.

Behaviorist theory, derived from work with laboratory animals, is indirectly responsible for such programs as piece-work pay for factory workers, stock options for top executives, special privileges accorded to Employees of the Month, and commissions for salespeople

John Condry, was more succinct: rewards, he said, are the “enemies of exploration.”

Incentives, a version of what psychologists call extrinsic motivators, do not alter the attitudes that underlie our behaviors. They do not create an enduring commitment to any value or action. Rather, incentives merely—and temporarily—change what we do.

His analysis, “Financial Incentives,” published in 1986, revealed that 16, or 57%, of the studies found a positive effect on performance. However, all of the performance measures were quantitative in nature: a good job consisted of producing more of something or doing it faster.

. For each person who wins, there are many others who carry with them the feeling of having lost. And the more these awards are publicized through the use of memos, newsletters, and awards banquets, the more detrimental their impact can be.