Why Incentive Plans Cannot Work

. 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.

People who do exceptional work may be glad to be paid and even more glad to be well paid, but they do not work to collect a paycheck. They work because they love what they do.

Anyone reading the literature on this subject published 20 years ago would find that the articles look almost identical to those published today.” That assessment, which could have been written this morning, was actually offered in 1975. In nearly forty years, the thinking hasn’t changed.

Outside of psychology departments, few people distinguish between intrinsic and extrinsic motivation.

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

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.

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.

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

when people are asked to guess what matters to their coworkers—or, in the case of managers, to their subordinates—they assume money heads the list. But put the question directly—“What do you care about?”—and pay typically ranks only fifth or sixth.

Punishment and rewards are actually two sides of the same coin. Both have a punitive effect because they are manipulative.