Why Incentive Systems Fail Eric Withee Kameel Husain.

Why Incentive Systems FailWhy Incentive Systems FailEric Withee

Kameel Husain

IntroductionIntroduction

• How are the incentives used today in corporations?

• What are incentives trying to accomplish?

• Are incentives really working?

Origins of the Reward SystemOrigins of the Reward System

• Behaviorist Theory – Positive/Negative Reinforcement

• In 40 Years, Thinking Hasn’t Changed

• Monkey Experiment?

Financial Incentives and PerformanceFinancial Incentives and Performance

• Is There a Positive Correlation Between Incentives and Performance?

• Jenkins Study – 90 U.S. Corporations• 57% Found Positive Effect on

Performance• BUT, All Results Were Quantitative

in Nature – Faster, More, etc.• No Analysis of the Quality

Why Rewards FailWhy Rewards Fail

• There Has Been Tremendous Research on Tweaking the Incentive Plan

• Still, There Are Fundamental Flaws In Behaviorism Itself

• 6 Reasons For Failure.

11 . .Pay Is Not A MotivatorPay Is Not A Motivator

• Employees Value Pay Less Than Most Expect.• Paying More Does Not Mean Better Work• Pay Cuts Often Demotivate, But Pay

Increases Rarely Increase Satisfaction or Job Quality

2. Rewards Punish2. Rewards Punish• Incentives are

Manipulative• Punishment and

Rewards are Two Sides of the Same Coin.

• Creates a Workplace In Which People Feel Controlled

3. Rewards Rupture Relationships3. Rewards Rupture Relationships

• Forces People to Compete For Rewards

• Competition Creates Dissent

• Damages Relationships Between Managers and Employees

4. Rewards Ignore Reason4. Rewards Ignore Reason• Incentives Are

Easy Fix for Problems – Band Aid

• Rewards Ignore What Employees Need to Perform – Useful Feedback, Social Support, Self Determination, Environment

5. Rewards Discourage Risk-Taking5. Rewards Discourage Risk-Taking

• Limits Creativity• Fear of Reward Loss

(Punishment) Deters Employees From Trying New Things

• Keeps Them Thinking Inside The Box

• “Do That and You’ll Get This”

• Do Rewards Motivate?

6. Rewards Undermine Interest6. Rewards Undermine Interest• Intrinsic Vs. Extrinsic

Motivation• The Need For

Managers to Motivate Through Incentives Gives the Impression That the Job is Undesirable

• Reward Drives Behavior

• Pay-For-Performance Lowers Enthusiasm

ConclusionConclusion

• Cannot Add Intrinsic and Extrinsic Motivators

• Turns Focus Away From Job• Social Capital Is Better Approach• Bribes in the Workplace Simply

Can’t Work

Questions?Questions?• Alfie Kohn, “Why Incentive Plans

Cannot Work.” Harvard Business Review.