Six rea­sons why em­ployee cash re­wards can fail

ELBONOMICS: In­cen­tives work only for peo­ple who want to be bribed to do things they don’t like to do.

Business World - - THEECONOMY - REY ELBO One, salary is not a mo­ti­vat­ing fac­tor. Two, cash re­wards pun­ish more than they re­ward peo­ple. Three, re­wards can dam­age work re­la­tion­ships. Four, re­wards ig­nore rea­sons for one’s achieve­ment or fail­ure to per­form. Five, re­wards dis­cour­age risk-t

Some­time ago, you cited many ex­am­ples of zero-cash strate­gies that mo­ti­vate em­ploy­ees. But still, why do many or­ga­ni­za­tions and their peo­ple man­agers con­tinue to rely on var­i­ous forms of em­ployee in­cen­tive pro­gram that in­volved giv­ing cash re­wards? — Doubt­ing Dory.

A col­lege stu­dent con­fronted the pro­fes­sor after class and asked for the mean­ing of the no­ta­tions on his ex­am­i­na­tion pa­per. The stu­dent in­quired: “How come I got 65% on a pa­per you marked “good and orig­i­nal?” The pro­fes­sor said that the ex­pla­na­tion was sim­ple:

“The part that was not good ap­pears orig­i­nal, and the part that was orig­i­nal wasn’t good.”

A thing is not right be­cause many peo­ple are do­ing it. But, you’ve an in­ter­est­ing ques­tion. Still, why do many man­age­ment ex­ec­u­tives rely on cash in­cen­tives? Per­haps they’ve not stud­ied care­fully the re­la­tion­ship be­tween cash in­cen­tives and their ef­fects on la­bor pro­duc­tiv­ity, morale and other re­lated things.

In 1993, Al­fie Kohn, an Amer­i­can author and lec­turer in hu­man be­hav­ior, wrote the ar­ti­cle “Why In­cen­tive Plans Can­not Work” for the Har­vard Busi­ness Re­view. Look­ing back, I still find it a time­less guide for man­agers to un­der­stand what the best ap­proach is to mo­ti­vate peo­ple. Kohn says: “Re­wards buy tem­po­rary com­pli­ance, so it looks like the prob­lems are solved. It’s harder to spot the harm they cause over the long term.” Let’s sum­ma­rize the fol­low­ing ar­gu­ments of Kohn here:

Kohn cites many stud­ies show­ing “pay typ­i­cally ranks only fifth or sixth… There is no firm ba­sis for the as­sump­tion that pay­ing peo­ple more will en­cour­age them to do better or even in the long run, more work.” I must con­cur with Kohn. In my more than 30 years of con­duct­ing exit in­ter­views with more than 1,000 re­signed em­ploy­ees, the top three rea­sons why em­ploy­ees re­sign from their work are as fol­lows: toxic bosses, lack of chal­leng­ing work as­sign­ments, and low pay and perks, in that or­der.

That’s be­cause co­er­cion and fear de­stroy mo­ti­va­tion and would rather cre­ate de­fi­ance, de­fen­sive­ness and rage, ac­cord­ing to Kohn. “Kick in the pants — may pro­duce move­ment but never mo­ti­va­tion.” Cit­ing the work of Fred­er­ick Herzberg, Kohn says “pun­ish­ment and re­wards are two sides of the same coin. Re­wards have a puni­tive ef­fect be­cause they, like out­right pun­ish­ment, are ma­nip­u­la­tive. ‘ Do this and you’ll get that’ is not re­ally dif­fer­ent from “do this or here’s what hap­pen to you. Peo­ple who are in the same race for ca­reer ad­vance­ment are “of­ten the ca­su­al­ties of the scram­ble for re­wards.” The play­ers them­selves re­duce the pos­si­bil­i­ties for greater co­op­er­a­tion among them­selves. Each and ev­ery worker work hard for their in­di­vid­ual gain rather than the ben­e­fit of a team or group or even the whole or­ga­ni­za­tion. Kohn writes: “The surest way to de­stroy co­op­er­a­tion and, there­fore, or­ga­ni­za­tional ex­cel­lence, is to force peo­ple to com­pete for re­wards or recog­ni­tion, or to rank them against each other.”

Kohn ar­gues that many peo­ple man­agers don’t even know the an­swer to is­sues like the ad­e­quate or lack of prepa­ra­tion of their work­ers to do the job right, their ef­fec­tive col­lab­o­ra­tion with their peers and bosses, and the or­ga­ni­za­tional hi­er­ar­chi­cal for­mat that may at times look in­tim­i­dat­ing to peo­ple. “Some ev­i­dence sug­gests that pro­duc­tive man­age­rial strate­gies are less likely to be used in or­ga­ni­za­tions that lean on pay­for­per­for­mance plans.”

Kohn says the root of the prob­lem of­ten lies “( W)hen­ever peo­ple are en­cour­aged to think about what they will get for en­gag­ing in a task, they become less in­clined to take the risks or ex­plore pos­si­bil­i­ties, to play hunches or to con­sider in­ci­den­tal stim­uli. In a word, the num­ber ca­su­alty of re­wards is cre­ativ­ity.” Be­cause of this, “ex­cel­lence pulls in one di­rec­tion, re­wards pull in an­other. Tell peo­ple that their in­come will de­pend on their pro­duc­tiv­ity or per­for­mance rat­ing, and they will fo­cus on the num­bers.”

Ev­ery­one’s goal is ex­cel­lence, but “no ar­ti­fi­cial in­cen­tive can ever match the power of in­trin­sic mo­ti­va­tion. 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 pay check. They work be­cause they love what they do,” ac­cord­ing to Kohn. This echoes what in­dus­try leader Toy­ota has been say­ing since time im­memo­rial: “Peo­ple go to Toy­ota not to work, but to think.” This is sim­pli­fied in ev­ery Toy­ota state­ment that reads: “Good think­ing. Good prod­ucts.”

“What­ever is the rea­son that you may think over and above the above-stated rea­sons, you’ll come to the con­clu­sion that any in­cen­tive tends to make peo­ple less en­thu­si­as­tic about their work, and there­fore less likely to ap­proach it with a com­mit­ment to ex­cel­lence.”

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