STREET DOGS

WE TAKE at face value the idea that large bonuses are the chief motivation for business leaders. But Ian Rhymers, of the psychology department of City University, offers a different perspective. “There is limited evidence,” says Rhymers, “on the effect that bonuses can have. But, basically, it involves two assumptions: that if you pay people depending on how well they perform they are more motivated to perform well; that if they are more motivated to perform well, they will perform better.

“The evidence is that at times neither of these hold true. There are intrinsic and extrinsic motivations. Extrinsic motivations are those rewards, like bonuses, coming from the outside. Intrinsic motivations are one’s sense of doing a good job. And several classic studies — children being paid for doing puzzles, charity workers being paid for raising funds — have shown that intrinsic motivation tends to crowd out extrinsic rewards. “We don’t assume nurses and social workers need bonuses to work hard, we just assume that they want to … so what’s different about CEOs?” asks Rhymers.

As to whether they will perform better and achieve more, it’s at the bottom of a firm’s hierarchy that bonuses are more effective — where speed matters, where efficiency matters — on a production line, or picking fruit. Those at the top of an organisation, who have to think creatively and problem-solve, may in fact perform worse with bonuses hanging over them. “Whether this applies to your standard CEO is debatable,” says Rhymers, “but it does raise the possibility that bonuses create additional pressure and divert attention from the task at hand.”— Adapted from BBC Radio 4’s All in the Mind. Michel Pireu — e-mail pireum@streetdogs.co.za