In business, in the Work Programme, in sales departments, on production lines and at governmental level, leaders consistently and regularly use incentives to incite greater effort and productivity. Effort is the thing that every business, every governmental scheme and every sales department wants to maintain.
So do incentives work?
Obviously it depends, however it seems we have quite a simplistic view of incentives: Offer a reward, usually monetary, for specific task completion and effort will increase. Unfortunately us humans are much more complex than that, and the actual truth from the psychological literature is that some of the things that organisations do intending to motivate people often backfire and reduce performance and compliance with the desired results. It seems we don’t know what else to do, and sometimes even when an incentive does not increase effort, we resort to ever increasing the ‘value’ of the incentive, hoping that eventually the effort on the task will be increased.
Research shows that are three things that organisations can look at before designing incentive schemes, there are many more too, but we can start with these:
1. Motive to reciprocate…kindness counts
People are quite simple in that they are motivated to voluntarily cooperate with their boss, superior or an organization if they are treated kindly. We all have discretion over the intensity or type of activity we perform and if we feel we are being treated badly, we may very well adjust the level of effort we are prepared to put in. Furthermore, we always know that there is some material gain for bosses, superiors or organisations if the task is completed well and we put in lots of effort. Quite simply, we will be less likely to want to contribute to the gain that the boss or superior gets if we think they are not treating us well.
Straight away we can see that even if you have a massively generous contract (e.g. benefits system, commission payments, bonus scheme) but then there is an explicit threat in the contract of, for example, firing or sanctioning, then the levels of effort expected and perceived generosity do not go together.
If we do not want to contribute to the ‘boss’s’ material gain, we will adjust our effort accordingly. And yes, this is even if it is detrimental to us too.
2. Social Approval
We all, to differing degrees, want to be the object of others’ admiration and not be the object of their disapproval, contempt and disgust. So sometimes we do things just because we do and just for social approval and feelings of connections, despite what material benefits there may be on offer. So an award scheme may be seen to be a good example of how we publicly offer admiration of colleagues for those that win the prize, but what of the people who participate and don’t win an award? Are they left shamed? If they are left shamed, there are a lot of people lacking any social approval incentives and their effort will be minimal and dimished. So although there is the temptation for organisations to create a super competitive environment to encourage effort, the reality is that if there is any shaming of people, effort may be catastrophically affected. The ‘Sales Board’ could have it’s very own chapter right here because it totally relies on a culture of public shaming and may well be negatively affecting 80-90% of your sales teams.
There is another problem with monetary incentives for behavior that people would just do anyway – it diminishes the experience of that task. If we are paying or incentivizing, or controlling, what people would do anyway it takes away the intrinsic pleasure of doing that task. Furthermore, if the behavior we are incentivizing is a moral behavior, we can now no longer trust whether someone is actually moral, or indeed they are only behaving morally because they are being incentivized to do so. Paying people for moral behavior is a total contradiction, it can no longer be moral by definition, and so can no longer be a source of social approval and therefore have a detrimental effect on effort and also task compliance. Sales departments and call centres beware – are you paying people to be polite and yet still having masses of customer complaints?
The harsh truth is that money can decrease the psychological incentive to perform the activity and rewarding people monetarily for obeying social norms may in fact weaken norm enforcement.
3. Enjoyment of tasks
People are motivated when they enjoy the task, and it seems historically that economists have assumed that people dislike effort and so require monetary encouragement to put in that extra effort. And as we have already seen from the research above, adding a monetary reward to a task that already has pleasure starts crowding out that intrinsic pleasure and we soon forget we actually liked the task just for it’s own sake. What is worse is that we then become reliant on the monetary reward for completing the task, so then if the incentive is removed or changed, we stop doing the task voluntarily. All the fun has been sucked out and we are in a worse place than we were to start with! Incentives become like the drug to get people to do things to maximum effort, and the irony being that in times gone by, they would have done them anyway without any incentive!
So, there we have three ways in which we can easily and accidentally demotivate when we really intend to motivate. We are a complicated lot. And money, it seems, does not always make the world go round.