Why Incentive Systems Fail
Eric Withee
Kameel Husain
Introduction
• How are the
incentives used
today in
corporations?
• What are incentives
trying to
accomplish?
• Are incentives really
working?
Origins of the Reward System
• Behaviorist Theory –
Positive/Negative
Reinforcement
• In 40 Years, Thinking
Hasn’t Changed
• Monkey Experiment?
Financial 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 Fail
• There Has Been
Tremendous
Research on
Tweaking the
Incentive Plan
• Still, There Are
Fundamental Flaws
In Behaviorism
Itself
• 6 Reasons For
Failure.
1. Pay 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 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 Relationships
• Forces People to
Compete For
Rewards
• Competition Creates
Dissent
• Damages
Relationships
Between Managers
and Employees
4. 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-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 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
Conclusion
• 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?
• Alfie Kohn, “Why Incentive Plans
Cannot Work.” Harvard Business
Review.