What's Wrong With Incentive Programs Besides Everything?

Chances are, you've been a manager for quite a long time, maybe even much of your adult working life. If so, reading this article might be a bit like taking a bitter medicine because it's going to attack and tear down some assumptions you may have held for as long as you've been a manager. Perhaps this seems harsh, but it's true.

To begin, the idea that a company's management can "motivate" its employees may be the single most faulty assumption in the whole world of business management. Motivation isn't something to be injected into people. It's internal. Your employees had motivation the day they walked through your doors for the first time. They arrived with the intent to do a good job. The only thing you can do after that is de-motivate them.

Why would managers believe their employees are withholding some amount of effort because they haven't been offered a few bucks more for it? I'm not sure either. But that's the idea behind most incentive and rewards plans: that employees must be bribed to do their best. No matter how you slice it, an external rewards program really says, "Do this and you'll get that." It also says, "Don't do this and that is what will happen to you." There's a really good word for cynicism like this, but I don't talk like that in public.

Finally, it's a waste of a manager's time to try to manipulate employees into becoming motivated. It's impossible and attempting the impossible is a waste of time. Providing external rewards, like offering goodies for extra sales or faster service times, is an attempt to manipulate behavior.

Wait a minute. You don't believe me yet? Then take note of this: there are no credible studies that show any long-term benefits from external rewards systems. None. But there is research showing they do harm.

So why don't rewards and incentive plans work and how do they do harm? Five reasons tell the story.

They create damaging competition. Inevitably what happens when rewards for achievement are scarce (which is the typical scenario) is that employees compete with each other for the scarce rewards. And so looking good becomes far more important than doing well. Problems disappear under rugs. People start to "game the system" in order to come out on top. Customers lose out as their interests come in second as employees do everything possible to win the scarce rewards.

They damage teamwork and cooperation. Individually and in groups, employees fighting to win rewards end up seeing each other as adversaries, even enemies. They'll behave as if they don't work for the same company. Instead of working their hardest for common goals, they're being trained to be selfish. They may very well try to sabotage each others' work efforts.

Luck often determines the winners. Very often, one of the most important factors in determining work output is luck. The luck might be in being assigned to work on the fastest or most reliable machine, or to be scheduled to work the busiest and most profitable days for sales. Or it might be the luck to have gotten the best training or to work in the store with the most affluent customers.

Rewards punish more than they celebrate. Rewards programs with only one or a few prizes inevitably create a feeling of losing for more people than get a feeling of winning. Why would anyone want the majority of their work force to feel like losers much of the time? More often than not, employees see external rewards programs as thinly veiled attempts by management to seem "employee-friendly." Employees become skeptical of all management efforts as a result. And that, as you can see, is not a pretty picture.

They discourage creativity and innovation. Why take a risk that might destroy your chances of winning? Why spend the time and energy to find a new solution to a vexing problem if it means losing an easy sale that will keep you on track for a reward? Why indeed?

Before wrapping this up, let me make one confession. Reward and incentive programs do motivate employees in one sense. They motivate employees to earn rewards. But that's all they do. And when you take away the rewards, what's left to work for?So what can you do if you're unhappy about your employees' performance and want to see it improve? First, it's important to recognize that a person's motivation depends on the situation he is in. His actions will differ between work, home, and out socially with friends. Each situation provides its own internal rewards that motivate the individual's behavior.

Having said that, I have to return to the words of Frederick Herzberg, one of the pioneers of human performance, that I have paraphrased many times: "If you want people motivated to do a good job, give them a good job to do." So the question is, actually, how do you provide people with a good job to do?

How, indeed? You hold the answers already, for the most part. To give people a good job to do, takes these two steps:

In the final installment in this series, I'll pull all these ideas together and show you the key steps to giving your employees the best possible jobs to do.

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