Six reasons why employee cash rewards can fail

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:

One, salary is not a motivating factor. 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.

Two, cash rewards punish more than they reward people. 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.

Three, rewards can damage work relationships. 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.”

Four, rewards ignore reasons for one’s achievement or failure to perform. 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 pay-for-performance plans.”

Five, rewards discourage risk-taking. 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.”

Sixth, rewards undermine interest. 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.”

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

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