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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