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Financial Rewards and the Damage They Do

Posted by leslieallan on Thu, 17/02/2011 - 06:38
Back to blog homepage for: People and Organisations

Dan Pink examines the common management notion that financial incentives drive employee performance.

Scientific studies spanning the last forty years show that financial rewards boost performance in only a limited range of circumstances. These are where the task is routine and rule-based and in which there is only a single solution. Where the work involves judgment, creativity or innovation, financial rewards lead to a decrease in performance as people focus on the extrinsic reward instead of broadening their mind to possible solutions. Financial rewards can lead to impaired performance even for jobs that require a modicum of cognitive thinking.

A meta-analysis of 51 studies on pay for performance plans, led by Dr. Bernd Irlenbusch of the London School of Economics, concluded, "We find that financial incentives ... can result in a negative impact on overall performance."

For many jobs in the 21st century, employers will elicit peak performance not by monetary rewards, but by creating jobs with autonomy, mastery and purpose. Find out more by viewing the video of Dan Pink's address at http://www.ted.com/talks/dan_pink_on_motivation.html and checking out Business Performance Pty Ltd's employee motivation factors page at http://www.businessperform.com/workplace-training/workplace_environment.html

What do you think? How do you use financial rewards in your organization?

 

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People and Organisations

A blog by leslieallan

Leslie Allan's news, commentary and sharing of what's happening in the world of work. People are our most important asset, we hear organisations say. How are organisations turning this wish into reality and how are they going? Read on to find out and to contribute your ideas.

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Hello! I'm a great believer in the power of stories, whether they be folk tales, novels, films or TV dramas.
 
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