Bonuses Might Backfire

It might seem obvious that people will be motivated by bonuses, but many scholars question this premise. Alfie Kohn has long suggested that workers are “punished by rewards” and urges that organizations avoid tying rewards to performance because of the negative consequences that can result. As an alternative to rewards, some experts recommend that managers foster a positive, upbeat work environment in hopes that enthusiasm will translate into motivation.

 

Although rewards can be motivating, they can reduce employees’ intrinsic interest in the tasks they are doing. Along these lines, Mark Lepper of Stanford University found that children rewarded for drawing with felt-tip pens no longer wished to use the pens at all when rewards were removed, whereas children who were not rewarded for using the pens were eager to use them. Similar experiments in which children completed puzzles have also shown that increasing rewards can decrease interest in the rewarded task. Some have questioned the extent to which these results generalize to working adults, but concern about rewards diminishing intrinsic motivation persists.

 

Rewards can also lead to misbehavior by workers. Psychologist Edward Deci notes, “Once you start making people’s rewards dependent on outcomes rather than behaviors, the evidence is people will take the shortest route to those outcomes.” Consider factory workers paid purely based on the number of units they produce. Because only quantity is rewarded, workers may neglect quality. Executives rewarded strictly on the basis of quarterly stock price will tend to ignore the long-term profitability and survival of the firm; they might even engage in illegal or unethical behavior to increase their compensation. A review of research on pay-for-performance in medicine found that doctors who were rewarded for treatment outcomes were reluctant to take on the most serious cases, where success was less likely.

 

Although there might be some problems with providing incentives, the great majority of research cited in this and the previous chapter shows that individuals given rewards for behavior will be more likely to engage in the rewarded behaviors. It is also unlikely that individuals engaged in very boring, repetitive tasks will lose their intrinsic motivation if the task is rewarded, because they never had any intrinsic motivation to begin with. The real issue for managers is finding an appropriate way to reward behaviors so desired behavior is increased while less-desired behavior is reduced.

 

  1. Do you think that, as a manager, you would use bonuses regularly? Why or why not?

Answer: The answer to this question will vary by student. But the answers will likely include reference to the motivational effects that variable-pay programs have on performance. Depending on the type of work and at what level, the additional value of bonuses could provide additional motivation for employees.

 

  1. Can you think of a time in your own life when being evaluated and rewarded on a specific goal lead you to engage in negative or unproductive behavior?

Answer: This answer asks for the student’s opinion from his or her experience and will vary based on the student’s opinion.

 

  1. Do you think providing group bonuses instead of individual bonuses would be more effective or less effective? Why or why not?

Answer: The answer will vary depending on the student’s belief’s regarding money as an incentive. But, the student should respond with a reference to studies that have found group incentives to be effective motivators is the criteria of the incentive is communicated clearly and its award is perceived to be fair.

 

  1. How would you design a bonus/reward program to avoid the problems mentioned in this case?

Answer: A bonus/reward program must be targeted at appropriate measures of performance. Otherwise, they could lead to outcomes that are not desired. Instead of measuring outcomes, the target could be related to specific goals set. The goals then would be defined based on significant criteria for desired outcomes including contribution to mission, measured production output, and quality of output.  Care would be taken to ensure that the criteria are communicated to employees to reduce any ambiguity about the program. And the judgment of performance would be transparent and open to observation to ensure perceived fairness in application.

 

Source: Based on N. Fleming, “The Bonus Myth” New Scientist 210, (2011), pp. 40-43; D. Woodward, “Perking Up the Workplace,” Director (Feb., 2011), pp. 33-34; and G. G. Scott, “How to Create a Motivating Environment,” Nonprofit World 28 (Sept./Oct. 2010),