Is the Purpose of Incentives to Motivate People?

Article after article tells us that we should halt our use of incentives because people aren't motivated by money.  Or because they are motivated by money, but to do the wrong things.

I can't help feeling that many of them are missing the point.

Many of the incentive arguments centered around whether or not money motivates people reflect a wrongheadedness about the role of and reason for variable pay.  This stems in no small part from the Deci/Kohn/Pink worldview that contingent rewards exist solely as bluntheaded instruments of control, as bribes, as a means of getting people to do things they would otherwise not be inclined to do.

I reject this point of view.  It suggests that most employees come in each day unwilling to do good work and unwilling to help their organizations succeed.  I don't buy that.  While there are bad apples in every bunch for sure, I don't think it's true of most places and for most workers.

Where it is true, however, I would agree that incentives have little chance of producing any lasting positive effect.  Truth is, you have to create the conditions for motivation - trust, transparency, a sense of shared interest, good work systems, etc. - as a baseline before any reward is going to be worth the investment.  If your employees don't walk in the door each day motivated to do good work, you have problems that no incentive plan is going to fix.

I don't believe that the purpose of incentive is to motivate people.

I would suggest that the purpose of incentive pay is - in fact - to influence the efforts and choices of workers who had better already have a baseline level of motivation, by calling out top priorities, by guiding them to areas and activities where they can create the most value, by signaling the importance of collaboration through highlighting shared goals and the opportunity for shared reward, and by defining a form of partnership through which employees have the chance to share in the economic success they help produce.

Variable pay - incentives - will be an critical part of the compensation landscape going forward.  I am convinced of it. And not because today’s workers need to be bribed to do their jobs well.  Rather, it will be because a static, inflexible, unchanging reward package with no connection to the things the organization must accomplish to succeed is a distinct competitive disadvantage in a world as unpredictable and fast-changing as ours. 

Creative Commons image "Question!" by Stephan Baudy

Comments

[Paul Hebert]

Fabulous. You're dead on.

I would add that incentives become more important as guideposts and touchstones for effort as priorities, strategies and activities continue to change on a faster and faster timeline. Redirecting "existing motivation" is a critical requirement. And... unfortunately, requires more skill than ever since it is changing so much.

Great post Ann.

[Ann Bares]

Thanks, Paul. And great additional point of emphasis - guideposts and touchstones are particularly important as the waters get turbulent and move more quickly.

Appreciate the reinforcement. When Paul Hebert agrees with me, then I know I'm on the right track! :)

[E James (Jim) Brennan]

Correct. Incentives reflect the motivations of management rather than that of the performer. Incentives, bonuses and all other forms of contingent compensation are superior ALLOCATION methods because they involve quid pro quos beyond the ability of simple fixed salary to achieve.

Variable pay permits the employer to provide constant and compelling (to management, even if not to the actor) communication feedback on goals, progress, needs and adequacy of result output. Whether incentives tap into the motivations of the performer or not, they ease the conscience of the manager who can sleep better at night about the fairness of the reward distribution process and who can better defend payroll cost to the owners. THEY are always the ones most motivated by incentives.

[Ann Bares]

Jim:

True that - incentives do reflect the motivations of management. To that end, they are a communication tool as well as a management tool. Though ideally/hopefully not the only communication/management tools in use (although too often they are). Thanks!

[Peggy]

"Incentives reflect the motivation of management" - brilliantly said Jim! And this also nicely speaks to Ann's point about transparency being a motivator. It seems so simple, doesn't it! :-)

[Harry]

Actually the point Deci/Kohn/Pink have been trying to make for decades is that contrary to economists´ believes, people aren't unwilling to work. In fact they even desire to if they are trusted, have sense of shared interest, etc.

You´re not disagreeing with them. You´re spreading their message. Thank you for that.

[Bill]

Thanks for spreading their message, Ann.

[Ann Bares]

Harry and Bill:

While I appreciate your "thanks", it would appear that you are parsing out and enjoying one element of my post out of context - and then missing the bigger point. If you have read any of my posts on this topic (or have heard me speak on it), you would know that I do - in fact - agree with many of their points ... but strongly disagree with their message on rewards.

[Bill Salacuse]

Ann, you are absolutely right. There is a baseline for how employees behave: their mindset or orientation. I wonder if the purpose of incentives is really to encourage and APPLAUD employees for choosing the mindset that drives the behavior that makes their organization succeed. A mindset that replaces blaming and complaining with asking “what can I do about it”, for example. When employees are making this shift – even in small ways and in small numbers - the organization is improving and so are its results (today) and how it gets results (in the future). Of course there will always be employees who are not making the best choices (for the organization or themselves) and it seems unfair for them too to be rewarded. This is true also of incentive plans designed to influence behavior. There will always be employees who manage to get desired results (and rewards) with undesirable behavior (by leaving dead bodies in their wake, for example).

I think our job (even us Comp Pros) is to help our employees and one another choose the mindset and stay in the mindset that drives our behaviors towards helping one another and the organization be successful. How can we design and communicate rewards to applaud and spotlight the mindset that drives the behaviors? Do I sound naive?

[Ann Bares]

Bill:

Good points all. Naive? Not at all. We have to aim high, don't we?

Thanks for the comment.

[Mercedes]

Ann, great post as always. If you're correct that incentives do not have the purpose of motivating people, then we sure do have the label wrong! Merriam-Webster defines incentive as "something that incites or has a tendency to incite to determination or action". I do think incentives are meant to motivate, yet perhaps directionally rather than emotionally. I believe that's what you're saying through "guiding" and "signaling" employees. I see it on a spectrum of intrinsic to extrinsic motivation, as opposed to incentives motivate or don't motivate people.

[Ann Bares]

Mercedes:

It starts to feel a little like a semantics challenge, doesn't it? The point I was trying to make is simply that arguments for and against incentives - or contingent rewards - which focus strictly on the question of whether or not money motivates people are missing the broader purpose of variable pay in today's business world.

Always appreciate your thoughtful comments - thanks!