Why cash incentives don't always motivate employees

Employee motivation is a delicate matter, it has many different aspects. How do you get someone to become the best version of themselves? How do we motivate ourselves to do something? Sometimes, while completing a task, we, like a tired runner, suddenly fizzle out and give up before reaching the finish line. Why do we lose motivation halfway to the goal?

Daniel Pink has written a great book on motivation. It's called Drive. What really motivates us. Talking about motivation, Pink distinguishes two types of motivation: external and internal.

Extrinsic motivation is associated with external rewards such as money or praise. Intrinsic motivation is something that is formed by the person himself and can be expressed simply in the joy of successfully completing a difficult task.

Pink also describes two fundamentally different types of problems: algorithmic and heuristic. Algorithmic problems are solved sequentially according to the established instructions, and their solution leads to a predetermined result. There are no instructions or specific sequence of actions to perform a heuristic task. Its solution must be approached creatively, experimenting in search of the most successful strategy.

As you can see, different types of motivation and tasks are fundamentally different from each other. Let's consider what the fundamental difference between them is, depending on what type of incentive is offered to the employee.

Standard rewards

It used to be that cash incentives were the best way to motivate staff. If the employer wanted the employee to stay with his company or to increase his productivity, he could simply take advantage of financial incentives. However, the question of the appropriateness of using monetary incentives as a motivating factor has become controversial over time in many ways. It is quite easy for a qualified employee to find a job with a salary in the desired range. Pink comments on the issue as follows:

Of course, the starting point for any discussion of employee motivation is a simple fact of life: people need to make a living somehow. Salaries, contractual payments, some allowances, office benefits - these are what I call standard incentives. If the standard incentives offered to the employee objectively do not correspond to the expended efforts, all his attention will be focused on the unfairness of the situation and concern for his financial situation. As a result, the employer will not be able to take advantage of either the predictability of the results of extrinsic motivation, or the unexpected effects of intrinsic motivation. The level of motivation will generally be close to zero. The best way to use cash incentives as a motivating factor is to provide employees with enough wages so that they do not worry about the money issue.

Once the issue of standard incentives is cleared up, other carrot and stick options often come into play to incentivize workers. Many of them ultimately lead to the opposite of the intended results.

If, then incentive

The incentive for this principle is that the employer promises the employee some kind of remuneration for completing a specific task.

For example, if an employee fulfills a sales plan, then the employer pays him a certain bonus. However, this type of reward is always associated with certain risks. It usually entails a short-term surge in motivation, but decreases it in the long term. The very fact that some kind of reward is offered for the result of the efforts made means that the work is still work. This has an extremely negative effect on intrinsic motivation. In addition, the very nature of rewards is such that they narrow the focus of our perception, as a result of which we tend to ignore everything except the finish line itself. This is convenient when solving algorithmic problems, but this approach negatively affects the performance of heuristic problems.

Teresa Amabile and other researchers on this topic have found that extrinsic motivation can be effectively used when employees solve algorithmic problems, that is, problems that are solved using specific actions, reproduced in a certain sequence to obtain a predictable result. But for more “right-brain” tasks that require ingenuity, flexibility, and a holistic view of the work being done, such conditional rewards can be detrimental. Employees who are encouraged in this way tend to approach their work in a superficial way and do not resort to unconventional solutions to problems.

Goal setting

If we set specific goals for ourselves to increase motivation, how does this affect our thinking and behavior?

Like any other means of extrinsic motivation, goals narrow the focus of our perception. This determines their effectiveness, as they force us to concentrate on achieving specific results.

However, when performing complex or abstract tasks, external rewards can prevent employees from thinking larger, which is necessary for innovative solutions.

Moreover, when achieving a goal comes to the fore, especially if a short period of time is given for this, the result is measurable in specific indicators and a large reward is offered for it, this limits our idea of our own capabilities. Business school teachers have found a lot of evidence that setting specific goals can lead to employee misconduct.

As the researchers note, there are a great many examples of this. After the American company Sears set profit margins for car repair workers, they began to inflate the cost of services provided and "repair" what did not require repair. When Enron set itself the goal of increasing revenues, the desire to achieve the desired indicators by any means possible led to its complete collapse. Ford was so focused on making cars of a certain kind and a certain weight at a certain price in a certain time, that it neglected to check the safety of the car's structure and released the unreliable Ford Pinto.

The problem with pushing extrinsic motivation to the fore is that some will take the shortest path to achieve their goal, even if they have to turn off the right path to do so.

Indeed, most scandals and examples of misconduct, which are already perceived as common in the modern world, are associated with attempts to achieve results at the lowest cost. Executives inflate their real quarterly earnings in order to grab additional bonuses. School guidance counselors adjust the content of the exam sheets so that graduates can go to college. Athletes take steroids to increase endurance and performance.

Employees with developed intrinsic motivation behave quite differently. When the results of the work themselves - the deepening of knowledge, the satisfaction of customers, their own self-improvement - serve to encourage activity, employees do not try to cheat and take the easy way. Such results can only be achieved honestly. And in general, in this case, there is no point in acting dishonestly, because the only person you will deceive will be you yourself.

The same goal pressures that can force an employee to act in bad faith can also lead to risky decisions. Striving by any means to achieve the goal, we tend to make decisions that in any other situation would not even be subject to discussion.

In this case, it is not only the employee who is motivated by external encouragement that suffers.

An employer seeking to shape the employee's behavior in this way can also fall into a trap. He will be forced to adhere to the chosen course, which in the end will be less profitable for him than if he did not begin to encourage the employee at all.

Prominent Russian economist Anton Suvorov has developed a complex economic model that demonstrates the effect described above. It is based on the theory of the relationship between the principal and the agent. The principal is the motivating participant in the communication: employer, teacher, parent. As an agent - motivated: employee, student, child. The principal mainly tries to get the agent to do what the principal wants him to do, while the agent decides to what extent the conditions proposed by the principal satisfy his interests. Using many complex equations that reproduce various scenarios of interaction between the principal and the agent, Suvorov came to conclusions that intuitively come to any parents who at least once tried to force a child to take out the trash.

By offering a reward, the principal signals to the agent that the task will be uninteresting or unpleasant for him. If it was interesting or enjoyable, then there would be no need for reward. But this initial signal, and the reward that follows the action, forces the principal to follow a path that is difficult to turn off. If he offers too little reward, the agent will refuse to complete the task. But if the reward turns out to be attractive enough for the agent, then, having provided it once, the principal will be forced to do it every time. If you give your son some pocket money to take out the trash, then rest assured that he will never do it for free again.

Moreover, over time, the proposed incentive will not be enough to motivate the agent, and if the principal wants the agent not to stop performing the assigned actions, he will have to increase the reward. Even if you manage to correct the employee's behavior the way you would like it, it is worth removing the incentive, and the results of your work will fizzle out.

Where extrinsic stimulation predominates, many people do exactly as much as is necessary to receive a reward, not more.

Therefore, for example, if students are promised some kind of reward for reading three books, many of them will not take the fourth, let alone just love reading. The same thing happens with many workers who reach targets and do not advance further. Of course, it doesn't even occur to them to set themselves the goal of making the company more profit in the long run.

Various studies also show that providing monetary rewards for exercising or quitting smoking initially produces great results, but once the rewards are removed, subjects quickly revert to their previous lifestyles.

When are rewards useful?

Rewards are useful when they are awarded for performing standard (algorithmic) tasks that do not require creativity. In the case of standard, repetitive activities that do not require creativity, rewards can somehow increase the motivation of workers without any side effects. This does not contradict common sense. According to researchers Edward L. Deci, Richard Koestner, Richard M. Ryan, rewards do not undermine the intrinsic motivation of a person doing boring, repetitive work, since doing such work does not generate intrinsic motivation at all. such.

You can increase your chances of success in providing rewards for chores by following these principles:

1. Explain why this activity is needed.

2. Recognize that the assignment is really boring.

3. Let the worker do the task in his own way (give him some autonomy).

Any external motivating reward should be unexpected and provided only when the task has already been completed. In many ways, this statement is quite obvious, as it assumes the opposite of the if-then approach with all its weaknesses: the employee does not focus solely on the reward, the motivation will not subside after the completion of the work, if the employee does not will be aware of the possible reward. However, be careful: if the rewards are no longer unexpected, they will be no different from the “if-then” rewards and will have similar consequences.