For happy people and improved performance, drop the incentive schemes


Numerous reports from well known organisations such as Gallup, suggest that employee engagement levels are as low as 30%. It saddens me to think that 7 out of 10 of my friends and family do not, to put it simply, enjoy their jobs. There is surely little doubt that many of today’s management and leadership principles and practices need to change to get us out of this mess. Well known management ‘gurus’, such as Dr W E Deming, have been speaking about this need for management change for decades. Between 1979 and 1982, for example, Ford incurred billion in losses. Deming, who was recruited to help them, questioned the company’s culture and the way the managers operated, saying that 85% of all problems in developing better cars was due to managements actions. By 1986, Ford had become the most profitable American auto company and for the first time since the 1920s, it’s earnings had exceeded that of their arch rivals, General Motors.

In this blog post I’d like to focus on one damaging yet extremely common management practice. It can be highlighted by one short sentence:-

“Do this and you’ll get that”.

Yes, incentive or bonus schemes.


Many studies in social psychology have shown that people who expect rewards do not even perform as well as those who expect nothing. In terms of changes in attitudes or behaviors, rewards offer only temporary compliance and certainly no long lasting changes. In fact, rewards and punishment are really two sides of the same coin, with rewards being just as manipulative. How different is being told what will happen to you if you do X, from being told what you’ll receive for doing Y? People feel punished if they don’t get the reward they were hoping for, too.


Collaboration will not emerge and if it was ever in existence, it will be killed. One of the main culprits for this is competition between your people. Team work is required but unfortunately, it will largely cease to exist when faced with the resulting competition.


To put an end to low productivity, management needs to ask themselves questions and study what the causes are. Incentive plans squash this by not answering and/or ignoring the answers to these questions.

Experimentation and learning

People will not want to take risks. People will not want to experiment. If we don’t experiment, how will we learn and grow ourselves and our knowledge and understanding of our world of work? The irony too is that a number of organisations start off by taking risks only to stop once they’re large and established.

Undermine our love for work

What can be more motivating than loving what you do? The answer is probably, nothing. When rewards erode intrinsic motivation (and they will) people have no reason to work other than for rewards. This creates a need for the self same incentive schemes and so an awful self for-filling prophecy will exist.

A quick word on metrics.

Here are a few examples of commonly used metrics that are often linked to individual performance appraisal systems and incentive schemes:-
– Call centre agents: the time taken to answer an incoming phone call.
– IT Support Service technicians: the number of support tickets closed and the time taken to close them.
– Software Development teams: a team’s velocity or the number of bugs logged by a tester.

John Seddon, a well known British occupational psychologist, author and speaker says; “Targets and all other arbitrary measures create a de facto purpose, making your entire system worse. When you incentivize behavior you always get less of the behaviors that you actually need.”

Using our examples above, the following is likely to occur:-
– The folks in the call centre will end existing phone calls prematurely in order to quickly answer new phone calls, providing a sub-standard service.
– Some folks in the IT support team will scavenge their team’s list of support tickets for the ones that are easy to solve; in order to increase their numbers of closed tickets. They will favour ‘quick and dirty’ support over a slightly longer yet far greater support experience for their customers. Teamwork, collaboration and mutual learning will all but vanish.
– The folks in the software development team are likely to rush their development and testing in order to inflate their velocities. If their velocities are calculated using estimates, they could intentionally increase their estimates too, in order to inflate the figures. The testers will log bugs for every issue they find, even spelling mistakes, wasting huge amounts of time.

I’m sure you’ll agree that none of these behaviours are desirable.


I am a large advocate of systems thinking. Dr W E Deming‘s “95% rule” states that about 95% of the performance of an organisation and its people is governed by the system within which the work happens and not by the individuals themselves. Dr Deming also wrote about “7 Deadly Diseases” relating to management practices. In 3rd place are personal review systems or evaluation of performance.

For years, people like Alfie Kohn and more recently Daniel Pink, have said that we must pay people well enough and then help them forget about money. Money does not motivate people involved in knowledge work. What motivates these people are things like working with a strong and common shared purpose, like the mastering of an art or skill, and like being able to work in an autonomous fashion.

Why do we continue with this archaic method when all the research and experience available to us says it is controlling and dysfunctional? Maybe for the same reasons so many other dysfunctional management practices still exist – reasons that continue to elude many of us…….

To end off, a quote from Alfie Kohn; “Reward systems are great. They work really well for training your family pet.”


About Mark Nilsen

My name is Mark Nilsen. Thanks for stopping by! My love for computers began with a Commodore 64, before I was 10 years of age. While studying towards a Commerce degree majoring in Industrial Psychology and Information Systems, I found myself far more interested in playing international sport, and in computer systems and computer programming. Currently, my professional life involves building software, optimizing processes and attempting to create and maintain highly effective, motivated teams. More recently, systems thinking and organisational cultures and mindsets have fascinated me (and frustrated me, but mostly fascinated me!). I believe effectiveness trumps efficiency, every time.
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2 Responses to For happy people and improved performance, drop the incentive schemes

  1. Donn says:

    Hey Mark, couldn’t agree more! These schemes do degrade performance but you must factor in the laziness concern. Companies try these incentives as a lot of people are inherently lazy and slack! If Mr X gets 10k a month, why does he need to put more effort in?but if he sees more than 50 clients he can get 2k bonus, so he tries harder…just saying
    Keep well, Cheers

  2. marknilsen says:

    Hi Donn

    Thanks for joining in the conversation.

    The notion that people are inherently lazy is a Theory X management style which has been proven counter effective in modern practice. On a purely economic level for example, this management style is far more likely to cause dis-economies of scale.

    In my opinion, this approach is very much part of the reason for the mess the world of knowledge work is in right now.


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