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Money Making Schemes Vs Real Business Ideas

If you want to build a committed, collaborative, and creative workforce, you have to pay employees for excellence, right? Not necessarily. Though most U.S. corporations use incentive programs, trying to reward quality may be a fool’s errand.

Why? Studies show that people who expect to receive a reward for completing a task typically underperform compared to those who expect no reward—particularly if the task requires sophisticated thinking. At the executive level, studies reveal minimal or even negative correlations between pay and performance, as measured by corporate profitability and other criteria.

Whether it’s piecework pay, stock options, commissions, or Employee of the Month privileges, pay-for-performance gains you one thing: temporary compliance. It may change people’s behavior in the short run, but it doesn’t alter the attitudes driving behavior. It can’t create an enduring commitment to your company’s values or lasting, meaningful change.

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So how can you build an exceptional work-force? Understand the real costs of pay-for-performance. Then consider more potent strategies—including long-term goal setting and training.

The Idea in Practice

Why Rewards Don’t Work

Pay-for-performance carries a high price for your organization in six respects:

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1. Pay doesn’t motivate. People need money, of course. But when asked what they care about most, pay typically ranks only fifth or sixth. Though cutting pay would damage morale, increasing it won’t necessarily improve performance.

2. Rewards punish. “Do this and you’ll get that” rewards aren’t too different from “Do this and here’s what’ll happen to you” punishments. People make little distinction between not receiving an expected reward and being punished. Pay-for-performance usually makes people feel manipulated rather than motivated to explore, learn, and progress.

3. Rewards rupture relationships. When you force people to compete for rewards, team-work evaporates. Viewing teammates as obstacles to their own success, employees pressure the system for individual gain. And instead of asking for help from managers—essential for enhancing performance—they conceal problems and present themselves as infinitely competent.

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4. Rewards ignore the causes behind problems. To solve workplace problems, managers must understand their causes: Are employees inadequately prepared? Unable to collaborate? Burned out? Too many managers use rewards as substitutes for what workers really need: useful feedback, social support, and room for self-determination. Dangling bonuses may be easy—but it impedes managers’ ability to fulfill their real responsibilities.

5. Rewards kill creativity. Incentives encourage people to focus on precisely what they’ll get for completing a task—not what might be gained by taking risks, exploring new possibilities, and playing hunches. Rewards pull people’s attention away from excellence. Employees may manipulate task schedules or behave unethically to “make the numbers.” To finish the task as expediently as possible, they’ll opt for simplicity and predictability, not challenge.

Money Making Schemes Vs Real Business Ideas

6. Rewards undermine interest. If your goal is excellence, no artificial incentive can match the power of intrinsic motivation: people working because they love what they do. Rewards undermine intrinsic motivation by making people feel controlled and devaluing their work—especially when tied to interesting or complicated work. When people view their work as externally directed and unworthy, they won’t approach it with a commitment to excellence.

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