Re: Incentives LO1081

John R. Snyder (
Sat, 6 May 1995 00:36:39 -0600

Replying to LO1078 --

Michael McMaster wrote:
>The problem with "incentive pay" is that it is solidly based in
>mechanistic, reductionist psychology. There's nothing "wrong" with
>it. It's just that, if you start from that place, you'll have to
>deal with the kind of problems you get when you treat intelligent
>systems (people, in this case) as if they aren't.

Well said, Michael.

Even if one is determined to live within the reductionism, there are less
damaging ways to reward than giving incentive pay. If you feel compelled
to reward your (American) teenager for a year of "straight A's," it's
better to send them on a two week tour of Europe than to, say, buy them a
car. The principle is that the negative side-effects of rewards are more
marked if the type of reward used is unrelated to the behavior being
rewarded. This, I believe, is usually the case with monetary rewards.
Desirable behavior inside the organization is rewarded with something that
enhances only the personal life of the receiver. To my knowledge, that's
not even good behaviorism!

Many defenders of incentive pay argue that it's a "necessary evil" because
"there aren't enough promotions to go around -- we can't reward everyone
with increased opportunity and responsibility -- at any given time only a
few people can be at the top." To this I can only say ... yet another
good reason to dismantle the hierarchy! This is related to a pattern I've
observed over the years: the organizations that tend to rely the most on
monetary incentives are precisely those for which no one in their right
mind would work ... except that they have such "great" pay systems. One
could argue that there is an "addiction" or "shifting the burden"
archetype at work here -- management and employees become increasingly
dependent on the monetary reward structure and decreasingly able to break
out of it. At some point the organization will reach the limit of its
ability to pay for performance, and the employees -- who have been
conditioned to view the bonuses as an entitlement -- will slump. This is
often seen by management as the ultimate confirmation of their view that
people won't perform if you don't reward them with bonuses.

Incentive pay systems are sometimes defended as being more equitable than
other kinds of rewards, but I don't agree. They are unilaterally designed
by the people doling out the rewards, under the bogus assumption that all
employees actually want to be rewarded in the same way. Nothing could be
farther from the truth. What is meant to be "fair treatment" creates
unfairness because uniformity is mistaken for equity. A case in point: a
few years ago I was visiting with a senior technical person in a large
information technologies organization. This person had, more or less by
accident, been involved in a sequence of interesting and demanding
projects, and he had excelled at every one. His spontaneous comment to me
was "You know, I wouldn't tell my boss this, but I have been having so
much fun over the last year I would have worked here for free!" (My
response was that if he wanted to continue to have fun he should tell his
boss right away since the boss was clueless as to what motivated technical
people if it wasn't the bonuses he gave them.) Clearly, this man's
excellent performance was not the result of the bonuses he was getting for
pulling off each project. On the other hand, since the company, in its
wisdom, had decreed that extra money signaled approval, if they had *not*
given him the bonuses I'll bet he would have been thrown into a
performance tailspin.

Then there's the larger question. Is it any wonder that companies believe
that money is a motivator when they themselves are embedded in an economic
system that rewards them primarily with ... you guessed it ... money?

John Snyder
Innovation On Demand
Round Rock, TX