The author goes further on to mention the research performed by Jude T. Rich and John A. Larson in which they examined 90 major US companies and found no difference in the shareholders’ return between the companies that had incentive plans and the companies that had none. Further, several meta-analysis researches on this subject, discussed by the author, indicate some relationship between financial incentives and productivity from the quantitative perspective but reveal no significant effect from the statistical analysis.
The author identifies the six point framework to explain the reasons why the rewards system does not work. First, the author notes that even though salary and compensation are the factors for workers to stay with an organization, these are not the only motivational factors and that higher compensation does not guarantee better workers or increased efficiency. Second, the rewards do more harm by upsetting those employees who desired and hoped for the rewards but did not receive them eventually contributing to a negative work environment. Third, rewards create hostility and non-cooperation among colleagues and teammates who compete against rather than work with each other. As Peter R. Scholtes, senior management consultant at Joiner Associates Inc., states that with the rewards systems everybody works towards their own selfish gain and much less care to work collectively. Fourth, rewards systems let managers ignore the possible reasons for problems. Managers prefer to choose rewards systems as it requires less effort on their part compared to substitutes like positive feedback, social support, and other motivational methods. Fifth, rewards make employees motivated to achieve more rewards rather than perform the work itself. It discourages creativity and risk taking in the workers and sometimes results in unethical and immoral behavior. Finally, the author explains that the intrinsic motivators are more powerful than the extrinsic motivators and therefore employees who love doing what they do, perform exceptional quality work without any reward in mind. However, the employees who are controlled using the extrinsic motivators by their managers feel less interested in the work.
In conclusion, the author argues that all evidence and studies gathered from his observation clearly shows that incentive rewards simply do not work.
Comments and Questions
This article creates a powerful look at a topic that is a common phenomenon in many organizations. Almost every organization provides some form of rewards to motivate their employees and enhance their performance. The author suggests that the companies should pay their employees fairly and generously so they are not preoccupied thinking about money. Further, there should be no additional rewards or incentives whatsoever.
Although I agree with the author’s point of view that awarding rewards encourage self interest among employees and cause other problems, I feel that without any incentive employees will have no motivations for creativity, better performance, and achievement. Companies can also risk losing their best employees if the pay and other incentives are not tied to the performance. Equity theory states that employees compare their job inputs (effort, experience, education, and competence) and outcomes (salary levels, raise, and rewards) to those of other employees (referents) and that these comparisons affect individual motivation. Similarly, expectancy theory also states that employees are motivated when they believe that their work effort will lead to a good performance appraisal which in turn will lead to organizational rewards.
Therefore, it is important that organizations recognize and reward high performance appropriately.
REFERENCES
Kohn, Alfie, “Why Incentive Plans Cannot Work” Harvard Business Review. September-October 1993.