The Bonus System
Decades of research has confirmed, again and again, that bonus systems rarely have a positive effect on people’s performance when they are involved in creative knowledge work [Pink, Drive] [Kohn, Punished By Rewards]. On the contrary, the effect is just as likely to be negative [Fleming, “The Bonus Myth”] [Spolsky, “Incentive Pay Considered Harmful”]. There is so much wrong with traditional incentive programs, it is impossible to list all their problems. But I feel incentivized to give you the most important ones here:
- People get addicted to regular rewards, and if they don’t get their anticipated reward, they will feel disappointed or punished. This ultimately destroys motivation and thus performance. [Kohn] [Pink]
- Individual rewards disrupt collaboration, which is crucial in creative knowledge work. It stimulates competition and cheating, which destroys relationships between workers, and also between workers and their managers. [Kohn] [Fleming] [Pink]
- Traditional bonus systems rely on objective measures, but reality is far too complex to capture in numbers. The metrics ignore the soft side of great performance, including teamwork and collaboration. [Kohn] [Spolsky].
- Research shows that rewards distract people from complex work, disrupt creative thinking, and increase people’s stress levels. This causes them to play safe and prefer easy tasks, while innovation requires the opposite: taking risks and doing complex tasks. [Kohn] [Fleming] [Pink].
- The research also shows that bonuses undermine intrinsic motivation and altruism. As soon as rewards are handed out people start to think, “They pay me extra for this work thus it cannot be fun, interesting, or good.” [Kohn] [Fleming] [Pink]
It should also be noted that bonus systems are usually based on company profits. But most workers cannot directly relate their work to their company’s profits, because most of what influences profits is beyond their own control [Bomann, “Bonus Schemes Should Be Handled with Care”].
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(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)
Comments
Oleksandr Alesinskyy replied on Wed, 2013/02/06 - 5:51am
Bonuses are not so bad - a salary is much more disruptive for a creative thinking, intrinsic motivation and altruism :(
Andrew Wilson replied on Wed, 2013/02/06 - 10:52am
in response to:
Oleksandr Alesinskyy
I once worked for a company that paid out a 20% fiscal year end bonus using a formula that included your personal, the business unit and the company's performances. The measure of "performance" was a set of goals that were mutually negotiated at all three levels. Consequently, it was possible for another business unit to set goals that became unattainable and would drag down the company's performance and hit your personal bonus.
Bonuses are fine when the factors determining your personal bonus are related to you specifically, but once you factor in other elements then it can become really demoralizing when you've worked nights and weekends and see your bonus get cut for reasons well out of your control or even influence.