In 1993 Alfie Kohn wrote an article titled ‘Why Incentive Plans Cannot Work’. For the time it was a radical piece critisising any attempts of increasing employee productivity via incentive plans. Even now, it is still more on the radical side of management and leadership theory.

Kohn said that “rewards typically undermine the very processes they are intended to enhance” and that they secured, at best, only temporary compliance.

Before getting further into Kohn’s reasoning, it’s worth hitting pause to revisit some motivational basics. Firstly, motivation is classified into two types, intrinsic motivation and extrinsic. Intrinsic motivation comes from the self, whereas extrinsic motivation is supplied externally, usually by the manager. There is a large amount of research that shows that the highest performing people are intrinsically motivated. Extrinsic motivation is a form of behaviour modification, whereby a manager will use techniques to motivate the individual to do something that they would otherwise not want to do. It may be that the employee theoretically wants to do the work, but in practice they’d rather take it slower or more relaxed than you’d like. To try and make the employee do what is wanted almost all organisations employ extrinsic motivational techniques, such as performance reviews and incentive plans such as the yearly bonus.

The use of incentive plans is widespread, so common place that when Alfie Kohn’s article was published in 1993 many dismissed it as crazy talk.

In his defense, Kohn observed:

“some ideas become so entrenched in the collective psyche, are perceived to self-evidently correct that not only are they no longer challenged but they are also no longer even open to challenge”*

So, with the paradigm that incentives are almost an assumed tool of management, here are Kohn’s six reasons why incentive plans cannot work:

1. Pay is not a motivator

This idea was first widely publicised by W.E.Demming. If you are unfamiliar with his work you owe it to yourself to read about him (start here). Pay not being a motivator seems to fly in the face of traditional wisdom. Of course pay is a motivator, that’s why I work so hard! Or is it?

There is reasonable research to suggest that pay is more of a ‘hygiene factor’ than a true motivator. That is, poor pay can make an otherwise satisfied employee dissatisfied, but on the flip-side, high pay is not enough to make a dissatisfied employee, satisfied. Research shows that employees are more likely to be happy for other, non monetary reasons (see earlier blog post, Top 9 Employee Values).

2. Rewards punish

In a recent MCO lecture, we were asked whether our organisations use incentive payments, and fourteen MBA students raised their hands. This fourteen were then asked whether we liked the reward system. Everyone put their hands down. It was a curious response, one that the lecturer enjoyed, and perhaps, expected. It was clear that all were uncomfortable with such systems. Kohn would state that this is because rewards punish in the same way that punishment, punishes. He calls such systems the ‘stick and carrot’ approach.

“Rewards have a punishment effect because they, like outright punishment, are manipulative. ‘Do this and you’ll get that’ is not really very different from ‘Do this or here’s what will happen to you’” – Kohn, 1993

Kohn states that the experience of being manipulated is “likely to assume a punitive quality over time”, and that “not receiving a reward one had expected to receive is also indistinguishable from being punished”.

3. Rewards rupture relationships

Kohn states that rewards will utimately rupture relationships within the organisation. People wll be motivated to get the reward, which is usually different from being motivated to be a great employee and help the company succeed.

“Everyone is pressuring the system for individual gain. No one is improving the system for collective gain” – Peter Scholtes

Whilst Scholte’s quote could be critisised for being too strong, I think it’s fair to say that if rewards are individual in nature, then the individuals will focus on their performance, at some expense of the whole company. They may even begin to see fellow employees as barriers to their own success.

Under a reward system, employees may be tempted to conceal problems they are having, and will be encouraged to present themselves to their manager as “infinitely competent”.

“Very few things threaten an organisation as much as a hoard of incentive-driven individuals trying to curry favour with the incentive dispenser” – Kohn

4. Rewards ignore reasons

There are many reasons that contribute to an employee’s performance. Generally managers tend to overstate the effect of an individual’s characteristics on performance, whilst simultaneously understating the effect the work environment and other factors contributing to performance. Kohn states that managers often use incentives as a substitute for real management and leadership. It’s much easier to say someone is a bad worker, than it is to try and address the real, underlying issues at play. Likewise, it is easier to dangle a carrot in front of employees than it is to answer why management think it is needed in the first place.

5. Rewards discourage risk taking

When rewards are in place, employees focus on obtaining rewards at the expense of anything that does not contribute to achieving the reward. If the measurement of their performance is KPI’s, then KPI’s will be met or exceeded, but unmeasured, unmonitored performance will suffer. This all comes back to one of the key management questions when dealing with motivation – “motivated to do what?” (see my earlier blog post, here).

“Do rewards motivate people? Absolutely. They motivate people to get rewards” – Alfie Kohn

By focusing on the reward, behaviours that are critical to creative and innovative thinking will suffer, such as risk-taking.  To innovate, you must be allowed to fail and encouraged to experiment. A reward system will inhibit this.

6. Rewards undermine interest

Research conducted both before and after Kohn’s article supports his contention that under a reward system, people become less intrinsically motivated. Over time, the requirement for extrinsic motivators becomes a self-fulfulling prophecy.  People who have been continually motivated by extrinsic methods, will begin to require more and more extrinsic motivators just to get a standard level of work done. The workforce will become less interested, less engaged, and company performance will suffer.

Great leadership should try to harness and encourage intrinsic motivation, realising that it is the key to a high performing organisation. They will avoid techniques that damage it.

Summary

So that’s Alfie Kohn Why Incentive Plans Cannot Work. He finishes off by stating that “bribes in the workplace simply can’t work”.

It’s a powerful and contentious article that takes some time to get your head around. We’re just so used to supplying punishment and reward that any theory or idea against this seems counter-intuitive.

The discomfort shown in the MBA classroom though, when asked about incentive schemes shows there is a problem here. That, by and large, people receiving as well as people rewarding, know that incentive payments aren’t really achieving their desired objectives.

There are some intangible benefits of bonus payments, such as employees like to tell their friends and family they got a bonus.  It also helps to offset the sad fact that Australians are poor at budgeting and generally will live 10% above their means (household income).

Personally, I love them and hate them. I’ve always aspired to achieve any incentive scheme, and appreciate the opportunity to earn more money. At the same time, every year, I fear their capacity to punish. The more effort you put in, the greater the fear. Withholding of reward hurts just like a punishment.

It’s a strange thing, and I think Kohn was on to something.

As always, comments, thoughts, hit me up below!

* Quote from ‘Setting people up for success: sustainable performance management” by Sam Wells, published in book ‘Readings in HRM and Sustainability’.