Do incentives work? by Mark Goodlake

Do incentives work?

In our busy lives as reward professionals, we are often engaged in designing and tinkering with incentive plans. But do we ever have time to ask a serious question – do incentives motivate, and do they work?

The science is a bit scary. Take a look at this you tube clip. An eminent US university recently ran an experiment with a group of students. They offered three levels of incentives for completing sets of physical tasks, and also for more complex thinking tasks.

When it came to the physical or mechanical tasks, a larger reward inevitably led to a better performance. But rather perversely, when it came to cognitive challenges, larger rewards led to poorer performance.

The experiment was repeated in India with more meaningful rewards, to see if the incentive was too low in experiment 1. But the same results were repeated.

Other research is equally unhelpful in proving that higher rewards lead to superior performance.

So why do we persist with incentives? In the last CIPD reward survey (show link), 71% of companies use incentive programmes, so they must have something going for them.

The answer as always is not a simple one, and perhaps we should recognise that organisations use incentives for a range of things, and don’t pretend that all staff will be motivated by incentives alone.

For example, according to the CIPD survey, many organisations use incentives to support the business goals, and improve financial results. A well designed plan, which aligns with the right measures to impact business performance, can help focus participants on the key measures of success. And it can help participants share in business success.

Another rationale mentioned in the survey is to recruit and retain high performers. An incentive plan is, these days, an expected element of the overall reward offering for new hires. It is important to pitch the incentive levels at the right competitive levels.

Incentives can also provide a tangible recognition of good performance, which is often high on the list of key engagement factors. If the underlying performance management system is sound, and the incentive plan is applied consistently and fairly, this can be a powerful engagement tool.

Last but not least, we should remember that incentive plans are just one element of the total reward offering and should not be viewed in isolation. Of equal importance is ensuring the work challenge, development opportunities and work environment are well designed and managed for the range of employees, to ensure engagement.

So before you rush to throw out your incentive plans because they don’t motivate people – my advice is be careful!