Incentives Can Be Bad For Business

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Whether they know it or not, most executives are Skinnerians. It was Harvard psychologist B. F. Skinner who popularized the theory of positive reinforcement, which holds that presenting a reward after a desired behavior will make that behavior more likely to occur in the future. To our pets we say, "Good dog!" and offer a biscuit. To our employees we say, "Good job!" and offer a performance bonus.

It seems to make sense. But research has been accumulating that shows tangible rewards as well as praise can actually lower the level of performance, particularly in jobs requiring creativity. Study after study has shown that intrinsic interest in a task -- the sense that something is worth doing for its own sake -- typically declines when someone is given an external reason for doing it.

Author and sociologist Philip Slater put it starkly in his book Wealth Addiction: "Getting people to chase money . . . produces nothing except people chasing money. Using money as a motivator leads to a progressive degradation in the quality of everything produced."

The problem is not with money per se, which most of us find desirable. Rather, it is the fact that waving dollar bills in front of people leads them to think of themselves as doing work only for the reward. Performance tends to suffer as a result.

In one study, Teresa M. Amabile, associate professor of psychology at Brandeis University, asked 72 creative writers to write some poetry. She gave one group of subjects a list of extrinsic reasons for writing, such as impressing teachers and making money, and asked them to think about their own writing with respect to those reasons. She showed others a list of intrinsic reasons: the enjoyment of playing with words, for example, and satisfaction from self-expression. A third group was not given any list. All were then asked to do more writing.

The results were clear. Those given the extrinsic reasons not only wrote less creatively than the others, as judged by 12 independent poets, but the quality of their work dropped significantly after this brief exposure to the extrinsic reasons.

This effect, according to other studies, is by no means limited to poets. When young tutors were promised free movie tickets for teaching well, they took longer to communicate ideas, got frustrated more easily, and did a poorer job in the end than those who got nothing. In another study, a group of subjects who contracted in advance for a reward made less creative collages and told less inventive stories. Students who were offered a reward for participating in still another experiment not only did more poorly at a creative task, but also failed to memorize as well as the subjects who received no reward.

What's going on here? The experts offer three explanations for such findings, and all of them have important implications for managers.

First, rewards encourage people to focus narrowly on a task, to do it as quickly as possible, and to take few risks. "If they feel, 'This is something I have to get through to get the prize,' they're going to be less creative," says Amabile. The more emphasis placed on the reward, the more inclined someone will be to do the minimum necessary to get it. And that means lower-quality work.

The very fact of turning a task into a means for attaining something else changes the way that task is perceived, as a clever series of experiments by Mark R. Lepper, a professor of psychology at Stanford University, demonstrated. He told a group of children that they could not engage in one activity they liked until they took part in another. Although they had enjoyed both activities equally, the children came to dislike the task that was a prerequisite for the other.

Second, extrinsic rewards can erode intrinsic interest. People who come to see themselves as working for money or approval find their tasks less pleasurable and therefore do not do them as well. "Money may work to 'buy off' one's intrinsic motivation for an activity," says Edward L. Deci, a professor of psychology at the University of Rochester and a leading authority on the subject.

What's true of money is also true of competition, which, contrary to myth, is nearly always counterproductive (see "No Contest," Managing People, November 1987). Deci put 80 subjects to work on a spatial-relations puzzle, and he asked some to solve it more quickly than those sitting next to them. Then each of the subjects sat alone -- but secretly observed -- in a room that contained a similar puzzle. It turned out that those who had been competing spent less time working on the task voluntarily -- and later told Deci they found it less interesting -- compared with those who didn't have to compete. The external prod of winning a contest, like that of a bonus, makes a task seem less enjoyable in its own right. Not surprisingly, what's seen as less enjoyable is usually done less well.

But there is a third reason that the use of external motivators can backfire. People come to see themselves as being controlled by a reward. They feel less autonomous, and this often interferes with performance.

There's no shortage of data showing that a feeling of freedom translates into happier and more productive employees. In 1983-84, Amabile and Stan Gryskiewicz, of the Center for Creative Leadership, in Greensboro, N.C., interviewed 120 research-and-development scientists, asking each to describe one event from their work experience that exemplified high creativity and one that reflected low creativity. The factor they mentioned most often, by far, was freedom or its absence. Receiving a clear overall direction on a project is useful, the scientists said, but they worked best when they could decide for themselves how to accomplish those goals.

Rewards are often offered in a controlling way, and to that extent, says Deci's colleague Richard Ryan, they stifle productivity. He emphasizes the enormous difference between saying, "I'm giving you this reward because I recognize the value of your work," and "You're getting this reward because you've lived up to my standards." Likewise for verbal feedback: the question isn't whether you give enough of it, or even how positive it is. What matters is how controlling the person perceives it to be.

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