BONUS culture has come under intense scrutiny since the ongoing financial crisis began in 2007. Many people have been outraged by the way some bankers and top executives seem to have been rewarded for failure. But few have asked whether performance-related bonuses really do boost performance. The answer seems so obvious that even to ask the question can appear absurd. Indeed, despite all the fuss about them, financial incentives continue to be introduced in more and more areas, from healthcare and public services to teaching and academia.
"Economists and workplace consultants regard it as almost unquestioned dogma that people are motivated by rewards, so they don't feel the need to test this," says Alfie Kohn, a teacher turned writer. "It has the status more of religious truth than scientific hypothesis."
So it may come as a shock to many to learn that a large and growing body of evidence suggests that in many circumstances, paying for results can actually make people perform badly, and that the more you pay, the worse they perform.
There are some obvious reasons why such payments can backfire. It has been argued, for instance, that cash bonuses contributed to the financial crash, because traders had little motivation to ensure their companies' long-term survival
"Once you start making people's rewards dependent on outcomes rather than behaviours, the evidence is people will take the shortest route to those outcomes," says psychologist Edward Deci of the University of Rochester in New York state.
These studies suggest that offering rewards can stop people doing things for the sheer joy of it, an idea known as the overjustification effect. This was the basis for a series of books by Kohn in which he argues that rewarding children, students and workers with grades, incentives and other "bribes" leads to inferior work in the long run.
New Scientist 12/4/11
