New research suggests the idea of an incentive is a good thing, but once employees get that idea in their heads it can, in fact, hurt their performance.
“When the stakes get too high, performance can suffer, according to a new paper from researchers at California Institute of Technology. By studying brain-scan data of volunteers performing a basic motor task (controlling an object on a screen) for money, the Caltech team found that once the incentive for successfully completing the task hit a certain threshold, the brain's reward center began to shut down, a response tied to loss aversion.
“Previous studies have suggested that success rates decline with high incentives because people can be too motivated, but the newest research suggests otherwise, finding positive responses in the reward-response area only when the incentive was first introduced. In other words, participants responded well to the initial incentive but grew distracted once the task was under way.
“Worries over losing the carrot—even before the carrot is in hand—can lead to failure, said Vikram Chib, a postdoctoral scholar at Caltech and lead author of the report. The bigger the carrot, the more fear and the more fear, the more failure.”
What does this mean? Should you never use incentives? Should you kick the “President’s Club” to the curb?
There are rarely such absolutes in the business. There are instances where incentives can be good for a big goal or a long-term project such as hitting annual sales targets. But for day-to-day encouragement of employees, recognition is a better approach.
What’s the difference? Recognition is given as a surprise after-the-fact, avoiding the problem of the dangling carrot and the accompanying fear of loss and ultimately failure. Indeed, by creating a culture of recognition and not just another “recognition program,” employees can be freed from fear of failure in an environment designed for greater innovation, teamwork and camaraderie.
What kind of culture do you work in? Is it cut-throat competitive, collaborative, recognition-based, or fear-based?
As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.