Editor's Note: I am proud to feature today's guest post from Dr. Gerry Ledford, who shares some key findings and points from his presentation at this week's WorldatWork Total Rewards and his recent WorldatWork Journal article. As a big fan of Gerry's work, I am particularly pleased to be able to share his thoughts and wisdom with the Cafe audience. Take it away, Gerry!
The rewards field is filled with mythology about what research has to say, and practice is guided by the mythology. Consultants, famous executives, the business press, and ultimately academics who don’t know their stuff monotonously repeat the popular wisdom until it becomes generally accepted as truth. All too often the body of research flatly contradicts the popular wisdom.
Two of my favorite myths are Herzberg’s claim that money is hygiene factor rather than a motivator (not supported by his own data, by the way) and the undying faith in the idea that a happy worker is a productive worker (the underpinning of much of the work-life and best place to work movements). We will leave a discussion of these myths for another day. Here I focus on a destructive myth, namely that extrinsic rewards such as monetary incentives undermine intrinsic motivation to such a degree that they make incentives ineffective.
You might imagine that effects of extrinsic rewards on intrinsic motivation is an obscure academic topic of little interest to practitioners. If so, you would be wrong. In fact, this position was championed the authors of perhaps the two best selling books on rewards in history, Alfie Kohn (1993) and Daniel Pink (2009). For example, Kohn claimed in his 1993 book that, The bottom line is that any approach that offers a reward for better performance is destined to be ineffective.” Furthermore, “Possibly the most compelling reason that incentive systems fail is . . . (that) extrinsic motivators not only are less effective than intrinsic motivation but actually reduce intrinsic motivation . . . Furthermore, the more closely we tie compensation (or other rewards) to performance, the more damage we do” (emphasis in original). Both books were heavily referenced, but neither author was particularly qualified to review the hundreds of research studies on this topic. Kohn was a high school teacher and Pink was a political speechwriter turned author.
The research says something quite different than Kohn, Pink, and their friends suggest.
- Monetary incentives generally lead to increased performance. There have been six major reviews of the literature on incentives in the past 20 years, and there were several others during the 1980s. As I demonstrated in my presentation at the WorldatWork meeting this week, all these reviews reached the same conclusion: monetary rewards increase performance. Even academic proponents of the Kohn and Pink position such as Edward Deci concede this. So much for the claim that any negative effect on intrinsic motivation is so serious that it causes incentive failure.
- Extrinsic rewards actually can increase intrinsic motivation depending on how they are implemented. All relevant academic theorists agree on this point. Good implementation means communicating the importance of the task and how the incentive works; setting specific, meaningful goals; providing supervisor feedback and support; hiring employees who want incentives; and building an incentive-oriented organizational culture. The idea that incentives are actually a source of intrinsic (not just extrinsic) motivation is not a surprise to anyone who has seen a salesperson, production worker, or CEO engrossed in calculations of their next performance bonus payout and developing tactics to maximize the payout.
- Rewards have no negative effect on intrinsic motivation for boring, routine work because the tasks have little intrinsic motivation to reduce. This is important because much of the work of our society would not be done if we did not offer extrinsic rewards for task performance. In fact, incentives (but not salary alone) can increase intrinsic motivation in routine work.
- The negative effect of incentives on intrinsic motivation can be manufactured in the laboratory, where most of the studies in this literature were originally conducted, but the effect disappears in real-world conditions. A review of 43 field studies found that incentives actually tend to increase intrinsic motivation.
Compensation professionals who are familiar with our topic may have wondered whether their work on incentives is an exercise in futility, and doomed to fail because incentives undermine intrinsic motivation. Fortunately, compensation professionals can rest easy. Extrinsic rewards increase performance because they increase total motivation (extrinsic plus intrinsic). Any negative effects of rewards on intrinsic motivation can be easily avoided by the sound implementation of incentive plans.
ENDNOTE: Readers interested in more information on this topic are encouraged to see the article by Ledford, Gerhart, and Fung in the current issue of the WorldatWork Journal (Q2 2013) entitled, “Negative Effects of Extrinsic Rewards on Intrinsic Motivation: More Smoke than Fire.” (Access the article on the USC site here.) The article offers an overview of the extensive literature on this topic.
Gerry Ledford is Senior Research Scientist at the Center for Effective Organizations, Marshall School of Business, University of Southern California. Much of his professional work focuses on employee reward systems. He returned to the Center for Effective Organizations in 2012; he was a key contributor there from 1982-1998. From 1998 to 2003, he held leadership positions at Sibson Consulting. Since 2004, he has been President of Ledford Consulting Network LLC. He received a Ph.D. and M.A. in Psychology from the University of Michigan. Gerry has authored over 100 articles and ten books and he frequently speaks at professional events.