The collateral damages of incentives

Do you still believe that incentives are a good instrument for motivating people?

Be careful—the results can be surprising.

Here is a recent example from Indonesia: Schools get rewarded with state money depending on their students’ exam pass rate. Higher rate—better school—more money. Makes sense?

Yes—until parents discovered that their children were forced by their teachers to cheat during the exams. Who wonders that several schools achieved pass rates of 100%?

Why is this story important for you as a business leader?

Because the same things happen in your organization each day if you have incentive systems in place (as most organizations do).

The effects are:

• Wrong direction. Not the ones with the highest performance are rewarded, but those who practice cheating best.
• Uncertainty. Metrics are no reliable indicator of good performance anymore, so what is real performance? Nobody knows.
• Lost trust. Nobody believes in results any more. Who will believe the students who did not cheat but still passed the exams?

Important: The stated collateral damages are NO exception. They are inherently built into EACH inventive system, even if people do not cheat consciously.

Are there better ways to get people motivated?

Yes. In one of our next blog posts, you will learn more about the motivators that REALLY work.

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