Do performance incentives really work?

Carrot In his excellent book, Drive, Daniel Pink suggests that performance rewards do
not work for creative activities. Our motivation for tasks we find
intrinsically enjoyable is actually decreased by the presence of a
reward for doing it. The reason is we turn our focus from enjoying the
task to seeking the reward. Over time, unless the reward increases, our
motivation for the task, which we previously enjoyed, will diminish.

there is a growing body of evidence, which suggests for open, creative
activities, the presence of an If/Then reward (If you do this, Then
I'll give you a Scooby Snack), also decreases performance. The logic
here is that we are so focused on the reward, we become closed to
alternative, non-obvious solutions to a problem. So the presence of a
reward not only decreases motivation but also performance. The goal of
having a reward in the first place was exactly the opposite.

has important implications for us as individuals – in how we are
incentivized, in how we manage our teams, in how we relate to our kids.
For instance, if you tell your child you'll give them a toy for reading
a book, you erode the enjoyment of reading and transpose it onto the
toy. Later on, no toy means no enjoyment in reading. Equally, that
manager you offered a 10% cut of additional revenue, will actually
start only doing it for the bonus, and will be closed to new ways to
deliver the sales.

This also applies in agency life, in how we
work with clients. Some clients look to increase performance by setting
stretch goals with additional payments if they are achieved. The aim is
to incentivize 'extra mile' performance. But the effect could be
exactly the opposite. If the team intrinsically enjoys the work, adding
a bonus will erode that fun, and also make their thinking more linear.
Later on, if budgets decrease and there's no pot for bonuses, the
program could under-perform the level it would have done prior, absent
the bonus.

You can't give people motivation. You have to
nurture it. Dangling a carrot can debase the level of motivation,
reducing the activity to a transaction not a calling. According to the research, a better approach
to motivating your team or agency, might be to clarify the mission and
their role, give them all the resources they need (including
financial), then let their intrinsic passion do the rest.