Myths Of Our Economy: Bigger Rewards Produce Better Results

It's amazing how often our economy does the exact opposite of what common sense and science dictate... Every employer knows it: if you want to extract better results from your workforce, you offer the employees a nice bonus for every extra sale made or product produced. Almost all jobs have some form of this mechanism of "carrots and sticks". It's made to seem self-evident: if you want people to perform better, you reward them! Right?

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Wrong. The problem with this is that half a century of social sciences show the opposite to be true. The targets and incentives are just another lie. All experiments done over the course of 50 years, all over the globe and in a wide variety of professions have the same results: higher rewards result in worse performance. This has a number of reasons, but I'll just give you the most obvious ones.

Incentives narrow the employee's focus on getting the reward. The effect is that while the incentive was introduced to enlarge creativity and increase productivity, it does the opposite: it blocks creativity and so decreases productivity. To be perfectly honest, the research shows that carrots and sticks do increase productivity in jobs that require no brainpower at all; there are surprisingly few creative solutions to screw more caps on bottles in any given time. Highly boring and repetitive work will benefit from incentives, but the employees will be burned out long before their time... And robots don't need incentives.

Another very damaging effect is that incentives almost always result in more fraud and dishonesty. When reaching a given target results in a bigger paycheck, that target becomes the employee's main focus. And since in most modern jobs some amount of creativity is required, employees find creative (fraudulent) ways, not to better service the customers, but to be sure to make the target. I see it in my work at a servicedesk every day; customers get half the service they need and deserve, because we have to reach a target number of calls per hour. So if the problem takes an hour to fix, the employee needs to cut the conversation short to get payed.

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This works on very large scales to. When schools are forced to publish their exam-results online so that their customers, the parents can make a better choice as to what school to send their kids to, something terrible happens. The schools are incentivized to make their exams easier so they can publish better results online, thereby luring in more new customers. Speaking of dumbing down the population in the name of the economy.

Or if local police forces are given targets for lower crime-rates the same happens. Say The Government deals out incentives in the form of more financial support for local police-forces if they manage to reduce a certain crime, let's say assault or rape. Nothing is more easy for the departments to do than to just categorize the crime differently. Just classify them as "violations" or something else and presto! Your crime-figures are eligible for a nice incentive, payed for by the taxpayer who gets worse protection for their buck.

Please, dear reader, I ask you: how has it come to this point? How can we continue to let our lives be ruled by an economy that spits in the face of both common sense and scientific reality? The speaker in the video below expresses how desperate this sometimes makes me feel. Pleas watch this short, funny and eye-opening TED Talk by Dan Pink:

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