When Economic Incentives Backfire

I came across this interesting article by Samuel Bowles on HBR. Economic Incentives and fines definitely trigger desired behavior in many cases and backfire as well in several situations. An effective Incentive system requires careful consideration before implementation.

Situational Impact

The motivational and performance impact of economic incentives often varies based on personality and situation differences. A same individual might consider economic incentive more attractive for a certain desired behavior while having negative perceeption of it for another desired behavior. For example, a person will be more attracted to an economic incentive for delivering a project, milestone or achiveing a revenue target while the same person might consider it negative for helping and coaching coworkers which is also a desired behavior from an organizational perspective.

Many people in the beginning of their career prefer acceptance, recognition and appreciation over economic incentives while those same people begin to prefer monetary rewards at later stages in their career.

Personality Impact

This mostly relates to the level of engagement people have with their organizations, products, teams and managers. Employees with high level of engagement just love making contributions and celebrate challenge and achievements more than the short economic incentives.

Link:http://hbr.harvardbusiness.org/2009/03/when-economic-incentives-backfire/ar/1