Is the Purpose of Incentives to Motivate Your Employees?

Article after article tells us that we should halt our use of incentives because people aren’t motivated by money. Or because they are motivated by money, but to do the wrong things.

I can’t help feeling that many of them are missing the point.

Many of the incentive arguments centered around whether or not money motivates people reflect a wrongheadedness about the role of and reason for variable pay. This stems in no small part from the Deci/Kohn/Pink worldview that contingent rewards exist solely as blunt-headed instruments of control, as bribes, as a means of getting people to do things they would otherwise not be inclined to do.

I reject this point of view.

You have to create the conditions for motivation

It suggests that most employees come in each day unwilling to do good work and unwilling to help their organizations succeed. I don’t buy that. While there are bad apples in every bunch for sure, I don’t think it’s true of most places and for most workers.

Where it is true, however, I would agree that incentives have little chance of producing any lasting positive effect. Truth is, you have to create the conditions for motivation – trust, transparency, a sense of shared interest, good work systems, etc. – as a baseline before any reward is going to be worth the investment. If your employees don’t walk in the door each day motivated to do good work, you have problems that no incentive plan is going to fix.

I don’t believe that the purpose of an incentive is to motivate people.

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Incentives = focusing on top priorities

I would suggest that the purpose of incentive pay is – in fact – to influence the efforts and choices of workers who had better already have a baseline level of motivation, by calling out top priorities, by guiding their to areas and activities where they can create the most value, by signaling the importance of collaboration through highlighting shared goals and the opportunity for shared reward, and by defining a form of partnership through which employees have the chance to share in the economic success they help produce.

Variable pay – incentives – will be an critical part of the compensation landscape going forward. I am convinced of it. And not because today’s workers need to be bribed to do their jobs well.

Rather, it will be because a static, inflexible, unchanging reward package with no connection to the things the organization must accomplish to succeed is a distinct competitive disadvantage in a world as unpredictable and fast-changing as ours.

This was originally published on Ann Bares’ Compensation Force blog.

Ann Bares is the Managing Partner of Altura Consulting Group. She has over 20 years of experience consulting in compensation and performance management and has worked with a variety of organizations in auditing, designing and implementing executive compensation plans, base salary structures, variable and incentive compensation programs, sales compensation programs, and performance management systems.

Her clients have included public and privately held businesses, both for-profit and not-for-profit organizations, early stage entrepreneurial organizations and larger established companies. Ann also teaches at the University of Minnesota and Concordia University.

Contact her at abares@alturaconsultinggroup.com.

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4 Comments on “Is the Purpose of Incentives to Motivate Your Employees?

  1. “Variable pay – incentives – will be a critical part of the compensation landscape going forward.” – I agree with this 100%

  2. What other carrots have people used to encourage the behaviors you desire? How many institutional barriers exist in your organization stopping you from offering many incentives? How has that led to creative incentives?

    Great topic. Thanks.

  3. I agree that we need to create conditions for motivation using transparency and trust as main drivers.  Further to what Bares listed, a culture of recognition is needed to drive and motivate employees to the next level.  What a CEO or someone in HR think is an incentive may not be what an employee may necessarily view as an incentive but rather as part of their every week compensation.  I’m conducting a research survey to understand what the gaps in perception are with employee engagement to these 3 core groups:  CEOs, HR, and employees.  I would love your input here at https://www.research.net/s/AchieversSurvey.

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