Here’s something that may challenge your current thinking about incentives: Not all incentive programs motivate people towards better and higher levels of performance.  In fact, a good many of these programs have just the opposite effect. They can also serve as a source of motivation for the wrong people or a source of entitlement.

Basically, there are three types of motivation:  Fear (self-imposed or direct threats); Extrinsic (outside programs such as bonuses, special perks, etc.); and Intrinsic (internal drive for accomplishment).  While fear and extrinsic motivation may have some immediate impact on performance levels their impact is generally short-lived.

The challenge with fear motivation is that people either get used to it or they get away from it.  Threatening people with the loss of their job, demotion, reduced salary, etc. can produce a temporary change that makes it look like people finally “got it.”  More often though, it produces a prolonged period of “malicious compliance” during which you actually begin to get less and less of what you want, sometimes even to levels lower than they were before any threats were ever made. 

A second challenge associated with fear is that people get away from it – they leave the organization.  “Good,” you say,  “If you don’t want to be here then I don’t want you either.  So leave and stop ruining it for the rest of us.”  While some would certainly consider that an appropriate response, most effective leaders would view that as the mark of an immature and insecure leader.  And, so do most of those who stay.  If you recognize yourself in that scenario, you might want to consider changing your approach and trying extrinsic or intrinsic motivation.

Extrinsic motivation can work pretty well for people who are employed in jobs that don’t require a great deal of personal engagement or commitment.  That would include some forms of retail sales, service occupations, manufacturing, administrative bureaucracy, and the like.  The major challenge with extrinsic motivation is that it can quickly become an entitlement; and once it does, it suffers a serious loss of value, often becoming more of a dissatisfier than a motivator.

The most common issue associated with extrinsic motivation is that the payoff is usually designed by someone who believes that all people are motivated by the same things.  So, the person designing the system bases the entire model on what (s)he likes and seldom considers even the remote possibility that others might be motivated differently.

Another problem with extrinsic motivation is that sometimes the payoff is larger than the owner/designer anticipated.  When that happens, a new and less lucrative plan is quickly introduced.  The stick gets longer, the string shorter, and the carrot less plump.  The incentive model doesn’t work as well as it previously did until there is enough turnover among the participants that very few original members are left to talk about how good the old system was. 

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