The problem with employee incentive programs

by Victoria Bruce04 Mar 2016
While offering perks and financial incentives for high achievement can motivate employees and boost productivity, using reward-based programs to incentivise employees could have harmful side effects.
 
People who win competitions due to their performance are more likely to act dishonestly later on, says moral philosopher Matthew Beard,
 
Beard says that many organisations are tempted to incentivise employees through reward-based or competition-based models.
 
“This is seen as a good way to promote a culture of productivity, reward for work and healthy competition between colleagues, and sales roles are often driven in this way, as are ‘employee of the month’ incentives,” Beard told HC Online.
 
“Although these might seem appealing to both employees and employers, they can have some unanticipated, harmful side-effects,”
 
But where winning was due to performance, not luck, winners develop a sense of entitlement that justifies acting dishonestly later, says Beard, who is speaking at the Ethics at Work workshop on the 1st of June.
 
He believes this is incredibly important for managers to be aware of given individual dishonesty can have organisational consequences.
 
“It only takes one person who feels entitled to their bonus – to winning – to undermine the moral authority of an entire organisation,”
 
A salesperson who commits fraud, deceives a client or ignores industry safeguards is harmful to an entire organisation – and may well be driven to do so by the incentives being offered for exemplary performance.
 
“This highlights the importance of non-monetary incentives and a culture of collective achievement for organisations,” Beard says.
 
The ultimate consequences for organisations hinges on just how deeply employees invest in the incentive program.

“Done properly, many would see incentive programs as having a positive effect on both productivity and culture. Employees work harder and feel appreciated by a culture that rewards achievement,” Beard says.
 
He says employers frequently incentivise employees because at first sight it seems to offer organisations a range of benefits.
 
“Increased productivity, employee satisfaction, a culture of meritocracy and a more motivated workforce all appear as benefits of workplace incentives,” Beard says.

“But there is also a downside, because incentives build a culture of competition.”
 
According to new research from Ben-Gurion University and the University of Jerusalem, people who win competitions are more likely to act dishonestly at a later date. 

“Even more significantly, the likelihood of future dishonest behaviour stems from winning based on merit, not luck,” Beard says.
 
“People who win competitions based on their own skill can develop a sense of entitlement: they start to believe they deserved to win even when they didn’t, they might bend or break the rules to assure themselves victory, all because they won a competition in the past.”
 
HR professionals wanting to create an incentives-based program in their workplace should be mindful that while building a culture of entitlement might increase productivity in the short term, it may expose their organisation to serious ethical transgressions further down the line if previous winners are tempted by dishonesty.
 
“Non-monetary incentives like the opportunity to work on a passion project, greater autonomy in decision-making or simple recognition of achievement are cultural inputs that aren’t dependent on an employee’s particular work over a given time,” Beard says.
 
“This builds a culture of collective achievement because there is less emphasis on competitive schemes that pit employees against each other.”
 
 Dr Matthew Beard is a moral philosopher at The Ethics Centre. www.ethics.org.au


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