By July 2, 2012 0 Comments Read More →

Pay For Performance Gone Wrong

Pay For Performance Gone Wrong

If you've read my past material on performance management and KPI's, you know research shows that financial incentives (and penalties) can drive the wrong behavior in your staff and suppliers. I've seen it personally and research shows it.

We don't have to see evidence just in one industry - it's everywhere. I found a recent article which shows how even the scientific community is impacted when you tie money to things. And it doesn't even have to be direct.

You can read the article from the NY Times "Rise in Retractions Plagues Journals"

In summary, because getting published in scientific journals comes with financial benefits (promotions, grants, etc.) and the pressure on scientists to create revenue to support their research has increased, the statistics show that incidents of retractions (meaning substandard work or outright fraud) has increased significantly from 3 in 2001 to 180 in 2009.

The solutions to the problem are outlined for scientists, and wouldn't apply directly to your staff, subcontractors or other providers, but the principle certainly does and as a manager, you should consider the impacts.

In addition, my seminar at Corenet Global in 2011 in Atlanta focused on whether financial rewards and penalties created better results and in all cases, the scientific studies I outlined proved that for our type of work, it didn't. In some cases, it either caused cheating or poorer performance in the long run.

The conventional wisdom is that you need penalties (and related rewards) to get performance from your staff and supplier. Yet scientific evidence (and even scientists!) have proven this wrong.

Next time you are considering pay for performance, penalties or rewards, re-think how it will impact actual performance and consider a different approach to driving the behavious you want.

About Michel Theriault

Michel is the founder of Success Fuel for Managers. He is an author, speaker and consultant focusing on topics relevant to Managers and aspiring Managers in businesses of all sizes who want to get results, get attention, and get ahead. He is also a contributor to Forbes and AllBusiness Experts . Michel is available for speaking engagements, training and consulting. Connect with him or send an email.

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