1. Is Your Company Operating from an Industrial-Era Playbook?
2. Why Performance-Based Compensation Doesn't Work (This article)
3. Traditional Project Management Needs and Upgrade
Almost all companies today have a compensation program for at least some employees based on performance. From CEOs who are awarded bonuses for hitting a target share price to bike messengers who are paid by the delivery, performance-based compensation is widespread today.
Clearly, given the ubiquity of performance-based compensation, one would assume that a great of deal of research has been conducted to assess the efficacy of this model. Why would all of these smart business leaders follow practices that don’t work? That would be crazy. And if you made that assumption you would at least be partially correct: decades of research have been conducted to determine if performance-based compensation works. The problem is that, according to author Alfie Kohn writing for the Harvard Business Review, the research all confirms the opposite conclusion:
As for productivity, at least two dozen studies over the last three decades have conclusively shown that people who expect to receive a reward for completing a task or for doing that task successfully simply do not perform as well as those who expect no reward at all.