Having worked in HR for over ten years, three of them in Compensation, I can assure you that the assumption that monetary rewards – bonuses, incentives, whatever you want to call them – increase employee motivation and consequently performance is more than just a belief in HR: It’s a holy cow, a basic rule on which systems are built on, an axiom you can’t touch or shake, one where the questioning of its effectiveness borders on heresy.

A couple of weeks ago, I came across a great TED talk by Dan Pink. In his presentation, Pink talks about the link between rewards and motivation. And he sends the holy cow to the butcher.

His premise, based on 40 years of motivational research is: Monetary rewards increase performance, but only in situations where the tasks are simple and profit from a focus of attention. For any kind of work requiring even rudimentary cognitive reasoning, and creative problem solving especially, rewards will lower performance. In other words: If your job is to produce X amount of Y, bonuses will motivate you to produce more; if your job is to solve a problems or invent stuff, they won’t.

It was a shock for me at first: I had thought that the problem with most performance management systems is that they can break down in three points: When setting goals (i.e. wrong or unmeasurable goals), when measuring performance (.e. using the wrong scales or being sloppy), and when rewarding according to performance (e.g. changing rewards despite results). But Pink’s thesis goes one level deeper: Rewards don’t work *at all* if they are used outside the narrow “X amount of Y” context. Other elements of work are much more important.

If you’re interested in learning more about this topic, check out Pink’s presentation as part of Google’s Leading@Google YouTube series. While his TED talk gives you the headlines, the (far less polished) Google presentation goes deeper into the underlying questions of culture and engagement in companies – all in the context of a company which embraces autonomy, mastery and purpose, the ingredience of high motivation. It’s an hour well spent.

Of course, there are questions remaining: The experiments Pink refers to rely on situations where the rewards are handed out almost immediately after the task. That’s not how most rewards schemes work – there is often a long delay of multiple months between the tasks and the reward. What about peer reward systems, especially if the system is spontaneous, has a “thank you” quality to it? And if Pink is right (I believe he is): How can we convince leaders to find better ways of motivating people, and overcome the systemic problems of moving away from bonus schemes?

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