Demotivate your staff with Incentives… Wait, what?

“Most people work just hard enough not to get fired and get paid just enough money not to quit.”
― George Carlin

More and more employers are incentivising roles within their organisations. While mostly monetary, other forms of motivation are offered like movie tickets and gift cards.

But does it work? A new study by Ian I Larkin at the Harvard Business School has actually found an employee incentive program centred on absenteeism and tardiness actually eventuated in a reduction in production.

Here’s what happened:
Management of a large laundry facility decided to implement an attendance award program at one of their five operations. With absenteeism and tardiness costing the economy billions per year it seemed like a good target to improve production and therefore the bottom line.

Employees with perfect attendance and no unexcused absences or tardiness were entered into a draw to win a $75 gift card. At the end of a six-month period, another draw was held for a $100 gift card for employees with perfect attendance over the previous six months.
While the program did produce reduced average levels of absenteeism and more punctual arrivals, there were negative effects overall.

With a chance of ‘winning’ a prize, some employees treated the scheme as a game. And they played the game, showing up on time only when eligible for the award and, in some cases, calling in sick rather than showing up late. At closer look, it was found workers were twice as likely to have an unplanned “single absence” after the scheme was implemented suggesting that once the employee became ineligible they preferred to stay home because they were disqualified.

In addition, while tardiness reduced initially, old habits of turning up late emerged in later months and once they became ineligible their tardiness slipped even further.

Larkin also found that employees with previously exemplary attendance and production records suffered a 6% - 8% reduction in output.

"The award demotivated these employees," says Larkin, who interviewed employees to gain extra insight to the loss in production. "People believed it was unfair to recognise people who only changed their behaviour because of this award. They felt that 'I'm a hard worker, and now they're giving awards for something like attendance. What about me?' "

"Having your top performers demotivated for all eight hours on the job ended up creating a much bigger productivity hit than having the extra five minutes of work from someone who came habitually late," Larkin says.

The major flaw of this reward program was rewarding behaviour that was expected of employees in their normal duties rather than rewarding excellence or going ‘above and beyond’.
Larkin suggests companies are better of giving people public praise or even a trophy to recognise exceptional performance, "You can't put a price on that. The recognition of hearing you did a good job and that others are hearing about it is worth more than money."

Personally I like a monetary gain for above average performance but that's not the motivation for all people. Different behavioural profiles react differently to certain incentives, it's worth knowing what motivates your employees and giving them the tools to shine.