Opinion: Bonuses reduce employee productivity. Huh?

Opinion: Bonuses reduce employee productivity. Huh?

Opinion: Bonuses reduce employee productivity. Huh?

Do you hand out bonuses, or strive to earn one yourself? This sort of motivation could be hindering your planning firm’s success. Managing director and CEO of MarkTwo Consulting, Mark Oliver, explains why:

Intrinsic Motivation: American psychologist Edward Deci observed that tangible rewards inevitably reduce the intrinsic motivation of individuals. He stated, “The facts are absolutely clear, there is no question that in virtually all circumstances in which people are doing things in order to get rewards, external tangible rewards undermine intrinsic motivation”. (There is one exception to this observation. This involves jobs where there is little intrinsic motivation, such as simple repetitive manual tasks, and in that case, rewards do tend to increase output or productivity.)

A good model on human motivation is so helpful because it enables you to predict better what the actual outcomes will be. The Universal Hierarchy of Motivation (UHM) provides the basis for a complete understanding of human motivation so that you can accurately predict what behaviours will result from system or structural changes.

The UHM helps you to understand human motivation comprehensively and so make the most accurate predictions on what people’s motivation (and hence resulting behaviour) will be, given a set of system or structural changes. The higher UHM level we are at then the more impact we have on our own and others’ lives. The UHM levels are shown in the table below correlated with the relevant intrinsic motivator and extrinsic behaviour.

UHM Level

Motivational Drive

Intrinsic Motivator

Extrinsic Behaviour

7

Meaning

Optimism

Grace (courteous good will)

6

Wisdom

Understanding (listening)

Feedback (not criticism)

5

Courage

Empathy

Accountability

4

Compassion

Sympathy

Cooperation

3

Power

Praise (genuine)

Commitment

2

Pleasure

Humour

Involvement

1

Survival

Belief

Satisfaction

 
How much an employee is “engaged” (feels an emotional bond) to the organisation has been shown in many studies across industries to have a direct correlation with productivity. International studies have found that employees who were fully engaged in their work were almost fifty per cent more productive in terms of revenue generation and three hundred per cent better at delivering value than their disengaged (disaffected) colleagues. The “extrinsic behaviours” in the table above correspond to increasing levels of positive engagement, going up the table and starting with the lowest one: satisfaction at work.

The UHM theory explains the observations that paid bonuses at work are poor motivators because they only move employees’ motivation to the level of pleasure, which renders them less able to deal with greater and more complex challenges which are best dealt with at a higher level.