Money

Getting Beyond Extrinsic Rewards

The Washington Post has a good guest post from Hebrew University Economics Professor Eyal Winter.

The fear of depriving your peers a bonus because of your laziness was a much more meaningful motivator than the fear of losing your own bonus.

He starts out with an intriguing question that I would like your opinion on. Which of these would make you feel worse?

  • You forget to pay a parking ticket and the fee goes up $60. You now owe $60 more.
  • You agree to pay a parking ticket for a friend who is out of town. You forget and the fee goes up $60. Your friend now owes $60 more. He will not ask you to pay it.

The question is whether having to pay $60 more yourself or causing your friend to have to pay $60 more himself has a stronger affective reaction. In the first case, there is a tangible, extrinsic consequence of your error. $60 to be exact. In the second case, it doesn’t cost you anything tangible. Just the knowledge that you hurt your friend.

Please post your response in the comments before reading on.

My Take

The post then focuses on how this can be used to understand the benefits of team-based incentives. Since we are social animals, the social consequences of our actions can be more salient than the tangible ones. If our prehistoric ancestors cared more about hoarding some extra food than they did about getting along with the rest of the tribe, they would be dead soon enough. At least that is the theory.

This has become ingrained in us and can be leveraged in performance management systems. Team incentives are not valuable because the user or the employee wants the incentive itself. They are valuable because we crave the acceptance and appreciation of our tribe (coworkers or social network). If we slack off, we lose their acceptance. If we excel, we gain their appreciation. Either one has value even without a tangible reward. In fact, there is a lot of research on externalization showing that adding a tangible incentive actually diminishes the motivational impact of the teamwork.

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