February 2014 Bar Bulletin
False Impressions: The Truth about Pay-for-Performance Incentives
By Autumn T. Johnson
The common wisdom is that if you pay your employees well, they will work hard; if you pay them more, they will work harder. But does this carrot-and-stick approach actually work?
Law firms, like other employers, usually have some sort of pay-for-performance model. Billable hourly requirements, bonuses and high salaries are designed to incentivize employees to work harder.
In Daniel Pink's book, Drive: The Surprising Truth About What Motivates Us,1 he calls this "Motivation 2.0." Pink recounts studies from as early as the 1940s to demonstrate a third drive - an intrinsic motivation - that explains why people do things in which the joy of the task is its own reward.
Studies suggest that not only are pay-for-performance incentives ineffective, they can actually hurt performance. That's right, paying someone a bonus can actually impede his or her work product.
Carrot-and-stick approaches assume that "if you reward something you get more of the behavior you want; if you punish something you get less of it."2 This concept is premised on the idea that workers "fundamentally dislike work and would avoid it if they could" and that "most people must be coerced, controlled, directed, and threatened with punishment to get them to put forth adequate effort toward achievement of the organizational objectives."3
However, psychological studies show "that creativity and ingenuity [are] widely distributed in the population, and that under the proper conditions, people will accept, and even seek, responsibility."4 Therefore, carrot-and-stick (pay-for-performance) incentives can actually:
1. Extinguish intrinsic motivation;
2. Diminish performance;
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