“Forty years of psychological research leaves little doubt that using money as primary motivators, promised in advance, and directly linked to performance, has very significant downsides,” Gaffney writes.
Despite widespread use in financial, legal, and consultancy sectors, financial incentives lead to adverse outcomes, she warns.
Intrinsic motivation
Bonuses for long hours and high targets undermine autonomy, intrinsic motivation, creativity, and quality of performance, Gaffney writes, because they encourage a narrow focus – do the work and pick up the financial reward.
Behaviour therefore becomes controlled by the prospect of reward, undermining any inherent interest in the task, and decreasing the creative and cognitive flexibility needed for deep conceptual processing of information.
“This is counter-productive when you are faced with a complex problem and the way to solve it is not immediately clear,” Gaffney writes.
Many current-day issues require organic, novel solutions that can only be discovered with the freedom and autonomy to play around with new ideas, and learn by trial-and-error, the psychologist adds.
Creative thinking is wide-ranging and focuses on subtle aspects of the task in hand, Gaffney writes.
Fragile process
“That vital but fragile process disintegrates when your autonomy is compromised and you feel controlled,” she adds.
Financial incentives increase stress and undermine physical and mental wellbeing, particularly in a highly-pressured competitive environment where the potential rewards are great and the cost of failure is high, Gaffney believes.
Forced ranking of individual performance against that of peers makes for a high-stress and chronic work-life imbalance, familiar to lawyers working under the yoke of the “billable hour”.
Financial incentives make for more negative and tense work relationships, with less collaboration, and little creativity, Gaffney writes.
Inherent interest
Focusing on the inherent interest of a project, however, will mean more time spent ‘on-task’.
Gaffney links the widespread use of financial incentives to business scandals, since bonuses encourage short-term thinking and unethical short-cuts, flipping the relationship between means and end, and short-circuiting moral qualms.
Researchers Edward Deci and Richard Ryan concluded in 2006 that, if powerful enough, financial incentives can “get people to do almost anything … to forgo autonomy, act against needs, and neglect or destroy what they value most, from relationships to the environment.”