Nature Vs Nurture: Is job success pre-determined?

16 February 2016 -

New research finds that incentive schemes might not be as effective as you may think

Jermaine Haughton

Bumper pay bonuses, free tickets to concerts and sporting events, and luxury dinners are among the many treats dangled before the eyes of staff by bosses to stimulate greater performance.

Employee rewards are an ever-present for even the smallest of firms, both home and abroad.

According to Glassdoor, employees at companies like Oracle, Salesforce.com and Cisco Systems earn average pay commission totalling tens of thousands a year. At the other end of the scale, aerospace engineering firm Finmeccanica UK offers employees discounts at supermarkets such as Morrisons, Sainsbury's and Asda.

In fact, some estimates are that they account for around 30% of total employee costs in large companies.

However, joint research from the Erasmus University’s Rotterdam School of Management and the University of Ljubljana in Slovenia has suggested such investment is unlikely to reap the significant financial and performance improvements bosses would hope for.

Academics measured the brain activity of 30 financial managers while they performed a series of computer-based tasks, under different time pressures and types of distractions, and found that though rewards can prompt participants to work harder, but did not improve the overall performance.

Professor Dr Frank Hartman, professor of management accounting and management control at the Rotterdam School of Management, Erasmus University, said: “Businesses need to recognise where performance limits may lie and avoid frustrating employees when results do not reflect best efforts.

“Organisations should take care that performance assessments accurately capture the efforts of workers, both to measure whether targets and incentives are effective and to ensure that individuals are rewarded fairly.”

As outlined in the Harvard Business Review, numerous studies in laboratories, workplaces, classrooms and other settings show rewards typically undermine the very processes they are intended to enhance.

While staff incentives may secure temporary compliance, rewards, like punishment, are strikingly ineffective at improving performance and changing long-term habits, with people reverting to their old behaviours once the rewards run out.

Meanwhile, countless studies over the last three decades have shown that people who expect to receive a reward for completing a task or for doing that task successfully simply do not perform as well as those who expect no reward at all.

Given the nature of the findings then, why do most of the UK’s biggest companies offer pay and non-monetary rewards to at least some their staff?

Despite the evidence, many employers do believe rewards boost work performance, by improving other important behaviours which indirectly supporting associated factors, such as increased motivation and loyalty.

The Aberdeen Group’s The Power of Employee Recognition, 2013 report showed 60% of Best-in-Class organisations believe employee recognition is extremely valuable in driving individual performance.

As John Sylvester, director at P&MM, explained: “Benefits that add value to an employment package can make a genuine impact on the way employees view their employer. When salary freezes are commonplace it is essential to offer staff other ways to make genuine savings on their everyday spending and demonstrate that your organisation is helping them to cope with the ever increasing cost of living.”

Critics have also raised the question of whether rewards can be more impactful when managers identify the right types of intrinsic and extrinsic incentives for the specific demands of individuals and their teams.

Understandably, remuneration is the first to mind for many employers regarding ways of improving staff performance, but managers must assess what he/she is compensating and what behaviours are being rewarded?

Are salespeople being solely rewarded for their sales record, or a more holistic overview including their query-handling, business development and their quality of client care? Are your creatives rewarded for coming in as early as possible and staying late, or for coming up with new ideas on how to complete their work more efficiently and effectively?

In other words, are your workers being rewarded for ticking rudimentary boxes, or providing excellence in a particular facet that helps your firm in its objectives to innovate, build strong and ethical relationships, as well drive efficiency and productivity?

The CIPD report, Show me the money! The Behavioural Science of Reward, discusses how, by evolving the reward structure, organisations can take more control over the complex array of factors that determine their employees’ motivation and effectively enhance their business success.

Jonny Gifford, research adviser at the CIPD, says applying knowledge of human behaviour correctly and in the right context will help you to incentivise employees in a much more effective way.

“The key is having a flexible reward package that takes into account behavioural nuances and doesn’t rely solely on a wad of cash as the only means to motivate staff,” he said. “It’s a change in direction for many but should also be welcome news for organisations who, in a challenging economic context, need to be more creative with their rewards package.”