So, did you figure out why paying someone to give blood reduces the number of people of who are willing to give blood? If you missed yesterday, you may want to catch up. Here is another story that may help you understand why people do not respond to incentives in the way we think they should:
In Haifa, Israel there was a group of six daycare centers that were trying to find a proactive approach to dealing with a particular group of parents. These parents were perpetually late in picking up their children at the end of the school day. As the frustration mounted, the daycare centers searched for an incentive that would make parents operate within the rules.
The incentive they chose was a fine that would be assigned for each time a parent was late. After the fine system was instituted, guess what happened? The number of tardy parents doubled. Like the blood donors, the incentive not only did not produce the desired effect, it made the situation worse.
These are just two of dozens of experiments that show that rewarding self-interest with economic incentives can backfire. Why? Some incentives undermine what Adam Smith called “moral sentiments.”
Dr. Bowles makes the following observations:
Regarding the blood donors:
“People desire to be esteemed by others and to be seen as ethical and dignified. And they don’t want to be taken for suckers. Rewarding blood donations may backfire because it suggests that the donor is less interested in being altruistic than in making a buck.”
Regarding the tardy daycare parents:
“The fine seems to have reduced their ethical obligation to avoid inconveniencing the teachers and led them to think of lateness as simply a commodity they could purchase… Fines or public rebukes that appeal to our moral sentiments by signaling social disapproval (think of littering) can be highly effective. But, incentives go wrong when they offend or diminish our ethical sensibilities.”
The art of coaxing performance from those we coach and manage is difficult because people are complex. When we treat people as machines or robots that can be poked and prodded into certain behaviors, then these types of issues usually surface to confound our efforts.
Treating people…well, like people, and respecting their complexity is the first prerequisite to earning the authority to step into their lives and make changes that positively affect them, as well as your organization.
Editor’s Note: Content for this article was collected from a recent Harvard Business Review article called: "When Economic Incentives Backfire" by Samuel Bowles. You can read this article in the March 2009 issue of HBR.
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