Adam Grant explains why your employee incentive program isn’t motivating anyone

Adam Grant at 10,000 Small Businesses 2022 Summit
Adam Grant finds that incentive programs can boost employee performance but can also have unanticipated consequences.
Brian Stukes—Getty Images

Good morning!

Employee motivation is closely linked to productivity. Some employers are leaning into recognition to ramp up engagement, while others are monitoring productivity. But there’s another lever that leaders have spoken less about: incentivization. 

The topic of employee incentivization can be divisive, with the main critique being that it doesn’t create genuine behavior change. But in a podcast hosted by organizational scientist Adam Grant, behavioral economist Uri Gneezy argues that employers tend to give up too soon on the practice. When designed right, incentives can have a powerful impact on employee behavior, the two say. Here are the top four factors to remember when creating an incentive program.

Know what you’re getting into

It’s true that incentives don’t always create the desired outcome. But Grant argues that incentivizing performance can boost the volume of work performed by employees, though it might not always result in the quality of work leaders seek. 

“My read of the evidence for performance incentives is that for the most part, they don’t undermine performance, but that reward is much more effective in motivating performance quantity than quality,” he says. “So incentives may boost productivity to a much more effective degree than they promote creative thinking. In other words, maybe it’s easier to motivate people with incentives to work harder than it is to work smarter.”

If at first you don’t succeed, design again

Incentives should be treated as an experiment that needs to be tested, tweaked, and adjusted to fit varying workforces. “Too often I see companies that say, ‘We tried incentives, it didn’t work,’” says Gneezy. “No, you just designed a bad incentive.”

He offers two suggestions for leaders whose incentive programs seem to be falling short. First, go back to the drawing board and think about what message you want to send employees through the incentive. Second, focus on testing to better understand what works. “If it works like you want it, great. If not, modify until you get it right.”

Mind the unintended consequences

The incentives you put in place to motivate employees may have an unanticipated effect, says Grant. “They’re almost like taking a drug that hasn’t been fully vetted yet. A lot of people assume that incentives are straightforward—you reward the behavior that you want, you get more of it. You punish the behavior you don’t want, you get less of it.” That’s an oversimplification, he says.

Consider the message

Consider your stated and unstated communication. “When we design rewards and punishments, we think a lot about the results we’re trying to motivate. We need to be at least as thoughtful around the relationship that we’re trying to build because every incentive sends a message,” says Grant. “It can tell people that they’re just a means to an end, or it can tell people that we care about them.”

Amber Burton

Reporter's Notebook

The most compelling data, quotes, and insights from the field.

Some economists say the Fed lightly raising the unemployment rate now could spare millions of jobs down the road. 

"The real debate isn’t between the relative evils of inflation or unemployment, argues Jason Furman, a Harvard economist and former top adviser to President Barack Obama. It is between some unemployment now and potentially much more unemployment later." —New York Times

Around the Table

A round-up of the most important HR headlines, studies, podcasts, and long-reads.

- The White House asked federal agencies to accelerate return-to-office plans. Reuters

- A Pennsylvania mailman sued the U.S. Postal Service for making him work on Sunday. The case could have national implications for religious protections in the workplace. Washington Post 

- Just under 13% of office space was vacant last quarter, an all-time high, according to data from commercial real estate company CoStar. Axios

- Accenture is delaying the start date of some recent hires as it contemplates job cuts. Bloomberg


Everything you need to know from Fortune.

C-suite layoff. Disney CEO Bob Iger said he fired Marvel Entertainment chairman Ike Perlmutter because his role was redundant, indicating that even top executives can get laid off. —Christiaan Hetzner 

Stop the spread. Real estate mogul Barbara Corcoran says leaders should fire “negative” employees because they risk contaminating the rest of the team. —Chloe Berger

The irony is striking. World Bank employees are on strike over low wages, a situation rife with irony as the organization’s mission is to eradicate poverty. —Fatima Hussein

Chatbot coworker. Goldman Sachs’ chief information officer floated the idea that the bank might build its own generative A.I. platform to help codify the knowledge that is currently only stored in employees’ brains. —Jeremy Kahn

This is the web version of CHRO Daily, a newsletter focusing on helping HR executives navigate the needs of the workplace. Today’s edition was curated by Paolo Confino. Sign up to get it delivered free to your inbox.

Read More

CEO DailyCFO DailyBroadsheetData SheetTerm Sheet