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Why Incentives Shouldn’t Be Your Go-To Strategy


Until I win the Mega Millions I’ll continue to say that incentives are your worst first option.  The fact that I’m posting today is evidence it wasn’t the case this past week.  Sure money motivates.  I bought a ticket.  You bought a ticket. 

Rational people who know the odds of winning the lottery are the same as getting mauled by a brown bear and a polar bear in the same day (according the baby on the etrade commercials) still bought a ticket.  The amount is just too big to ignore.

Recent Incentive Fail

But there are limits to incentives and those limits are why I always look elsewhere first when trying to impact organizational behaviors.

Case in point…

A recent article on Rueters last week had this intro:

A program to pay hospitals bonuses for hitting key performance measures, or dock them if they miss, failed to improve the health outcomes of patients, according to a large, long-term study.

To quote the article:

“It really didn’t move the needle very much on patient outcomes,” said Dr. Ashish Jha, a professor at the Harvard School of Public Health and the study’s lead author. “There was no evidence that patient outcomes got better under this different financing scheme.”

The findings do not necessarily mean the concept of pay-for-performance is invalid, Jha said, but suggests the design of those new incentives should be reconsidered.

“It says to me that we have to go back to the drawing board and try new ways to do pay-for-performance because the current effort is not having the kind of benefit that we really should be seeing,” Jha said.

Two Words – HIRE ME

See… the reason the pay-for-performance incentive failed had nothing to do with incentives as a tool. 

The reason if failed is that it’s not a motivation issue.  IMHO – it’s not an issue incentives can fix.

Think about it this way…

The premise in this situation seems to be – people care for other because of the money.  In many cases (I’d even go out on a statistical limb and say MOST cases) patients don’t get inadequate or poor care because the people providing it aren’t paid enough.  The reality is that most healthcare professionals do it for reasons OTHER than money. 

Their premise is wrong. 

Patients aren’t harmed because incentives are misaligned.  Those in the healthcare industry – and I’d add teachers into this mix as well – don’t go into those fields solely for the money.  They are in these fields to help.  To do good.  To make people better.  Incentives have a very small role to play in this world.  The participants’ behaviors are aligned with the outcomes regardless of the incentive.

Recognition has a role – possibly (but that has to be designed well of course.)

Money – Or More Accurately – Incentives Don’t Always Work

Incentives have kryptonite.  Incentives will be ineffective when the reason people do something is bigger than money.  As in this case.  I’d speculate that the improvement in the behaviors they identified was small because they were already at a pretty high level of compliance because of their social/values connection to the outcome.  Creating an incentive on these behaviors actually cheapens the behavior.  It communicates that the participants are heartless and need increased pay to do the “right” thing.  Not something I’ve found in my dealings with nurses, doctors, etc.  Their behaviors are very aligned with making sure I’m healthy.  Money won’t change that for the better (for the worse maybe…)

Target Appropriate Audiences and Behaviors

Also – and not addressed in the article… the behaviors that were the subject of the incentive may not have any impact on the outcome anyway.  The ultimate outcome desired was a decrease in patient mortality.  The incentive was on the healthcare professional giving appropriate advice (from the article:)

“…data on 33 performance measures, such as whether patients were given recommended prescriptions or if they received counseling not to smoke.”

IMHO – The behavior that really needed to change is the behavior of the patient.  Having healthcare workers tell 100% of the patients that smoking is bad isn’t the cause of heart attacks.  Smoking is.  If they could show that telling people smoking is bad leads to reduced mortality then it might be a good proxy.  But 25 years of packaging changes, heart attacks and pleading from family members that smoking is bad, hasn’t moved the needle, why would they think simply having healthcare professionals suggest to patients that quitting smoking would impact the outcome?

As Einstein is credited with saying…

“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”

Same here… don’t judge incentives when they are designed and applied poorly.

Take time to understand the root cause.  Again… incentives are your worst first option.  Say it three times and then call me in the morning.


Originally posted on on Incentive Intelligence

6 Responses to “Why Incentives Shouldn’t Be Your Go-To Strategy”

  1. Talitha Akin says:

    Throwing incentives at people without addressing the core issue often and possibly in this case may come across as “I don’t care what the issue is just fix it”. It can sometimes even lead to worse performance and can be understood when you look at possible thought processes “they’re paying money to increase sales… We must be doing poor on sales… I feel pressured to increase sales”. I’m not saying that this is what always happens but it’s something that needs to be taken into consideration. If you don’t understand and address the core issues how are your employees going to? It often comes down to leadership in this case, but incentives are another method of communicating your message. It is important to look at how that message is going to be received and whether it is your intended message in the first place.

    • Paul Hebert says:

      Exactly – know what the problem really is before you start to try to solve it.  Seems so simple but we (collective “we”) do it backwards so often!

      Thanks for commenting Talitha – always nice to get engagement on the site.

  2. Paul, I so agree with you. As a Compensation & Benefits lead for many years now, I am regularly asked to add or increase incentives when the company is facing some issues. And I often try to push back, when I feel that we are addressing the right issue with the wrong solution.

    An engagement problem is not necessarily linked to pay. A lack of belief in your annual incentive scheme does not necessarily mean you need to increase the payout. Transparency and fairness can go a long way ! As Dan Pink mentioned in Drive, a lot of the positive outcomes for an organisation has to do with intrinsic motivation. And ti does not apply only in the “do-good” industries such as healthcare, not-for-profit or teaching, but also in high tech, professional services etc.

    • Paul Hebert says:

      Sorry to be tardy – been a bit involved in things – not a motivation problem on my end!  Agree with everything… it’s not just healthcare or teaching – although I’d submit there are more people in those fields who would be insulted with a financial incentive than in many others.  Thanks for taking the time to comment here, really appreciate it.

  3. davidburkus says:

    Interest comparison between healthcare and education. Both are intrinsic but both are also vastly more complicated than traditional incentives might be able to influence. For instance, both healthcare and education depend not just on performance of the institution but also the dedication of the patient/student.

    • Paul Hebert says:

      Thanks David and I’m on board.  I’d also throw out that even in less “intrinsically” motivated fields people do look for other motivators than cash.  I once had a discussion with a CEO that wanted everyone to focus on the financials.  I said to him… “You may get up everyday worried about the share price – but many (most) of your people get up everyday focused on how they can change their department, the company or the industry.”  Money and the finances – were never going to be their focus – never.

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