Every credible movement has its detractors. That comes with the territory. There is always some clever self-promoter attempting to build their career on the rubble created by destroying the foundation of something credible. In the world of incentives, this has been attempted many times.
The most famous perpetrator is Alfie Kohn. In his book Punished by Rewards, Kohn somehow managed to parlay his dislike for gold stars in elementary school classrooms into a credible philosophy of business management. His writings are more diatribes than carefully considered assessments written from experience (click here for one such polemic). In it, he cites the lack of "a single controlled study show[ing] long-term improvement in the quality of work as a result of any reward system." This he considers to be proof that people don't work for money. While academics like Kohn bemoan the paucity of controlled studies, the rest of us are building incentive plans that work.
Another famous iconoclast is Steve Levitt (author of Freakonomics). In this video clip, Levitt pontificates about something he knows little about, incentives. It is fun to watch his brain work in response to a thoughtful question on incentives from the audience -- "Uh oh, I don't really know anything about this, but I am the expert and people expect me to answer, so let me stall with this anecdote about Christmas turkeys from my wife's former company while I try to figure out what to say. I know, I'll talk about Google. I have no idea what they do as far as incentives, but I can talk about their corporate culture for a while and dodge the question." Might have been easier to say "I don't have anything useful to say about incentives."
What I have generally found (as the Levitt clip illustrates) is that those who are opposed to variable pay either . . .
- Are confusing incentives with bonuses (as Levitt does with his turkey example), and/or
- Are approaching the topic from such an incomplete and/or academic/theoretical perspective (ala Kohn) that they simply don't know what they are talking about (but can convince those more naïve than themselves that they do), and/or
- Are attempting to make the case that people don't really work for money which, if it was ever true (which I seriously doubt) is an argument holding precious little water these days.
I have never seen a person who is both credible and experienced make a seriously convincing case that well-designed incentives don't work.
Another common misconception aimed at undermining incentives is to infer that they are so complicated and difficult to design that they should be entirely avoided lest you make some egregious mistake and ruin your entire business. In response to that, as I have said repeatedly in this blog, you are much more likely to ruin your business by increasing base salaries indiscriminately than by attempting variable pay. If you make a mistake and increase someone's salary for the wrong reason, you will live with that mistake forever (or as long as they remained employed by you). Whereas, if you screw up an incentive plan, you get to start all over next year and try again. Much more forgiving.
Besides, everything looks complicated to the uninitiated. But to those who have been around the block a few times, it is all rather simple. It is not so much a question of what you do as what you don't do. Kind of like the difference between major league baseball and little league -- kids make catching routine fly balls into a real adventure, while the pros make diving catches look routine. It comes down to economy of motion.
Consider this. If you you watch an experienced sailor in a storm at sea, they don't look all that different from a novice on a placid lake. But let the novice take the helm in a gale and you will quickly see that the old salt is doing more than meets the eye. The novice will come back describing a hair-raising experience (if they come back at all) while, for the old salt, it was just another day at sea (or at the office).
Incentives are no different from any other business practice -- learn from experience, do it right, reap the rewards. Listen to amateurs, screw it up, pay the price. And above all, make up your own mind -- Don't let the pundits do your thinking for you. And if you want to get a crash course on how to build incentive plans right, check out Incentive Plan Builder.