In my second article for the entrepreneur and startup website Alleywatch, I take on the myth that performance bonuses spur improved employee performance. Quite the contrary, they usually both cost money and reduce productivity. As I note, Pink persuasively argues that financial incentives can lead to all sorts of negative consequences; from reducing internal motivation, fostering short-term thinking and crushing creativity. Probably the worst consequence of such incentives is that it incentivizes cheating though. If, for example, an employee gets a bonus if that employee sells 1K units, it’s hardly surprising if that employee uses some underhanded and perhaps unethical or illegal techniques to hit that mark. It shouldn't at all be a surprise that employees may bend the rules to reach the benchmarks needed for a bonus. But further than that, performance bonuses reduce "intrinsic motivation." What is that you ask? Well, you'll just have to read the article to find out.
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