The founder and CEO of Amazon seems to agree with Dan Pink’s famous TED video that incentive compensation plans can be detrimental to creativity, cooperation and–ultimately–companies.
We pay very low cash compensation relative to most companies. We also have no incentive compensation of any kind. And the reason we don’t is because it is detrimental to teamwork.
My CEO executive coaching clients frequently wonder how best to motivate and retain key employees. The question often takes the form of, “Should I give her an unscheduled bonus or a raise?” The business owner often tends toward a raise because it defers the cash outlay. My study of psychology recommends the bonus.
I have written about Professor Christopher Hsee of the Booth School of Business before. Recently he spoke explicitly about the bonus vs. raise question. “If you ask a typical employee, he or she will tell you they want the salary. But that’s because they don’t understand psychology,” Hsee said. “You should give them the bonus instead. Salary is stable and people adapt to the new salary level quickly. Bonuses are not as easy to adapt to.”
Hsee also supports my advice about giving a gift, particularly something the employee wants but might not indulge in. “Give somebody something they like but won’t (more…)
Paying for performance seems like an all-purpose principal. Daniel Pink argues that it is not.
From TED: Career analyst Dan Pink examines the puzzle of motivation, starting with a fact that social scientists know but most managers don’t: Traditional rewards aren’t always as effective as we think. Listen for illuminating stories — and maybe, a way forward.
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My CEO executive coaching clients frequently wonder how best to motivate and retain key employees. The question often takes the form of, “Should I give her an unscheduled bonus or a raise?” The business owner often tends toward a raise because it defers the cash outlay. My study of psychology recommends the bonus.
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