Thursday, June 04, 2009

Obama's Obession with Extrinsic Motivators

President Barack Obama offers pay for performance as the solution to most of America's ills. From health care to education, incentives are needed. Will extrinsic motivators help? Doubtful, they can make matters worse. The President wants incentives for people to live healthier, for students to learn. He also believes in giving doctors and teachers pay incentives for quality work. America's obsession with incentive pay misses the most powerful motivators, those that come from within. Tapping intrinsic motivation is critical. Extrinsic motivators take people's attention away from the real work, focusing it on award attainment. America has a clear record in this regard:
1. Some 30% of executive stock option awards were backdated, an unethical to illegal practice that maximized executive compensation over a decade long period. 
2. Financial firms produced trillions in junk products, generating millions in incentive compensation for Wall Street executives. 
3. A former chief executive of Lehman Brothers in the 1970s has slammed the bonus culture at the bank for breeding “spoiled and ungrateful schmucks.”

Yet, pay for performance is offered at nearly every turn as a solution to leadership challenges. As Dr. Deming said, "Substitute leadership!" It is sorely lacking in the Capital, White House and corporate board rooms across America. Under extrinsic motivators, expect more cheating.

Update 12-24-21:  Committing fraud to garner performance bonuses resulted in U.S. military families getting substandard housing service from contractor Balfour Beatty.  The fraud ran from "around 2013 to around 2019."

“Instead of promptly repairing housing for U.S. servicemembers as required, BBC lied about the repairs to pocket millions of dollars in performance bonuses."

Update 5-30-23:  HuffPo's "The Golden Age of White Collar Crime" stated:

32 percent of American managers said they were comfortable behaving unethically to meet financial targets.

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