Why financial incentives aren't the optimal way to motivate your knowledge workers

In “The 6 Rules for Rewards”, Jurgen Appelo points out that extrinsic motivators (bonuses, etc) are far less powerful than intrinsic ones. He makes the bold statement that employee bonus schemes can actually reduce effectiveness.

Reflecting on this - I wouldn’t want to loose my yearly bonus at my current employer, but it’s not a great motivator either (the conditions are rather vague and subjective too, around customer and internal satisfaction, so it would be hard to game the system!) Even the staff whose bonuses are dependent on billable hours have roughly 50% of their bonuses calculated against “soft targets” like satisfaction and teamwork.

It’s my observation that critical acclaim, respect and challenging work are far more effective motivators (at least for geeks) than bonus schemes.

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