The Futility of Incentives

I’ve spent my entire executive career in the marketplace getting rid of incentives. Why would I do such a foolish and contrarian thing? Because incentives are only necessary where a void in leadership exists. Allow me to explain.

We hire willing and capable people to do specific work in our enterprise that we, as leaders, design. Significant dollars are spent recruiting, interviewing, assessing, and selecting the right candidates to do the work. During the recruiting and “attraction” phase, we talk about how the company meets the temporal needs of employees, not the least of which are their compensation and benefits. If we are prudent, we also promote how the company serves the higher-level needs of belonging and self-esteem among other needs people pursue. 

Once an employee joins the enterprise, he or she is now subject to the real values and culture in our company, not just the pitch. Those values and norms manifest in and through that person’s leader. This, by the way, is why clarity of personal values – things for which you can be held accountable – have a greater impact on employee commitment than the clarity of organizational values. Organizations don’t behave (a consequence of values), people do. But I digress …

Managers who struggle with leadership often implement incentives to get their people to behave consistent with values and norms or hit specific performance targets, or they just do what’s always been done. Excuse the repetition, but remember, we are already paying our “willing and capable” employees to do the job they were hired to do. So, we are going to pay them twice for the same work we hired them to do in the first place?! That sounds odd, doesn’t it, but it’s true. More importantly, think of the subliminal message we are sending to those we are incentivizing: “I don’t trust that you’ll behave in ways that reflect our values or perform to our standard without some sort of carrot or incentive.” If your manager was more explicit about this message during your interview, how many of you would choose to work for this company or manager?” 

I argue that incentives are a lagging indicator of a vacuum or void in leadership. With well-designed incentives – by the way, designing incentives that aren’t perverse is very hard – one does not need to lead. They simply let the employees’ pursuit of compensation do the leading for them. And yet we wonder why employees these days are perceived to work only for a paycheck! No discomfort getting to know someone. No doing the hard work of inspiring others to commit. No risk or vulnerability placing your values on display, subject to the judgment and purview of others. All these alternatives to incentives are part of effective leadership!

Some try to justify the use of incentives as “sharing in the upside or rewards.” There is a subtle yet significant difference between sharing rewards and incentivizing others. That difference is primarily reflected in the way-of-being of the leader. Are people treated as people, or are people treated as objects? The latter responds to incentives. The former responds to leadership. Share the rewards justly, yes! But don’t offend your workforce by using the simplicity of incentives as a substitute for your leadership. I’ve had so much experience with this, I can’t unsee the futility of incentives. I hope you can’t unsee the same futility now. See incentives for what they are: a very, very poor substitute for leadership. Lead better. Loving at work, seeing people as people, requires working at love.

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Dave Geenens

Dave Geenens is an Associate Professor and is the Assistant Director of the Thompson Center for Integrity in Finance and Economics in the School of Business at Benedictine College in Atchison, Kansas. His over 30-years of executive experience in addition to his Bachelor’s Degree, MBA, and CPA license (inactive) add a realism to his research and teaching. Dave has written four books and speaks often on the integration of faith and work and the critical role Christian virtue plays in protecting free markets and liberty. Since Dave writes on multiple topics including investing and philanthropy, nothing in this article is to be construed as investment advice and any investment of any kind includes a risk of loss.