As governments grapple with COVID vaccine hesitancy, some have turned to lotteries to encourage communities to get a jab. From Quebec and Slovakia to California, cash, beer, holidays and cars have been given away to incentivise people to get vaccinated. Only last week, one lucky Australian won $1 million in a vax lottery backed by philanthropists and several corporations. But according to a recent study published in the JAMA Health Forum, vaccine lotteries had no significant effects on vaccine uptake in the US states that deployed them. This begs the question: do we really understand how to incentivise people?
When and why don’t financial incentives work?
In the case of the vax lotteries, researchers speculated that the incentives offered weren’t enough to counteract the mis-information about COVID vaccinations being spread on social media. Nor did they address the lack of trust in the institutions administering the shots. In other words, lotteries failed to address why people were hesitant about getting vaccinated. This failure to come to grips with the attitudes that underpin behaviour is common in incentive design - and it applies to that most common of all incentives, the bonus.
Paying bonuses could waste your money
Economists have long promoted financial incentives to drive behaviour change in the belief that higher rewards lead to more effort and better performance. As a result, bonuses, recognition rewards and sales commissions are baked into the remuneration structures of most corporations. This is despite a growing body of research that shows incentives often don’t work and if they do compliant behaviours are mostly short lived. This is for the same reason vaccine lotteries don’t work: bonuses do nothing to change the underlying attitudes that drive behaviour. If you want long-term behaviour change, the research is conclusive - external rewards are largely ineffective.
Even when directed towards specific tasks, financial incentives are blunt instruments. Being paid to do a particular task can change how a person perceives that task, which in turn can negatively impact performance: if I need to be paid to do something then the task must be bad, or I must be ill-suited to the task. This effect has been found in dozens of studies across adults, children and genders. When people expect to be rewarded for completing a task, they perform worse than those who weren’t expecting to be paid. In some contexts, an incentive is worse than no incentive at all. Incentivising charitable acts is another example of this.
Paying people to ‘do good’ is bad
Paying people to donate blood, argued Richard Titmuss, a psychologist working in the 1970s, was likely to result in fewer donations than if there was no incentive at all. Why? Because incentives are encoded with social messages about how an individual is perceived. If I need to be paid to donate blood then my self-image as a good person is undermined, which in turn negates my ‘intrinsic motivation’ to give blood. When financial incentives negatively impact self-perceptions, positive behaviour change is unlikely.
Negative effects of incentives on collaboration and risk-taking
Companies also need to consider the impact of incentives on collaboration and risk-taking. If you share a bonus bell curve with colleagues, the motivation to collaborate towards a universal goal is undermined because you’ve created internal rivalry rather than a common purpose. Furthermore, ‘employee of the month’ rewards make a winner out of one person and losers out of everyone else. Bonuses and rewards can undermine social cohesion, pit colleagues against each other and damage self-esteem.
As for impacts on risk-taking, again incentives can work against desired outcomes. If your end of year bonus depends on success, you’re less likely to move away from the tried-and-tested methods and try something new. So, ironically, financial incentives intended to encourage innovation can have the opposite effect, at precisely the time innovation is a top priority for corporations.
So, if financial incentives don’t work, what does?
Research shows that goal setting and training have more long-term, positive effects on performance than incentives. Helping employees to set and track goals and then training them to achieve their objectives creates positive and empathetic workplaces and promotes long-term behaviour change.
Pay is rarely ranked at the top of surveys of what matters to employees. As long as wages are competitive, above a certain threshold, money doesn’t matter. It’s time, therefore, to reconsider incentives and invest in what does matter to your people – support and training in a collaborative, non-competitive environment.
Sources
Andorsky, N., Decoding the Why, New Degree Press, 2020
Ariely, D., Bracha, A., and Meier, S., 2009. "Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially," American Economic Review, American Economic Association, vol. 99(1), pages 544-555, March.
Gneezy, Uri, Stephan Meier, and Pedro Rey-Biel. 2011. "When and Why Incentives (Don't) Work to Modify Behavior." Journal of Economic Perspectives, 25 (4): 191-210
https://hbr.org/1993/09/why-incentive-plans-cannot-work
https://jamanetwork.com/journals/jama-health-forum/fullarticle/2785288
https://milliondollarvax.com/