I banged on about bonus schemes a while ago. I have a thing for intrinsic rewards over extrinsic ones and I wondered how successful a business model of performance bonus pay would work with a bunch of educational types.
Watts makes the point in his book that 'a number of studies, in fact, have found that financial incentives can actually undermine performance. Financial rewards can also generate a "choking" effect, when the psychological pressure of the reward cancels out the increased desire to perform".
In summary he says:
The upshot of all these confusing and often contradictory findings is that although virtually everyone agrees that people respond to financial incentives in some manner, it's unclear how to use them in practice to elicit the desired result. Some management scholars have even concluded after decades of studies that financial incentives are largely irrelevant to performance.I often wonder what the thinking is at company HQ when financial incentives are discussed and then thought to be a good idea.