08 Apr 2013 Research & Ideas

How to Demotivate Your Best Employees

Many companies hand out awardssuch as "employee of the month,"but do they work to motivateperformance? Not really, saysprofessor Ian Larkin. In fact, theymay turn off your best employeesaltogether.

by Dina Gerdeman

It would seem to make sense thatwhen companies recognize theirworkers with awards, they arelikely to see a boost in morale andperhaps even inspire them to workharder.

It turns out that sometimesrewarding employees for goodbehavior can actually backfire,leading to a drop in motivation andproductivity.

More than 80 percent of companiesdole out work-related awards like"employee of the month" or "topsalesperson." Managers often viewthese awards as inexpensive waysto improve worker performance;many believe that when employeesbask in the glow of corporatepraise, they may even feelmotivated to work harder over thelong term.

But new research suggests thatsome awards may actually have theopposite effect, according to arecent paper called The DirtyLaundry of Employee AwardPrograms: Evidence from theField, written by Harvard BusinessSchool Assistant Professor IanLarkin, along with professor LamarPierce and doctoral studentTimothy Gubler from the OlinSchool of Business at WashingtonUniversity in St. Louis.

The researchers studied anattendance award program initiatedby managers at one of the fivecommercial-industrial laundriesowned by the same midwesterncompany. Perfect attendance wasdefined as not having anyunexcused absences or tardy shiftarrivals during the month.

The plant managers had all theright intentions when theyimplemented the award program.Absenteeism and tardiness costsUS companies as much as $3billion a year. And in the case ofthe laundry plant, one worker'stardiness or absence can affectanother's productivity. If one teamof workers falls behind on the job,for example, other workers downthe line are left to sit idle.

Stellar employees whopreviously had excellentattendance and were highlyproductive ended upsuffering a 6 to 8 percentproductivity decrease

The plant's attendance awardprogram began in March 2011 andcontinued for nine months.Employees with perfect attendancefor a month, including nounexcused absences or tardy shiftarrivals, were entered into adrawing to win a $75 gift card to alocal restaurant or store; thewinner's name was drawn at ameeting attended by all theemployees. At the end of the sixthmonth, the plant manager heldanother drawing for a $100 giftcard for all employees with perfectattendance records over theprevious six months.

The program did produce onebenefit the plant managers werelooking for: it reduced the averagelevel of tardiness and led to morepunctual arrivals for the workerswho participated.

Airing dirty laundry

Yet when Larkin and hiscolleagues took a closer look at

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employee time sheets and recordsshowing the amount of laundry thatactually got done both before andafter the program was introduced,they found that the plant—unlikethe other four that didn't have anaward program—experienced someproblems:

• First, employees ended up"gaming" the program,showing up on time onlywhen they were eligiblefor the award and, in somecases, calling in sick ratherthan reporting late. Mostinterestingly, workers were50 percent more likely tohave an unplanned "singleabsence" after the awardwas implemented,suggesting that employeeswho would otherwise havearrived to work tardy on acertain day might insteadeither call in sick to avoiddisqualification or elsesimply stay home becausethey would be disqualifiedfrom the award regardless.

Also, while punctualityimproved during the firstfew months of theprogram, old patterns oftardiness started to emergein later months. And onceemployees becamedisqualified and the carrotof the award was out oftheir reach, their punctualbehavior slipped backdownhill. Larkin says thisruns counter to what somepeople believe—that suchan award program mightinstill a long-term patternof on-time performance inworkers.

The hope is that with the

award "you get them to dowhat you want them to doin a habitual way," Larkinsays. "But we can say it'sthe exact opposite. Therewas only a change inbehavior while peoplewere eligible for theaward."

• Second, and perhaps moresignificantly, stellaremployees who previouslyhad excellent attendanceand were highlyproductive ended upsuffering a 6 to 8 percentproductivity decrease afterthe program wasintroduced. This suggeststhat these employees wereactually turned off—andtheir motivationdropped—when themanagers introducedawards for good behaviorthey were alreadyexhibiting.

These workers may havebelieved that the awardprogram was unfair; afterall, they had been showingup to work on time beforethe attendance program, sothey wondered why anaward was necessary andwhy some employees whoused to show up late werewinning the award.

"The award demotivatedthese employees," saysLarkin, who interviewedworkers at the plant to gainadditional insight. "Peoplebelieved it was unfair torecognize people who onlychanged their behaviorbecause of this award.They felt that 'I'm a hard

worker, and now they'regiving awards forsomething like attendance.What about me?' "

• All in all, the awardprogram actually led to adecrease in plantproductivity by 1.4percent, which added up toa cost of almost $1,500 amonth for the plant.

"Having your topperformers demotivatedfor all eight hours on thejob ended up creating amuch bigger productivityhit than having the extrafive minutes of work fromsomeone who camehabitually late," Larkinsays.

Ultimately, the researchersconcluded that rewarding onebehavior sometimes can "crowdout" intrinsic motivation inanother.

Rewards that work

Despite the fact that this particularaward brought more harm thangood, many other types of awardincentives have proven beneficialfor companies. But Larkin sayscorporate managers should managethem closely to make sure thatemployees aren't gaming thesystem and that the programs aren'tfostering unintended negativeeffects.

"Many award programs havecreated value and are cost-effectivefor companies," he says. "Ourpaper shouldn't be taken as ablanket criticism of awards. Youcan't say awards are good or bad. Itdepends on how they're

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implemented."

This particular attendance awardmay have been especially flawedbecause rather than rewardingworkers for exceptionalperformance, it rewarded them forfulfilling a basic job expectation.

"A lot of awards are focused onidentifying people at the top of theclass or people who went the extramile," Larkin says. "This award didnot recognize people who wentabove and beyond. It was an awardfor a behavior that employeesshould do."

Also, Larkin believes that awardsare more effective when theyrecognize good behavior in thepast, rather than behavior goingforward. Plus awards for pastperformance aren't likely to see asmuch gaming, he says.

"It's motivational to hear thatyou've done a good job and arebeing recognized for doing theright thing," he says. "And itprovides a good example for otherpeople. People aren't beingrewarded because they changedtheir behavior to match what themanager wanted or by gaming."

Larkin says that in the laundrystudy, the reward itself—giftcards—may have led to a higherlikelihood of gaming. Sometimesit's better to keep money out of thedeal.

"People respond very strongly tomonetary incentives with thisgaming mentality," he says. "WhenI talk to companies about awardprograms, I find myself tellingthem, 'Don't put in that $500 or thetrip to the Bahamas.' It sounds likea nice thing to put in, but it also

changes the psychological mindsetpeople have."

Instead, Larkin says thatcompanies may fare better just bygiving people a nice plaque,sending an email to staff, or callinga meeting to recognize certainworkers publicly in front of thewhole crew.

"You can't put a price on that. Therecognition of hearing you did agood job and that others arehearing about it is worth more thanmoney."

About the author

Dina Gerdeman is a writer basedin Mansfield, Massachusetts.

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